US IRS tax reporting for cryptocurrencies


#162

will do! nothing should stop you from trading…the tax reporting is an after the fact event.

Trade on!

Taxes will be just a formula to best maximize the Gain Loss laws using specific identification vs FIFO/LIFO


#163

Good shit @cryptoBrad I was able to use this website to sort out all my trades. Great source


#164

Coinbase is providing a Cost Basis for each of the different wallets for Tax purposes.
However they are considering a SELL if you move your money out of their wallet into a hardware wallet.

That is not an accurate picture though. Say you moved money to a hardware wallet and did not sell.
Or if you moved money to an exchange to buy altcoins. The gains/losses would be different in both cases.

Also they provide a 1099-K for users with more than 20K in transactions. Don’t know how helpful will this be as it won’t capture the transactions accurately. So why are they even creating an inaccurate tax report such as a 1099-K?


#165

Coinbase is providing a Cost Basis for each of the different wallets for Tax purposes.
However they are considering a SELL if you move your money out of their wallet into a hardware wallet.

Great catch Abs!!! Is this transaction labeled by Coinbase in any specific way?

Everyone should be aware of this wrinkle when (if) they go through the process of downloading their activity and give it to their accountant.

Also they provide a 1099-K for users with more than 20K in transactions. Don’t know how helpful will this be as it won’t capture the transactions accurately.

Prime example of The Accountant Full Employment Act. Everyone receiving a 1099-K this year having errors like those described above MUST reconcile their 1099-K proceeds to what they actually received. Put those schedules away for 1.) when/ if the IRS decides to audit your return or 2.) you receive a notice of deficiency related to that difference.

If it is a large difference caused by a large dollar transfer I STRONGLY SUGGEST that you hire a good accountant this year.


#166

Ton Vay’s has been stating this is how they will deal with it for months and his reasoning for this is because Coinbase doesn’t know where that money is going so they have to do it in this manner. This manner is also easier for us users to deal with because it is easier to prove you have something than to prove you do not have it.


#167

Peter,

They are not labelled in anyway. However they have a disclaimer saying “This report does not constitute legal or tax advice. Tax laws and regulations change frequently, and their application can vary widely based on specific facts and circumstances invloved.”

Also they say in their website:

“Our cost basis tool is in beta mode and we do not guarantee the accuracy of gain/loss calculation provided. You should always refer to your account transaction records for the details of all trades. We expect the cost basis tool to be released in final version in January 2018.”

My concern is for those who receive 1099-K statements and have invested in altcoins. The IRS will automatically think that your information is incorrect and might audit you?


#168

That’s fine but if IRS gives an incorrect 1099-K form from coinbase about you.

You will provide different form 8989 statement.

Will that flag IRS to audit you?
Hopefully IRS will accept your version of the transactions. :slight_smile:


#169

If you keep your documentation up it shouldn’t be an issue as everything is for the most part on a public blockchain. So you can prove that you sent it from coinbase to your own wallet.


#170

The IRS goes by the 1099. They may audit you but if they start sending out notices and everyone says they are wrong because of one thing or another they generally back off. In the mean time you have to deal with their [insert your adjective here].

They’ll send out a small test batch to see what replies they get. If no one complains then they step up the mailings.

As I said, reconcile your personal records to the 1099 and keep it with the return. This is Coinbase’s first year of sending out 1099-K’s and they may not get it right.


#171

Hi Peter,

Does this mean that I need to report my gains on all crypto?
Your statement “pay tax even if you don’t cash out” is confusing me based on what I know so far.
For example:

  1. Bought 1 ETH <== Not taxable
  2. Moved 1 ETH to bittrex <== Not taxable
  3. Traded 1 ETH for 500 XRP <== Taxable
  4. Still holding XRP after 2017 but it is now 5X what I bought it at. <== Taxable or Not Taxable?

Also Form 8949 is the correct form to use for reporting crypto gains/losses?


#172

@ ABS how would they know if its a hardware wallet or not? Would it be a sell if I move it to another exchange like Binance?


#173
  1. Correct - Not Taxable
  2. Very close to correct - Any fees you incur to move to a different exchange are used to increase the cost basis of your holdings. This is needed when you eventually calculate your gain or loss in #3
  3. Correct - Taxable
  4. Not taxable as you did not sell or convert any of it after you acquired it.

Yes, Form 8949 is the correct form to use to report gains/ losses.


#174

Ok, so if I incurred a fee of say $30 to move from one exchange to another the $30 could then be used to decrease my gains so I pay less taxes. Correct?

Also thanks for all the responses. Very informative (for me anyway).


#175

That’s correct. You should always record your fees as part of the cost calculation.


#176

Can someone in the forum please clarify for me whether a hardware wallet (Trezor/ Nano/ etc) has a unique ID or address? I know that all transfers are recorded to an address on the blockchain and that the IRS has various firms building databases of addresses (and probably IP addresses).


#177

Hello Peter_Rehm, if I may ask,

  1. If I send some bitcoins to bitconnect about $13,120
    And I have capital gains on it and if I lend my bitcoins to bitconnect, I have to pay tax on this capital gain I (Lended) invested?
  2. And do I have to pay on my capital gains in bitconnect if I’m reinvesting my gains back in?
  3. I think I should not because it’s like stocks dividends threated right?
    I think it’s not right to pay the capital gains Twice; A. One when I invested into bitconnect…
    B. Two when I send back the same capital gains into bitcoin… again
  4. What do you think?
    Please write the answers for each question in numbers so I would Understand each answer for each question… I Would appreciate very much…

#178

I would assume so. For the Nano I have, when you install the wallets on your desktop/Nano it gives you a wallet address, but would also have to use an ID of some sort to know that it belongs to the Nano in your possession. A simple test I could do later is to install the XRP Nano wallet on my laptop and see if I can use my Nano to access my funds from there.


#179

Jesus,

I’m presuming that you are a US taxpayer. Has BitConnect provided you with any written tax advice to date? If so I’d be interested in seeing what they have provided. I’d also be interested to see what kind of disclosure statement they have provided – a 1099 form for example.

  1. In classical taxation the answer would be an unequivocal yes - you will have to pay tax on the capital gain. Is your gain a long term gain or is it short term? That will make a huge difference in the amount of taxes you will pay. The method you use (FIFO or LIFO or even Cost Recovery which might be wise here) also has an effect on the amount of tax you pay.
  2. No. You may have already paid taxes on your capital gains in #1 above.
  3. Correct. You paid the taxes on the items in #1 above.
  4. Done

My advice: Please have a CPA prepare your return this year. Make sure you give them the breakout of long/ short term gains. They’ll be unable to prepare it without that.


#180

Why dont we use cointracking.info? You can upload your transactions. It will show you how much you need to pay in tax. It’s easy to keep track with cointracking.info.


#181

I have not looked into it, but they make their transactions easy to understand, it shows your bitcoin, bitconnect, capital gains, your lent transaction… but yeah I think when I withdraw my capital gains from bitconnect in bitcoin into fiat I would have to pay my taxes, using income as taxable event… and I’ll keep track of time of investment to determine if it’s short or long term…
I still need to do a little bit more research, but it’s looking more easier the more I understand what should be reported or not, and yes my capital gains it’s long term 15% tax bracket., I’m close to being ready for tax season… I thank you a bunch… I’ll keep following your advices and if I have another question I’ll ask… thanks… :+1: Peter I appreciate