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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

#151

Post by chanfest22 »

cloakandswagger wrote: post #86
kolinko wrote: post #72

Earlier quoted context omitted.

It's not that diffiult really - most exchanges allow exporting historic transactions, and there are tools popping up that help to organise it all for the tax purposes.

I use Coinbase and yes, it was that difficult. I didn't receive a 1099 from them, so I had to use their "Cost Basis for Taxes" report. That might've worked, except it doesn't delineate short and long-term gains, and even worse it counts every transfer to GDAX as a sale. That meant hours of pouring through GDAX's even more bare-bones reports to figure out which coins were sold, which were kept, which were transferred…

Oooof! Consider checking out tools like www.cointracker.io that help do this for you automatically!

Re: IRS reminds taxpayers to report virtual currency transactions

#152

Post by iamdave »

JumpCrisscross wrote: post #146
iamdave wrote: post #102

Earlier quoted context omitted.

A given day could have multiple instances of open/close price n for any number of trading intervals though couldn't it?

The IRS is usually fine with reasonable approximations. Tax lawyers and preparers are familiar with this problem; their input could inform a compliant system. Disclaimer: I am neither a lawyer nor a tax expert. This is not legal nor tax advice. Talk to a CPA about your tax situation.

Ahh okay. Thanks for the correction.

Re: IRS reminds taxpayers to report virtual currency transactions

#154

Post by vidarh »

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…

I don't agree that it's unreasonable to expect your broker etc. to provide the data, but I also agree that in general tax authorities (I have no direct experience with the IRS, but have experienced the same both in the UK and Norway) tends to look with relatively benign eyes on it if you report something that looks like you've made a reasonable effort and are unlikely to be intentionally under-reporting.

E.g. I had a really chaotic year once, and instead of getting in a state of panic, I figured out the money I'd put in and what I got out, and documented that, wrote a letter explaining why I was unable to document the trades, explained that the final number I came up with would cover my full profit, promised to assist to the extent of my ability if they needed more details, and presented my taxable income on the basis of that, and they just sent me my tax statement without ever asking for more info - after all I'd openly reported income they'd otherwise not have known about without going looking (the brokerage account was in another country).

As long as it doesn't look like you're trying to be overly clever in strategically omitting information, in general presumably they'll have bigger fish to try (namely the people who look like they are being overly clever in leaving out information because they're actually hiding something major) than someone who looks like they're trying their best...

Re: IRS reminds taxpayers to report virtual currency transactions

#155

Post by cft »

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…

Mine said "use before and after figures for us to prepare the return, but download and save detailed transaction history for the cost basis in case you get audited- they will want it". I assume I can compute the exact cost basis later and it should match the difference of before and after figures.

Re: IRS reminds taxpayers to report virtual currency transactions

#156

Post by mathgeek »

hkmurakami wrote: post #94
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.

This isn't tax advice, but it's common accounting practice to use a daily average value for trades where you only know the date and not the exact time of the trade. There's plenty of guidance from the IRS since many crypto trade situations have corresponding traditional concepts.

Re: IRS reminds taxpayers to report virtual currency transactions

#157

Post by [deleted] »

gst wrote: post #100
jobigoud wrote: post #74

Earlier quoted context omitted.

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?

[deleted]

Re: IRS reminds taxpayers to report virtual currency transactions

#159

Post by mathgeek »

purple-again wrote: post #92
jobigoud wrote: post #74

Earlier quoted context omitted.

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.

Most crypto trades do not involve USD because they are directly between one coin and another. Since each coin had a value in BTC, and BTC has a value in fiat, each altcoin has a value in fiat. That's why the new tax rules work (kind of).

Re: IRS reminds taxpayers to report virtual currency transactions

#160

Post by gwillen »

modeless wrote: post #53
rblatz wrote: post #8

Earlier quoted context omitted.

I would assume it would be treated like a company spin-off. https://www.investopedia.com/ask/answers/052115/why-are-some...

That assumption is reasonable but unfortunately wrong. The laws around spinoffs are specifically written to apply only to securities (stock in a company) and cryptocurrencies are not securities.

I don't know who's downvoting this, but this is exactly what my high-paid CPAs told me. I'm hoping the IRS gives guidance, and I'm extra-hoping that they give sane guidance, but the law simply doesn't appear to allow for treating coin splits like stock splits.
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