7 ms·

A tax CPA I used in the past advised me with (hundreds of) short term equity trades to just present the before and after figures, since that represented the tru

by blunte 9y ago

A tax CPA I used in the past advised me with (hundreds of) short term equity trades to just present the before and after figures, since that represented the true income. They explained that in their experience, that was satisfactory to the IRS. It is unrealistic to expect people making frequent trades to carefully document every trade (unless perhaps that is their profession). It's even worse for cryptocurrencies, since the value of the outcome of a trade is entirely relative to some other more established asset (such as US Dollars). If you trade USD for BTC, then some time later trade BTC for XRP, then liquidate that for something more obscure (like cV), determining the value is really difficult. You would have to lookup the currency pair rates for each pair in a given trade, as well as some chain of currencies which can be associated directly with USD. Not only would that be highly inaccurate, but it could easily be argued very differently depending on which exchange(s) you used (since at any given moment, the difference of rates on different exchanges can be very significant). I think as far as the IRS is concerned, unless you're obviously getting rich, if you can just show you made reasonable effort to assess and report what you earned, they'll be satisfied. But if they think you're trying to fool them, they make take personal offense and put far more resources into nailing you than you think it's worth in lost tax revenue.

hkmurakami 9y ago
No wonder there are companies out there whose value add message is solely to provide tax compliance for crypto trading. This sounds like a nightmare since you don't have exact timestamp data for anything really.
- mathgeek 9y ago
  This isn't tax advice, but it's common accounting practice to use a daily average value for trades where you only know the date and not the exact time of the trade. There's plenty of guidance from the IRS since many crypto trade situations have corresponding traditional concepts.
kchoudhu 9y ago
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.
- charlesdm 9y ago
  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.
  - wbl 9y ago
    Customer service is a selling point.
    - charlesdm 9y ago
      Sure. But America is not the world
  - kchoudhu 9y ago
    If OP is trading abroad, I hope s/he is also keeping up with his FACTA and FBAR obligations.
    - sekh60 9y ago
      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.
      - charlesdm 9y ago
        You might also have to pay tax then, if your income exceeds a certain threshold. Good times.
Edmond 9y ago
Not unreasonable, it is the LAW. I doubt the IRS has the resources to try to acquire the kind of records they can get from traditional trading houses but if they ever could, a lot of people will be in a lot of trouble.
vidarh 9y ago
I don't agree that it's unreasonable to expect your broker etc. to provide the data, but I also agree that in general tax authorities (I have no direct experience with the IRS, but have experienced the same both in the UK and Norway) tends to look with relatively benign eyes on it if you report something that looks like you've made a reasonable effort and are unlikely to be intentionally under-reporting. E.g. I had a really chaotic year once, and instead of getting in a state of panic, I figured out the money I'd put in and what I got out, and documented that, wrote a letter explaining why I was unable to document the trades, explained that the final number I came up with would cover my full profit, promised to assist to the extent of my ability if they needed more details, and presented my taxable income on the basis of that, and they just sent me my tax statement without ever asking for more info - after all I'd openly reported income they'd otherwise not have known about without going looking (the brokerage account was in another country). As long as it doesn't look like you're trying to be overly clever in strategically omitting information, in general presumably they'll have bigger fish to try (namely the people who look like they are being overly clever in leaving out information because they're actually hiding something major) than someone who looks like they're trying their best...
cft 9y ago
Mine said "use before and after figures for us to prepare the return, but download and save detailed transaction history for the cost basis in case you get audited- they will want it". I assume I can compute the exact cost basis later and it should match the difference of before and after figures.
kyle65 9y ago
That's what I did, just provided the before and after. If I get audited, it shouldn't matter, since I already paid all the tax so they have the money. Worst case I'll just have to spend time getting all the records in order. From here on out I am keeping better records however and trying to minimize how many trades I make.
asfasgasg 9y ago
Isn't it the case that all bitcoin transactions are in some kind of . . . what do you call it . . . ledger? And don't we know roughly the price of bitcoin in USD at all times? It seems like it would be pretty easy to import all this info into a spreadsheet or even just a little Python script to calculate everything correctly according to wash rules and what have you.
- sp332 9y ago
  No, if you trade using an exchange, the transaction does not get put on the global ledger. The accounts at an exchange are kept on the exchange's own books. Trades into and out of the exchange are registered on the global ledger, but they will show up coming to/from the exchange's large working wallets, and will not be traceable to an individual user's account without inside information.

by blunte 9y ago

hkmurakami 9y ago

No wonder there are companies out there whose value add message is solely to provide tax compliance for crypto trading. This sounds like a nightmare since you don't have exact timestamp data for anything really.

mathgeek 9y ago
This isn't tax advice, but it's common accounting practice to use a daily average value for trades where you only know the date and not the exact time of the trade. There's plenty of guidance from the IRS since many crypto trade situations have corresponding traditional concepts.

kchoudhu 9y ago

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.

charlesdm 9y ago
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.
- wbl 9y ago
  Customer service is a selling point.
  - charlesdm 9y ago
    Sure. But America is not the world
- kchoudhu 9y ago
  If OP is trading abroad, I hope s/he is also keeping up with his FACTA and FBAR obligations.
  - sekh60 9y ago
    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.
    - charlesdm 9y ago
      You might also have to pay tax then, if your income exceeds a certain threshold. Good times.

Edmond 9y ago

Not unreasonable, it is the LAW. I doubt the IRS has the resources to try to acquire the kind of records they can get from traditional trading houses but if they ever could, a lot of people will be in a lot of trouble.

vidarh 9y ago

I don't agree that it's unreasonable to expect your broker etc. to provide the data, but I also agree that in general tax authorities (I have no direct experience with the IRS, but have experienced the same both in the UK and Norway) tends to look with relatively benign eyes on it if you report something that looks like you've made a reasonable effort and are unlikely to be intentionally under-reporting. E.g. I had a really chaotic year once, and instead of getting in a state of panic, I figured out the money I'd put in and what I got out, and documented that, wrote a letter explaining why I was unable to document the trades, explained that the final number I came up with would cover my full profit, promised to assist to the extent of my ability if they needed more details, and presented my taxable income on the basis of that, and they just sent me my tax statement without ever asking for more info - after all I'd openly reported income they'd otherwise not have known about without going looking (the brokerage account was in another country). As long as it doesn't look like you're trying to be overly clever in strategically omitting information, in general presumably they'll have bigger fish to try (namely the people who look like they are being overly clever in leaving out information because they're actually hiding something major) than someone who looks like they're trying their best...

cft 9y ago

Mine said "use before and after figures for us to prepare the return, but download and save detailed transaction history for the cost basis in case you get audited- they will want it". I assume I can compute the exact cost basis later and it should match the difference of before and after figures.

kyle65 9y ago

That's what I did, just provided the before and after. If I get audited, it shouldn't matter, since I already paid all the tax so they have the money. Worst case I'll just have to spend time getting all the records in order. From here on out I am keeping better records however and trying to minimize how many trades I make.

asfasgasg 9y ago

Isn't it the case that all bitcoin transactions are in some kind of . . . what do you call it . . . ledger? And don't we know roughly the price of bitcoin in USD at all times? It seems like it would be pretty easy to import all this info into a spreadsheet or even just a little Python script to calculate everything correctly according to wash rules and what have you.

sp332 9y ago
No, if you trade using an exchange, the transaction does not get put on the global ledger. The accounts at an exchange are kept on the exchange's own books. Trades into and out of the exchange are registered on the global ledger, but they will show up coming to/from the exchange's large working wallets, and will not be traceable to an individual user's account without inside information.