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Who have you used for Crypto Taxes

Discussion in 'Asset Protection/Taxes/Legal' started by Fightrepreneur, May 8, 2018.

  1. Fightrepreneur
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    Fightrepreneur New Contributor

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    Hi TFLF.
    Just quit my slowlane job to pursue TFL.
    Im sitting on 5-6 figures of cryptocurrency profit and I really have no idea how to handle cashing any of it out. I want to get out a down payment for a duplex to start house hacking as my rent is a fortune (moving to a LCOL area from a super HCOL) which will stretch my savings months if not years while I pursue my first venture. I pulled out 10k this year already and have no idea how to pay taxes on it, H&R block was clueless

    Has anyone cashed out 20-50k+ of crypto assets and how did you do it tax wise?
     
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  2. Ungodly
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    Ungodly Tom Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    If these gains were experienced by holding the coins for more than a year(and live in the US), then you would qualify for the long term capital gains tax rate. If less, then expect full short term capital gains tax rate based on your income tax rate.
     
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  3. Fightrepreneur
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    I have been holding some for over a year. This was my understanding as well. My question is more about HOW to pay this tax. At H&R block the lady said I needed some receipt. My bank statement shows money showing up from a crypto trading platform. I don't have something to show the tax people other than that.
     
  4. Ungodly
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    Ungodly Tom Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    This explain it in enough depth: Wait, we have to file taxes on our bitcoin?

    For the form: About Schedule D (Form 1040), Capital Gains and Losses | Internal Revenue Service

    Personally, I wouldn't let someone working at H&R Block anywhere near my taxes, much less if you're reporting substantial capital gains via something like crypto. FWIW.
     
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  5. CareCPA
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    CareCPA Silver Contributor FASTLANE INSIDER Speedway Pass

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    Every transaction is a taxable event, not just when you convert it to cash. So if you go from cash to BTC, BTC to ETH, and back to BTC, you would have a gain or loss on each of the last two transactions.

    Edited: you should be able to download a report from your trading platform showing all your transactions. There is also a software that I've seen @JScott recommend, but I don't recall the name of it.
     
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  6. Fightrepreneur
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    Yeah I have a fair # of alts that I'm going to have to
    Yes I have a fair number of alts that I'll have to deal with.. yikes...
     
  7. Fightrepreneur
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  8. JScott
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    JScott Platinum Contributor FASTLANE INSIDER Speedway Pass

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    I've used both bitcoin.tax and cointracking.info to calculate my gains. They will pull in data from all major (and many minor) exchanges and will allow you to manually enter transactions as well. They will both generate an IRS Form 8949 (Disposition of Capital Assets), which can be attached to your 1040 and your capital gain/loss will flow directly to your 1040.

    Bitcoin.tax is less expensive and less full featured (also worked better for me). Cointracking.info is very full featured, but more expensive and I had some issues with incorrect cost basis on a couple transactions. I used bitcoin.tax for 2017 taxes -- I had a few hundred transactions and 6-figures in gains, and it worked great.
     
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  9. ShadowX
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    ShadowX Be Grateful Read Millionaire Fastlane FASTLANE INSIDER

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    Is it true if you find someone to give you cash in real life in exchange for it, a way to avoid tax? Hmm
     
  10. JScott
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    JScott Platinum Contributor FASTLANE INSIDER Speedway Pass

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    Sure, if you don't mind committing tax evasion/fraud. Doesn't matter to whom or how you sell it, if you sell it, you owe taxes. There are lots of ways to try to hide your sales from the government, but you still owe taxes regardless.
     
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  11. CaliforniaCPA
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    CaliforniaCPA Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    It's a funny thing that I'll hear from time to time. "Oh, I was paid in cash." As if that's some magical loophole that everyone agrees it's not taxable.

    While it's true that no one may find out about it, realize that it's still your responsibility to claim any income you earned. Same goes if you're an independent contractor... Even if your contract employer didn't give you a 1099, that doesn't absolve you of claiming the income. At the same time, you should claim all of your legal deductions so that you can pay the least amount of tax possible.

    Bitcoin, much like gold, is being treated as a currency and an asset. So if you receive compensation for services or product sales, you have to report that income. And then when you sell that asset, you have to report the gain or the loss on selling that asset.

    If you think it's weird that you have this "dual reporting," in a sense, it's really not that much different than if you charged for your services in US dollars but got paid in Euros. First you claim your income and second you would claim any gain or loss because of the fluctuation in the exchange rate from the time you billed your client till when they paid you.
     
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  12. Vigilante
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    Vigilante Legendary Contributor Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    A friend just called who dabbled in Crypto and his accountant has him super paranoid about his Crypto trading (mostly at a loss). She said the crypto itself may be an audit trigger. Everyone needs to calm down.

    1. Report your activity like you would any other investment profit or loss and
    2. Treat it ethically

    Hard to get in trouble if you simply follow the rules/laws.
     
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  13. Vigilante
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    Vigilante Legendary Contributor Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Second vote for Bitcoin.tax. Super simple. Hook it up to your exchanges, it imports all of your transactions, creates a completely detailed forensic history of your trading activity, and dumps it in to the IRS Form 8949 (not as a summary - which I think is the KEY --- but PER TRANSACTION).

    If you attempt to give the IRS a summary of your trading activity, I think it will create an issue. Bitcoin.Tax filled out my 8949 with the DETAIL TRANSACTIONS right within the IRS forms so that the trades themselves are reported (as each one is a gain or a loss on the sale). So you have to essentially itemize the trades.

    And I made more than I thought I did LOL.
     
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  14. Fightrepreneur
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    If I'm sitting on some winners but bagholding a couple losers can I declare losses if I do a big sell off the bags to offset the taxes. I have a pretty diverse altcoin portfolio, a couple are way down and I'm not banking on them anyways so I figure I can take advantage while cashing out some winners if I can declare a loss.
     
  15. CareCPA
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    CareCPA Silver Contributor FASTLANE INSIDER Speedway Pass

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    Yes, capital losses can offset capital gains.
     
  16. JScott
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    JScott Platinum Contributor FASTLANE INSIDER Speedway Pass

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    A few things to keep in mind:

    - Short-term losses must first be deducted against short-term losses and likewise with long-term;
    - If you use all losses against gains, you can only use an additional $3000 in losses to offset other income -- any additional losses need to be carried-forward;
    - You can only deduct losses in the same year as the gain, unless it's a carry-forward -- so, if you haven't paid 2017 taxes yet, you can't sell crypto today to offset last year's income.
     
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  17. Fightrepreneur
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    Fightrepreneur New Contributor

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    I'm gonna have to import everything to bitcoin.tax and then examine from there. My portfolio is a mess in terms of when I bought which coin etc. I know my wins absolutely crush my losses so I was hoping to pull out 20k of gains and then sell off some bags for a 2-3k loss and that would cover the 15% capital gains.
     
  18. CareCPA
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    CareCPA Silver Contributor FASTLANE INSIDER Speedway Pass

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    Related to what @JScott said - if you had transactions in 2017 and you already filed your taxes, you may want to re-examine if you had any reportable transactions (either gain or loss). I think the IRS will be cracking down on this in the next year or so.
     
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  19. Fightrepreneur
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    I did some alt purchases with Eth in December and I do need to go back and figure out what to do. The people who I was communicating with were convinced that it didnt matter unless you took profit, which was absolutely wrong, but I just kind of said f*ck it.

    Is there a way to go back and re do this if I already got my tax return. I was a W-2 worker in 2017 and that's all I based it off of.

    If I can show the IRS that I acted in good faith and I still screwed (assuming they get the money they are owed).

    I really don't have a problem paying taxes, its just the people I've been interacting with on this space were not taking it seriously enough when it was all chaos and everything going up 400% etc and I fell into that trap of not thinking it mattered as I hadn't pocketed any cash yet.
     
  20. CareCPA
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    Yes, you can file an amended return if you find something that should have been reported and was not. Assuming you had gains, you'll probably owe some additional tax, but it's not like they're going to bankrupt you with penalties or throw you in jail.
     
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  21. Fightrepreneur
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    Okay thats what I was worried about.
     
  22. JScott
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    Good rule of thumb is that you'll pay about .5% per month in penalties and interest on under-reported income... So, if you owe an extra $5000 and don't pay until mid-June, you'll likely owe about $50 in penalties and interest.

    That said, I'm not a tax professional, so don't take my word for anything... :)
     
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  23. CareCPA
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    I am a tax professional, and I'd say you're doing pretty well so far. You add some solid depth to my brevity.
     
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    IGP Silver Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    I know someone who missed something small in 2016, like $500 bucks. You really have a choice to make; file an amended return and potentially draw attention to yourself or take your chances at not fixing the mistake and deal with the risk.

    The statute of limitations is 3 years I believe.
     

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