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US Tax Law - Need Help Calculating


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3 minutes ago, bachmanity said:

At best it was a grey area before, even though many CPAs even in 2017 said you cannot do it. So there is a pretty decent chance that if you file a 1031 like kind exchange form and list crypto on it that you may get audited by IRS in later years and be assessed penalties and fees. If you want to play it safe then just pay tax on your trades. If not then best of luck

I agree but it's easier said then done. Some cryptos are a little easier than others. For example, I want to trade some LTC for XRB (Raiblocks) but there isn't a good way to tell the USD value of Raiblocks. I can get within 1 dollar or so per XRB but i'd like to be 100% exact.

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6 minutes ago, CryptoMaster1000 said:

I agree but it's easier said then done. Some cryptos are a little easier than others. For example, I want to trade some LTC for XRB (Raiblocks) but there isn't a good way to tell the USD value of Raiblocks. I can get within 1 dollar or so per XRB but i'd like to be 100% exact.

Im dealing with the same issues right now. Ive been talking with my CPA. Ill probably try bitcoin.tax to make an 8949

I imagine that the IRS will be as equally confused as everyone else so as long as youre trying to pay taxes and getting very close then even in the worst case senario and got audited i think they would go easy on you. As opposed to someone who tries a like kind exchange or doesn't report any trades at all.

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44 minutes ago, bachmanity said:

At best it was a grey area before, even though many CPAs even in 2017 said you cannot do it. So there is a pretty decent chance that if you file a 1031 like kind exchange form and list crypto on it that you may get audited by IRS in later years and be assessed penalties and fees. If you want to play it safe then just pay tax on your trades. If not then best of luck

i'm definitely wanting to be 100% compliant - the issue is that even this new law is a "grey area", because it takes affect 1/1/18, but there's still a possibility to get audited for activity prior to this... it's so bogus.

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2 minutes ago, g___ said:

i'm definitely wanting to be 100% compliant - the issue is that even this new law is a "grey area", because it takes affect 1/1/18, but there's still a possibility to get audited for activity prior to this... it's so bogus.

Yes it is bogus.

I would talk with a tax professional about it. But my understanding is that even for 2017 taxes, its is pretty grey to call it a like kind exchange. Maybe it will be fine but who ever knows what politicians will choose in the future and if they decide to go after crypto traders then they could audit people for filing 1031 for crypto to crypto trades and claim that you filed an incorrect tax return. At the same time, were all hoping XRP will be at the moon by then and the penalty amount might be nothing compared to future profits

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1 minute ago, bachmanity said:

Yes it is bogus.

I would talk with a tax professional about it. But my understanding is that even for 2017 taxes, its is pretty grey to call it a like kind exchange. Maybe it will be fine but who ever knows what politicians will choose in the future and if they decide to go after crypto traders then they could audit people for filing 1031 for crypto to crypto trades and claim that you filed an incorrect tax return. At the same time, were all hoping XRP will be at the moon by then and the penalty amount might be nothing compared to future profits

yup, definitely having a tax professional prepare for me this year. i would like to think that the IRS will provide more details closer to april ?

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4 hours ago, eoma said:

When you cash out a couple million dollars a few years from now after XRP mooning, you think the IRS isn't going to have a few questions if they have no trading history for you? 

The IRS takes more than 6 months to update a change to your EIN. Do you really think they are going to have the time or resources to dig deeper into transactions that they have no proof occurred? No. They will just want their percentage depending on the amount of deposit. 

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1 minute ago, TheXRPer said:

The IRS takes more than 6 months to update a change to your EIN. Do you really think they are going to have the time or resources to dig deeper into transactions that they have no proof occurred? No. They will just want their percentage depending on the amount of deposit. 

I'm not convinced but good luck to you.

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23 hours ago, CryptoMaster1000 said:

I need some help with tracking my taxable events for my cryptocurrency trading and think that many others struggle with how to record taxes with the new tax laws that went into affect January 1, 2018. It is pretty straight forward if you buy a crypto with USD and then sell the same crypto for USD.

Where I am having trouble is if I buy a crypto with USD then trade that crypto for another crypto. For example, if I buy ETH on GDAX with USD I record that as a line item in my excel file then calculating the cost basis is easy. Now I send that ETH to Binance and Trade it for XRP. According to the new tax laws my ETH to XRP trade is now a taxable event. In the past, people could use IRC 1031 which allowed for deferred taxes on like kind exchanges of property. Cryptocurrency has been identified by the US government as intagible property for several years now. As far as I understand it, the government has changed IRC 1031 starting in 2018 to replace the word "property" to "real property" making crypto currency no longer eligible under this rule. This means all crypto to crypto exchanges are now a taxable event.

I need advice on how to calculate the USD value of a like kind exchange. I want a way to get this exact and have definitive proof that my numbers are accurate if I was to be audited.

Lets keep it simple with a hypothetical: I buy 1 ETH for 10 dollars (cost basis) on January 1, 2018 at 5pm and then trade that ETH 1 week later on January 8, 2018 for 5 XRP. Now I have to find out how much my ETH was worth after holding it for 1 week when I "cashed out" for XRP which means I have to figure out how much XRP was worth in USD at the exact second of my trade. So if my XRP was worth $4 each at the time of that trade that means my ETH appreciated from my cost basis of $10 to $20 (because I traded the 1 ETH for 5 XRP which are worth $4 each). In addition, my new cost basis for the XRP would be $20, so I guess I would have 2 line items for that one trade (A sell line item for ETH and a buy line item for XRP).

Basically, I would have a taxable gain of $10 for my ETH and a cost basis established for my XRP of $20.

So how do I capture the Fair Market USD Value of XRP at the time of my trade of ETH to XRP???? There is almost no way to be exact with the amount of fluctuation in price per second.

Advice?

 

Any advice on tracking this is appreciated.

I found this site to be of great use.

https://cointracking.info/

I pulled my info from Bitstamp, imported it.  Printed 3 reports for my taxes.  Easy Pesy.

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18 hours ago, TheXRPer said:

The IRS takes more than 6 months to update a change to your EIN. Do you really think they are going to have the time or resources to dig deeper into transactions that they have no proof occurred? No. They will just want their percentage depending on the amount of deposit. 

That seems like bad advise based on almost every article I've looked up about taxes and crypto trading. I would just recommended you talk with a tax professional about it.

Seems more likely that the IRS would just have a blanket view that any person who reports gains above X amount from crypto trading that didn't file anything in the previous years to show where it came from automatically gets audited.

http://cryptocurrencyfacts.com/2017/12/30/the-tax-rules-for-crypto-in-the-u-s-simplified/

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