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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

#141

Post by purple-again »

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 crypto, lose basis in your stock and you assume no basis (obviously you make best guess and hope To not get audited, but once audited, you take no basis).

Re: IRS reminds taxpayers to report virtual currency transactions

#142

Post by kchoudhu »

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…

This is most definitely not how 99.99999% of trading volume is executed.

Re: IRS reminds taxpayers to report virtual currency transactions

#143

Post by charlesdm »

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 might not need a brokerage. But you do need to pay tax on those exchanges. Your responsibility to figure out the corresponding exchange rates at the time of your transaction.

Re: IRS reminds taxpayers to report virtual currency transactions

#144

Post by sokoloff »

tunesmith wrote: post #34
kentm wrote: post #11

Earlier quoted context omitted.

Nope. If you mine cryptos or receive them as income they’re reported as income. You also have to report gains if you spend them or trade them for another crypto currency.

The signup promotion in 2016 was for 5000 or 6000 lumens. Historically it looks like in 2016, 6000 lumens would have been worth five or ten bucks. So I guess that should be reported as income back then although it approaches being a rounding error. At some point, stellar converted lumens to stellar. Anyone know if that would be considered a taxable event? Did that change my basis?

Not a tax pro, but I would treat any involuntary conversion similar to a corporate action where you got new shares for old shares, the new shares inherited the basis of the old shares, and would generally not be a taxable event. This is assuming it’s analogous to a tax-free spinoff event in the equities world.

Re: IRS reminds taxpayers to report virtual currency transactions

#145

Post by sokoloff »

AYBABTME wrote: post #117
maxerickson wrote: post #63

Earlier quoted context omitted.

What reforms do you propose? It seems perfectly reasonable to me that income is income regardless of whether it is dollars or magic beans and that gains on investments are taxed largely without regard for the form of the investment.

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.

Re: IRS reminds taxpayers to report virtual currency transactions

#146

Post by JumpCrisscross »

iamdave wrote: post #102
JumpCrisscross wrote: post #95

Earlier quoted context omitted.

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.

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.

Re: IRS reminds taxpayers to report virtual currency transactions

#147

Post by sekh60 »

kchoudhu wrote: post #127
charlesdm wrote: post #114

Earlier quoted context omitted.

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.

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.

Re: IRS reminds taxpayers to report virtual currency transactions

#148

Post by charlesdm »

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.

You might also have to pay tax then, if your income exceeds a certain threshold. Good times.

Re: IRS reminds taxpayers to report virtual currency transactions

#149

Post by saosebastiao »

kentm wrote: post #37
saosebastiao wrote: post #32

Earlier quoted context omitted.

> Exchanging one token for another — for example, using Ethereum to purchase an altcoin — creates a taxable event. The token is treated as being sold, thus generating capital gains or losses. Which is absurdly difficult for the average person to account for. If I buy 60000 XRP for 4 BTC, what is my cost basis? Do I have to keep track of how much those bitcoins were worth on a different exchange with Fiat pairings at…

> 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 KRW/BTC market on Bithumb?

Re: IRS reminds taxpayers to report virtual currency transactions

#150

Post by chanfest22 »

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

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