US IRS tax reporting for cryptocurrencies


#323

Yeah i came in during the Nov 2017 craze. I was up say $5k going into the year but obviously didn’t sell.

Say I am down as of 2018. I had to pay $5k gainz for 2017? What the?! How do you have money to pay for it if you don’t actually have it on hand?


#324

I think if you trade (exchange between cryptocurrencies or fiat) and your gain is $5K, then you pay tax of your gain. However, if you bought and hodl, then no tax.


#325

I think most people here didn’t just buy btc and hodl. I believe most here did some sort of trading from btc/eth to alt and try to make money but didn’t cash out of the market yet. I still work a job but feel like the potential my portfolio is not even close to final form lol


#326

EXACTLY! WTH?! Its like you’re penalized for being a long term HODL’R. This is what was discussed in previous chat sessions in the pub but no clear answer. @peter Care to elaborate rather than a “like” this time ?


#327

Sure. Hodl with conviction!


#328

Guys, there lots of crypto tax resources out there now. Even here in the pub with previous topics. Lots of services that try to make filing easier too. I use https://www.zenledger.io but there’s a bunch more, even free ones. I suggest you guys take a look. It will at least get you started. When in doubt, see a CPA.


#329

This is not true for the US.

If you only purchased say Coins on Coinbase and held on to them or mined coins and held on to them then there isn’t any taxes owed until those coins are traded for FIAT or another asset. But say you purchase Etherum on Coinbase send it to Binance to purchase an alt then the purchasing of said alt triggers a possible taxable transaction. This is due to the price of Etherum changing between when you purchased it and then traded it for the alt.

This is also why I feel it is very important that we have more exchanges like Coinbase where we can purchase more coins directly for FIAT. If you want to HODL this is how you should purchase your coins as this allows you to do long term investing with out ever worrying about short term gains. Also the more exit ramps we have the better.

@edwin - This has been discussed in multiple threads at great length. It is not a penalty for long term HODL ing. If you are disciplined and send the BTC/ETH as soon as you get to your Binance/(what ever exchange) then there is very little taxes owed. This is very true in the current market and can also be mitigated by how the BTC/ETH price is calculated. ie. moving average, daily average, spot price which ever is chosen you need to stay consistent. Again get a CPA these rules are not new they have been around for ages with the stock market traders. Just because they are new to the vast majority of crypto enthusiasts doesn’t make them new. We by trading crypto’s are trying to play ball with the big boys its time to step up / level up your game.


#330

I don’t feel it is a penalty. The key is knowing when to get in and out the market and plan for taxes on a calendar year basis. What a lot of my clients say is that they didn’t expect to pay taxes on crypto so they just weren’t thinking about it. Many have also said if the market was still doing well, they wouldn’t mind paying the taxes. They are worried now because portfolio values are low.

As Nekko said- these rules have been around long standing. Stock market folks go through this. Now it is being applied to crypto.


To clarify-
There are taxes to be paid for mined coins. Mined coins are considering income per the Notice.

Here is the Notice for anyone who wants to read through it. Mining is answered on question 8.


#331

Yeh forgot about the income tax on mined coins. Was totally thinking just about the trading aspect.


#333

From what i understand , are you in lameness terms telling us, that if we don’t report anything. Than we don’t start that agreement with the IRS. so the IRS wouldn’t know about our trading ? and we wouldn’t have to pay taxes?
I think coinbase automatically sends the reports to the IRS of every us citizen investing in crypto through them.


#334

I think they do too.
Only way around it possibly is to buy crypto via cash possibly credit from a foreign entity.
Monero, specifically.

My thing is, how do they catch miners if the miner doesnt report it?


#335

im so new to this space , i would like to give you a very informative answer but i cant lol, sorry bud !

im here , learning with you.


#336

isn’t crypto losses can be a tax deduction?
sell some of the coins for a loss even on the same day of trading - buy btc on coinbase tranfer to binance to buy etc right away. you buy/exchange within 1hr or so and gain/loss is minimal.

good article/blog here to read for information/knowledge

https://bitcoin.tax/blog/crypto-currency-tax-losses-deduction/

summary from above article below

Summary

  • Crypto-currencies are not currently subject to wash sale rules
  • Review any re-purchases of crypto to ensure you are not failing the economic substance doctrine
  • Be aware you could still incur some costs from the difference in buy and sell prices as well as trading fees
  • Reduce taxable income by up to $3,000 per tax year with excess capital losses, with any remainder carrying forward to future years
  • Tax loss selling will be reset and reduce the cost basis of your assets so selling the following year could result in increased short-term capital gains

I personaly use cointracker.io to trackmy purchase/trades and they have tax options but I will be doing mine on my own. I am still researching on first in and first out option vs last in first out. to see of benefit or this strategy or not.
the reason I chose cointracker.io is becuase there is no fees to track or even sign up for the services you only pay if you want to report taxes. this is my first year using them so I’ll find out soon.


#337

Ivan on Tech recently had an interview with a crypto tax person, take a look:

Pretty shocking how tight grip the US gov is trying to hold on crypto traders


#338

Kortik,
Please be very careful with giving tax advice because if you say something wrong someone could be financially hurt.


#339

I understand, I am reading an article from bitcoin.tax, which is a crypto tax firm. and they mentioned tax deductions for loses especially if you file taxes as self-employed.

P.S. Ivan on tech video above and the tax girl also suggested to sell at a loss if you hear her video at 24:35 minute of the video, take a look.


#340

Most of the tax advice articles on the internet that’s been done by non-CPA/ lawyer writers is wrong. For example, many, if not most, seem to think that crypto to crypto exchanges are tax free (which is incorrect).

And Yes, I agree that it’s a good time to sell at a loss and then rebuy after 30 days to avoid wash sale rules.


#341

Loving this thread! Keeping track of this one.


#342

@Peter_Rehm I have a question for you. I know you’re not my CPA, but i figured it may be an obvious answer. Lets say i paid my capital gains tax in 2017 and i continued to hold through all of 2018 without making any trades or increaseing any of my holdings. If one of my holdings say increased 300% in value, would I have to pay tax on that gain as well for 2018?


#343

Ravindram, in what country are you located? Some countries tax you on the increase in value of your investments. Most do not.