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IRS reminds taxpayers to report virtual currency transactions

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Re: IRS reminds taxpayers to report virtual currency transactions

#91

Post by hobofan »

JumpCrisscross wrote: post #82
njarboe wrote: post #62

The problem, if one want to trade crypto currencies, is that you have to record every transaction. Then one has to figure out if the coins you have traded have been held for over a year and thus treated at the long term capital gains tax rate as opposed to the short term rate. Then, I believe with the new tax bill, one has to, going forward, sell the oldest coins first (if they are going to be treated like stocks). T…

> if one want to trade crypto currencies, is that you have to record every transaction This is true for all capital assets. With cryptocurrencies, the data are all public. There may be room for a service which, given a set of wallets, produces a sample tax transcript.

You still need the fiat exchange value at the time of buying/selling the cryptocurrencies (unless you only assume "token for token" trades), which is not stored on the blockchain.

Re: IRS reminds taxpayers to report virtual currency transactions

#92

Post by purple-again »

jobigoud wrote: post #74
sergiotapia wrote: post #48

Reminded me of this kid that said he bought some bitcoins and then sold to buy some alt coins. >At the advice of my friends, I took most of my savings and bought 8 bitcoins back in early 2017 for about $7200. You can imagine how I felt when it went up. Around December 2017, I got caught up in the altcoins frenzy and sold most of my bitcoins (about $120k worth) to buy a bunch of different coins. I didn't know this bac…

I still find it weird that he has to pay taxes in dollars on something that he doesn't know the value of in dollars since he hasn't converted his cryptocurrency assets to fiat yet.

He exhanged a storage of value from one party to another on a set date. There was an agreed upon value at the time (bitcoin to USD and then USD to altcoin).

You can’t convert your real estate into stock without paying taxes anymore than you can one crypto coin to another.

Re: IRS reminds taxpayers to report virtual currency transactions

#93

Post by 2chen »

jobigoud wrote: post #74
sergiotapia wrote: post #48

Reminded me of this kid that said he bought some bitcoins and then sold to buy some alt coins. >At the advice of my friends, I took most of my savings and bought 8 bitcoins back in early 2017 for about $7200. You can imagine how I felt when it went up. Around December 2017, I got caught up in the altcoins frenzy and sold most of my bitcoins (about $120k worth) to buy a bunch of different coins. I didn't know this bac…

I still find it weird that he has to pay taxes in dollars on something that he doesn't know the value of in dollars since he hasn't converted his cryptocurrency assets to fiat yet.

No, he has to pay taxes on the BTC he DID convert to fiat. He does get to write off the losses of the alt-coins but since he hasn't yet realized those losses (and since they're in a different fiscal year), he's pretty well fucked.

EDIT: even if he didn't convert to fiat, the exchange of BTC for an alt-coin is a taxable event. That makes sense because otherwise you could, in theory, convert to a dollar-pegged crypto like Tether and defer taxes indefinitely.

Re: IRS reminds taxpayers to report virtual currency transactions

#94

Post by hkmurakami »

blunte wrote: post #89

A tax CPA I used in the past advised me with (hundreds of) short term equity trades to just present the before and after figures, since that represented the true income. They explained that in their experience, that was satisfactory to the IRS. It is unrealistic to expect people making frequent trades to carefully document every trade (unless perhaps that is their profession). It's even worse for cryptocurrencies, si…

No wonder there are companies out there whose value add message is solely to provide tax compliance for crypto trading.

This sounds like a nightmare since you don't have exact timestamp data for anything really.

Re: IRS reminds taxpayers to report virtual currency transactions

#95

Post by JumpCrisscross »

hobofan wrote: post #91
JumpCrisscross wrote: post #82

Earlier quoted context omitted.

> if one want to trade crypto currencies, is that you have to record every transaction This is true for all capital assets. With cryptocurrencies, the data are all public. There may be room for a service which, given a set of wallets, produces a sample tax transcript.

You still need the fiat exchange value at the time of buying/selling the cryptocurrencies (unless you only assume "token for token" trades), which is not stored on the blockchain.

Aren’t those data trivial to procure for the common cryptocurrencies? For uncommon ones, just ask the user to find the price on dates X, Y and Z.

Re: IRS reminds taxpayers to report virtual currency transactions

#96

Post by markonthewall »

kentm wrote: post #18
roddux wrote: post #12

"No", respond taxpayers. How do they intend to record this?

Coinbase and other crypto exchanges report to the IRS for one. There’s also forensic accounting where large unexplained cash flows (i.e. buying a house for money far above your income level) establish probable cause, which allows them to go fishing.

It's actually trivial to dodge US taxes. The most basic and effective way to accomplish that is to establish fiscal residency in a friendly european country. It becomes /really/ easy when you have dual citizenship.

Same applies for crypto gains, if you avoid using US based crypto-exchanges you are probably OK for the foreseeable future.

I have found that many americans overestimate the reach, competence, and sheer willpower of the IRS.

You would be surprised at what /doesn't/ happen if you stop filing taxes.

Re: IRS reminds taxpayers to report virtual currency transactions

#97

Post by jupiter90000 »

purple-again wrote: post #4

If you are walking down the beach and find a $20 bill on the ground, you are required to report it as income. The only way that I know of that you can legally enrich yourself without paying taxes is via a direct gift and that’s because the giver pays tax instead of you.

One other way is selling a home -- in certain circumstances, one can get $250k (single filer) or $500k (married filer) gains from the home sale tax-free. https://www.irs.gov/taxtopics/tc701

Re: IRS reminds taxpayers to report virtual currency transactions

#98

Post by kentm »

markonthewall wrote: post #96
kentm wrote: post #18

Earlier quoted context omitted.

Coinbase and other crypto exchanges report to the IRS for one. There’s also forensic accounting where large unexplained cash flows (i.e. buying a house for money far above your income level) establish probable cause, which allows them to go fishing.

It's actually trivial to dodge US taxes. The most basic and effective way to accomplish that is to establish fiscal residency in a friendly european country. It becomes /really/ easy when you have dual citizenship. Same applies for crypto gains, if you avoid using US based crypto-exchanges you are probably OK for the foreseeable future. I have found that many americans overestimate the reach, competence, and sheer wi…

I probably am overestimating their reach. I would imagine the willpower scales proportionally with the amount of lost revenue minus the cost of pursuing. I’m sure a lot of people in crypto think they’re cleverly covering their tracks when they’re not, and it really comes down to whether or not the IRS notices. Personally I don’t want to roll the dice.

Re: IRS reminds taxpayers to report virtual currency transactions

#99

Post by spookthesunset »

jobigoud wrote: post #74
sergiotapia wrote: post #48

Reminded me of this kid that said he bought some bitcoins and then sold to buy some alt coins. >At the advice of my friends, I took most of my savings and bought 8 bitcoins back in early 2017 for about $7200. You can imagine how I felt when it went up. Around December 2017, I got caught up in the altcoins frenzy and sold most of my bitcoins (about $120k worth) to buy a bunch of different coins. I didn't know this bac…

I still find it weird that he has to pay taxes in dollars on something that he doesn't know the value of in dollars since he hasn't converted his cryptocurrency assets to fiat yet.

It's no weirder than having to pay tax on selling MSFT for AMZN. Once you sell an asset, you pay the tax on any gains. doesn't matter how the transaction took place "physically". Just because this crypto space thing is The Future of Money and uses The Internet, doesn't somehow exempt it from real world tax law.

Seems like people should have found better exchanges that would have helped facilitate tax reporting...

Re: IRS reminds taxpayers to report virtual currency transactions

#100

Post by gst »

jobigoud wrote: post #74
sergiotapia wrote: post #48

Reminded me of this kid that said he bought some bitcoins and then sold to buy some alt coins. >At the advice of my friends, I took most of my savings and bought 8 bitcoins back in early 2017 for about $7200. You can imagine how I felt when it went up. Around December 2017, I got caught up in the altcoins frenzy and sold most of my bitcoins (about $120k worth) to buy a bunch of different coins. I didn't know this bac…

I still find it weird that he has to pay taxes in dollars on something that he doesn't know the value of in dollars since he hasn't converted his cryptocurrency assets to fiat yet.

Vanguard allows me to exchange one mutual fund for another mutual fund (without having to explicitly sell and re-buy). Do you think that's something that shouldn't be taxable? Where's the difference to the cryptocurrency example above?
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