IRS reminds taxpayers to report virtual currency transactions • Hacker News Board

Re: IRS reminds taxpayers to report virtual currency transactions

#121

Post by steve_taylor » Sun, Mar 25, 2018, 7:45 PM UTC

kchoudhu wrote: post #112

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…

Why is it unreasonable? Your brokerage should be tracking your entry and exit for each trade and sending you a comprehensive 1099-B come tax time. If your cryptocurrency brokerage isn't doing that for you, move your money elsewhere. If you can't find a brokerage that does that for you, maybe you should start wondering what other important controls are missing from your brokerage. Just saying.

Good luck getting a comprehensive 1099-B from ShapeShift.

Re: IRS reminds taxpayers to report virtual currency transactions

#122

Post by loeg » Sun, Mar 25, 2018, 7:47 PM UTC

kureikain wrote: post #115

If I invest but didn't cash out, then do I have to report? And if yes, then report what?

As usual, you report income. If you bought something and did not sell it, you didn't receive any income. Replace "something" with any kind of asset.

Re: IRS reminds taxpayers to report virtual currency transactions

#123

Post by tibbon » Sun, Mar 25, 2018, 7:47 PM UTC

kchoudhu wrote: post #112

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…

Why is it unreasonable? Your brokerage should be tracking your entry and exit for each trade and sending you a comprehensive 1099-B come tax time. If your cryptocurrency brokerage isn't doing that for you, move your money elsewhere. If you can't find a brokerage that does that for you, maybe you should start wondering what other important controls are missing from your brokerage. Just saying.

What brokerage? I don't need any brokerage to trade one crypto for another. Find someone who wants X, I send them X and they send me Y in return. X and Y may not be fiat currencies, and the value in USD at the time may be spread by 10% on various markets at the moment. Does the IRS want me to value those transactions as per GDAX at that moment, or Upbit?

Crypto takes out the need for middlemen like brokers. You can use them, but you don't have to either. Even with them, unless you're trading for USD at the time it's a standing question of what the USD value was at the moment. This isn't like, "use the price in the WSJ that morning".

Re: IRS reminds taxpayers to report virtual currency transactions

#124

Post by kchoudhu » Sun, Mar 25, 2018, 7:47 PM UTC

pmorici wrote: post #119

kchoudhu wrote: post #112

Earlier quoted context omitted.

Why is it unreasonable? Your brokerage should be tracking your entry and exit for each trade and sending you a comprehensive 1099-B come tax time. If your cryptocurrency brokerage isn't doing that for you, move your money elsewhere. If you can't find a brokerage that does that for you, maybe you should start wondering what other important controls are missing from your brokerage. Just saying.

It's not possible for them to know in many cases so you really do need to keep track on your own. This is a problem for stock brokerages too when you've funded your account by transferring assets from another brokerage.

Your previous brokerage will still send you a transcript of everything at account closure, which provides a baseline for comparison with your new account.

OP's argument that "it's too hard" is not adequate justification for not obeying tax laws.

Re: IRS reminds taxpayers to report virtual currency transactions

#125

Post by loeg » Sun, Mar 25, 2018, 7:47 PM UTC

mannykannot wrote: post #26

There are people who have lost the key to wallets. For most of them, that is the same as not owning the cryptocurrency, but a small number might get lucky and remember where they put it, or remember enough of it to eventually recover it, at some point in the future. I haven't looked in detail, but do the rules address this scenario?

You only realize income on sales. So if it's lost and you can't sell it, there is no taxable income.

Re: IRS reminds taxpayers to report virtual currency transactions

#126

Post by ThrustVectoring » Sun, Mar 25, 2018, 7:48 PM UTC

kinghajj wrote: post #55

my_username_is_ wrote: post #3

They still haven't issued guidance on how to treat forks like BTC/BCH, have they?

I consider them the same coins, simply sold twice, to two communities that disagree on where the coins have been sent. Since my cost basis is $0 (mined pre-2013 as a student living with my parents, and didn't bother to report the pittance of an income that would have been), I don't think the IRS will mind.

Reporting a cost basis of $0 has you paying the maximum amount of taxes. As a general rule, the IRS doesn't care if you decide to say that you owe the maximum possible amount of taxes - it generally focuses on possible underpayment, not overpayment.

Re: IRS reminds taxpayers to report virtual currency transactions

#127

Post by kchoudhu » Sun, Mar 25, 2018, 7:49 PM UTC

charlesdm wrote: post #114

kchoudhu wrote: post #112

Earlier quoted context omitted.

Why is it unreasonable? Your brokerage should be tracking your entry and exit for each trade and sending you a comprehensive 1099-B come tax time. If your cryptocurrency brokerage isn't doing that for you, move your money elsewhere. If you can't find a brokerage that does that for you, maybe you should start wondering what other important controls are missing from your brokerage. Just saying.

He's talking crypto, not stocks. A brokerage company operating outside of the US has zero reason to supply you with any specific US tax docs.

If OP is trading abroad, I hope s/he is also keeping up with his FACTA and FBAR obligations.

Re: IRS reminds taxpayers to report virtual currency transactions

#128

Post by ThrustVectoring » Sun, Mar 25, 2018, 7:50 PM UTC

isostatic wrote: post #51

cft wrote: post #28

Earlier quoted context omitted.

What if I bought 1BTC at $10, then I bought 1BTC at $200, then I bought something with 1BTC when BTC dropped to $100/1BTC? Which BTC was used for the purchase- the one I bought at $10 or the one at $200? It sort of kills the use of cryptocurrency as "currency" in the US. Imagine if in the end of the year we had to report every dollar transaction (e.g. buying a coffee and a bagel), trace how you earned that dollar and…

If I bought 1 ton of gravel at $10, then bought one ton of gravel at $200, then swapped one ton when it was $100 for a meal out. Which ton was used for the purchase, the one I bought at $10 or the one at $200?

Whichever one you report to the IRS.

Re: IRS reminds taxpayers to report virtual currency transactions

#129

Post by Edmond » Sun, Mar 25, 2018, 7:50 PM UTC

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…

Not unreasonable, it is the LAW. I doubt the IRS has the resources to try to acquire the kind of records they can get from traditional trading houses but if they ever could, a lot of people will be in a lot of trouble.

Re: IRS reminds taxpayers to report virtual currency transactions

#130

Post by loeg » Sun, Mar 25, 2018, 7:52 PM UTC

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.

There is a 0% capital gains tax bracket, for example.

Additionally, below a certain (low) level of wage income deductions and credits can negate nominal income tax owed, for an effective zero or even negative (with credits) tax rate.