U.S. Taxes - What to do?

[Highflying1]

Suppose you bought and sold Bitcoin and a number of other cryptocurrencies and moved coins around between several wallets. If you’re American, what on earth do you do? Does H&R Block know bitcoins?

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[Tiny_Tania]

I think it will be a while before we can pay to have our taxes done and not fear being jailed for mistakes, Not many people understand cryto outside those who use it.

[MintDice]

Just keep track of everything you do, transfers, cash outs, etc, for when the time comes and you need to explain. That said, moving coins from your exchange to a wallet does not equate a "sale" since you are still in possession of them. It's all about honest reporting, if you make money on a sale/exchange of btc then report it on your taxes, of course.

Something to note: exchange sites like Coinbase automatically label any btc leaving your coinbase wallet as a sale (even if you're just transferring to another wallet of yours) because they have no way of knowing where those coins go once they leave their platform. Ultimately, as I said before, it's up to you to note these movements and when the time comes apply the appropriate tax/accounting methods to fulfill your tax report. Wish there was an easier way; as crypto continues to become more ubiquitous in society these issues will surely get clarified. For now research on forums for info and see if you can find a tax professional with the appropriate knowledge!

Cheers!

[paulmaritz]

Suppose you bought and sold Bitcoin and a number of other cryptocurrencies and moved coins around between several wallets. If you’re American, what on earth do you do? Does H&R Block know bitcoins?

If you're scared and wish to declare all, try Crypto Tax Prep offered by Happy Tax: https://cryptotaxprep.com/

Alternatively:

1. They have to prove that a certain wallet belongs to you.

2. Crypto exchanges such as Coinbase and Poloniex are sharing info with the IRS - avoid them like the plague itself. Use alternative on and off-ramps. E.g. the cash option offered by LocalBitcoins.com

3. Make use of privacy tokens such as VERGE (XVG), PIVX (PIVX), Zcash (ZEC), Monero (XMR) and DASH (DASH).

I could tell you more, but then I might be in more serious trouble.

[squatter]

Suppose you bought and sold Bitcoin and a number of other cryptocurrencies and moved coins around between several wallets. If you’re American, what on earth do you do? Does H&R Block know bitcoins?

I wouldn't trust H&R Block with my taxes regardless of cryptocurrency. I hear they screw up all the time.

In a nutshell: You need to export your trading histories from all exchanges, then calculate the basis and adjusted basis of your investments. When you use USD to buy BTC, that forms the basis of your BTC investment. Let's say you bought at $1000 -- that's your basis.

Now let's say you used that BTC to buy an altcoin. The altcoin price was 0.002 BTC and the BTC price at the time was $1500. That means that your adjusted basis on your original BTC buy is $1500. So, you had a taxable gain of $500/BTC. In this example, your new altcoin investment has a basis of $3/coin. And so on.....

If you just mix all your coins together and don't keep separate, identifiable lots, then you need to calculate using FIFO or LIFO. More on that here. Good luck!

[HabBear]

I think it will be a while before we can pay to have our taxes done and not fear being jailed for mistakes, Not many people understand cryto outside those who use it.

This is an interesting comment. How much time do you think the American taxpayers have? Does the size of their holdings or transactions have any impact on the timeframe?

Taxes are a m*therf*cker, yeah? Proceed carefully.


This guy has the right idea, maybe you should hire him to help you get your affairs in order before you file with the authorities.

In a nutshell: You need to export your trading histories from all exchanges, then calculate the basis and adjusted basis of your investments. When you use USD to buy BTC, that forms the basis of your BTC investment. Let's say you bought at $1000 -- that's your basis.

Now let's say you used that BTC to buy an altcoin. The altcoin price was 0.002 BTC and the BTC price at the time was $1500. That means that your adjusted basis on your original BTC buy is $1500. So, you had a taxable gain of $500/BTC. In this example, your new altcoin investment has a basis of $3/coin. And so on.....

If you just mix all your coins together and don't keep separate, identifiable lots, then you need to calculate using FIFO or LIFO. More on that here. Good luck!

The LIFO/FIFO thing isn't as daunting as it sounds, it actually gives you more control over how you report your gains or losses.