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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

#161

Post by vollmond »

spookthesunset wrote: post #99
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.

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...

In the MSFT/AMZN transaction, doesn't the value pass through USD on the way? If I use ShapeShift to convert BTC to LTC, USD isn't involved.

Not saying it affects the situation, but it is still a different type of transaction in the way that a lot of laypeople would think of it.

Re: IRS reminds taxpayers to report virtual currency transactions

#162

Post by AYBABTME »

sokoloff wrote: post #145
AYBABTME wrote: post #117

Earlier quoted context omitted.

I'd expect that converting from 1 cryptocurrency to another doesn't count as a gain until it's turned back into a country issued currency. They're basically the same unusable[1] asset under a different umbrella. [1]: if we're pragmatic about it, cryptocoins can't be used for much on their own

This is no different than selling one Vanguard fund and buying a different one. There is a notional to/from USD implied in the conversion, even though Vanguard lets me do it in a single transaction.

I thought there was something about selling/buying an asset of the same class within a certain period not triggering a tax event or something? The thing that tax-loss harvesting is based off.

Re: IRS reminds taxpayers to report virtual currency transactions

#163

Post by TallGuyShort »

purple-again wrote: post #141

Another point everyone should remember because I’ve seen the attitude a lot recently. If the reporting requirements seem to be literally impossible to comply with, this doesn’t mean you conclude “so I don’t have to pay taxes”. It means you should conclude “I have to pay the maximum taxes possible under the worst case scenario because I don’t have the records to prove my version of events”. It has nothing to do with c…

The government needs to fix the problem that it's so difficult to know what you're required to pay without just paying the maximum guess (and then pay more ahead of time to avoid penalties). I've reported an instance of 2 conflicting statements in 2 separate IRS forms to the IRS, and rather than clarifying what was required they referred me to a tax advisor, who also didn't know the answer to the question. So we took the more liberal guess, and filed. And then had to rework it anyway because the law for how much tax I was required to pay in 2017 changed in 2018 anyway. The principles that we consider "rule of law" don't seem to apply to tax law.

Re: IRS reminds taxpayers to report virtual currency transactions

#164

Post by heptathorp »

akeck wrote: post #153

If someone pays me for a service in bitcoins (e.g. GPU rental), what dollar amount do I report for income? The dollar value of the bitcoin at the time I was paid? The dollar value on 12/31/2017 at 23:59?

You owe income tax on the value at the time you earned the income...

If you later sold it for more, you owe tax on the gains.

Re: IRS reminds taxpayers to report virtual currency transactions

#165

Post by sokoloff »

AYBABTME wrote: post #162
sokoloff wrote: post #145

Earlier quoted context omitted.

This is no different than selling one Vanguard fund and buying a different one. There is a notional to/from USD implied in the conversion, even though Vanguard lets me do it in a single transaction.

I thought there was something about selling/buying an asset of the same class within a certain period not triggering a tax event or something? The thing that tax-loss harvesting is based off.

You might be thinking of one of two things:

1. Wash sale rules (where buying a substantially identical security within 30 days before or after a sale-for-a-loss disallows the loss)

2. Section 1031 exchanges

Re: IRS reminds taxpayers to report virtual currency transactions

#166

Post by bringtheaction »

saosebastiao wrote: post #149
kentm wrote: post #37

Earlier quoted context omitted.

> If I buy 60000 XRP for 4 BTC, what is my cost basis? For the BTC? The USD value at the time you bought them. > Do I have to keep track of how much those bitcoins were worth when I traded? Yes > What if I don't have that data? You can get the transaction date via the block chain or your exchanges reporting and then lookup the USD value at the time. > How is that calculation supposed to account for actual liquidation…

> You can get the transaction date via the block chain or your exchanges reporting and then lookup the USD value at the time. What if the exchange I traded on doesn't have a USD Fiat pairing? Can I use any price from any exchange that day? Can I report $0.06/BTC for an xrp sale on 4/16, the date of the major coinbase flash crash? Does it have to be the exact price at the exact time? Can I choose the USD value of the…

> Can I use any price from any exchange that day?

You should use the fair market value.

Re: IRS reminds taxpayers to report virtual currency transactions

#167

Post by Taniwha »

tibbon wrote: post #123
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.

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 u…

You don't need a brokerage to sell stocks either (assuming you actually hold the stock certificates) but you're still responsible for reporting to the IRS your capital gains

It's magical thinking on the part of people selling digital assets that somehow the tax codes of any country don't apply to them

Re: IRS reminds taxpayers to report virtual currency transactions

#168

Post by Baeocystin »

chanfest22 wrote: post #150
purple-again wrote: post #141

Another point everyone should remember because I’ve seen the attitude a lot recently. If the reporting requirements seem to be literally impossible to comply with, this doesn’t mean you conclude “so I don’t have to pay taxes”. It means you should conclude “I have to pay the maximum taxes possible under the worst case scenario because I don’t have the records to prove my version of events”. It has nothing to do with c…

+1 There are also tools like www.cointracker.io out there to simplify the complexity of these crypto taxation rules

Oh, that looks useful. Thanks!

Re: IRS reminds taxpayers to report virtual currency transactions

#169

Post by makemoniesonlin »

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.

Isn't it likely the person who lost the $20 bill already paid tax on it?

Re: IRS reminds taxpayers to report virtual currency transactions

#170

Post by CryptoPunk »

sekh60 wrote: post #147
kchoudhu wrote: post #127

Earlier quoted context omitted.

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

Ugh, not a cryptocurrency trader, but I recently learned that by having U.S. citizenship from birth, and though I never lived there, I'm responsible for FBARs and tax-filing in the states. $4000 or so later and I'm compliant now. What a stressful pain that was.

No surprise that in both Great Britain and the US, the income tax was first instituted during a time of war.

Only during a war, with the demands it places on the public conscience to make sacrifices, would the population acquiesce to an institution so contrary to natural rights and so pernicious to liberty.

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