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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

#211

Post by hippich »

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.

minor correction - not all blockchains built around public view of all transactions.

Re: IRS reminds taxpayers to report virtual currency transactions

#212

Post by saosebastiao »

s73v3r_ wrote: post #185
saosebastiao wrote: post #174

Earlier quoted context omitted.

So any price from any exchange at any time during the day? You haven't clarified a thing by telling me to use the fair market value, because there is no standardized way to determine fair market value. These aren't stable mature markets, a blink of the eye and the market may be transacting at +/-10%. Determining fair market value is the primary problem with cryptocurrency taxation . If you're lucky enough to be tradi…

The fact that these things are extremely volatile is not the IRS's problem. You are the one responsible for recording the details of your trade.

I did record the details of my trade. What I didn't record was the concurrent status and details of some completely unrelated market on a completely unrelated exchange that establishes some sort of mythical fair market value denominated in USD that so far has no canonical way of being calculated anyway. Nobody can answer the question in any precise way, the IRS guidance on the issue is barebones and not informative at all, and my CPA can't figure it out either. The best we can do is take a best guess that makes it look like I'm not stiffing the IRS.

I want to pay my taxes. I believe crypto should be taxed. But when you get into the situation where well meaning people have to take guesses at what is appropriate, and differences between seemingly simple rules of thumb can result in 20+% disparities in taxes owed, you're gonna have a bad time no matter how diligent you are.

Re: IRS reminds taxpayers to report virtual currency transactions

#213

Post by tzs »

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…

> 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”.

Shouldn't that be "pay the minimum amount that (1) you can reasonably argue you believe is what you owe, and (2) is close enough to the maximum possible under the worst case scenario that you will not be subject to underpayment penalties if you are audited and they determine you owe the maximum"?

Re: IRS reminds taxpayers to report virtual currency transactions

#214

Post by gxs »

hkmurakami wrote: post #107
gxs wrote: post #33

Earlier quoted context omitted.

Worth mentioning that there exists a $5MM lifetime max that any individual can gift before paying taxes. A common misconception is that you have to pay tax on every gift you make, but as long as you’re under that $5MM all you have to do is report it.

That doubled with the tax reform. It's roughly 10.x million per person now.

Wow no way, thanks for the update.

Re: IRS reminds taxpayers to report virtual currency transactions

#215

Post by TheCoelacanth »

vollmond wrote: post #161
spookthesunset wrote: post #99

Earlier quoted context omitted.

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.

Usually, yes, but it doesn't change your tax liability if you happen to find someone willing to directly trade MSFT for AMZN. The tax exemption for like-kind exchanges only applies in limited circumstances like with real estate.

Re: IRS reminds taxpayers to report virtual currency transactions

#216

Post by jimmaswell »

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.

Trading done within a single exchange might only take place within that exchange's records, only interacting with the blockchain when a withdrawal or deposit is made with the exchange from the outside.

Re: IRS reminds taxpayers to report virtual currency transactions

#217

Post by tzs »

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.

> 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

How about tax-free bonds?

Re: IRS reminds taxpayers to report virtual currency transactions

#218

Post by cmurf »

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…

Not maximum possible. This isn't that difficult to compute. Not so long ago, 1099-B only showed the sale price of stocks (funds, etc) and you had to go back and compute basis yourself from the confirmations, even if the asset purchase was 50 years ago. It's no different for a house sale.

Having a CPA doesn't help at all whatsoever to compensate for bad record keeping.

There are other ways to do this that would be simpler, e.g. tax equals 1-2% of the asset value per year, rather than taxing the income. This isn't fundamentally different from property tax computation.

Re: IRS reminds taxpayers to report virtual currency transactions

#219

Post by zdragnar »

cmurf wrote: post #218
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…

Not maximum possible. This isn't that difficult to compute. Not so long ago, 1099-B only showed the sale price of stocks (funds, etc) and you had to go back and compute basis yourself from the confirmations, even if the asset purchase was 50 years ago. It's no different for a house sale. Having a CPA doesn't help at all whatsoever to compensate for bad record keeping. There are other ways to do this that would be sim…

> tax equals 1-2% of the asset value per year, rather than taxing the income

So penalize everyone in down years when their stocks lose money, plus wipe out a ton of potential growth in 401k accounts? At least, that's what it sounds like to me.

Re: IRS reminds taxpayers to report virtual currency transactions

#220

Post by cmurf »

TallGuyShort wrote: post #163
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…

This is a direct consequence of productizing things that should be rights. i.e. justice, education, accounting, health care, infrastructure. Making justice a product rather than a right means if you can afford a better lawyer, you get better justice. If you can afford a better accountant and tax layers, you can pay less tax. If you can make yourself not black or brown, or not show up in court and just have lawyers fight for you, you get better justice.

Republicans absolutely, unequivocally, believe in class. Better people have more money. Period. They can buy better products with that money - otherwise there's no point in being wealthier than others. Democrats are kinda sorta sometimes maybe occasionally OK with this but then abruptly not OK when the political winds change a bit. The party of ambiguous ethics are the Democrats. The aristocrats' party is the Republicans.

Directly asked, both party types lie. But if you look at a few dozen policy positions an individual policians has, with emphasis on the less conventional (the ones with ready talking points) ones, it's really easy to triangulate their positions and contradictions - for a political scientist.

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