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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 w

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).

chanfest22 9y ago
+1 There are also tools like www.cointracker.io out there to simplify the complexity of these crypto taxation rules
- Baeocystin 9y ago
  Oh, that looks useful. Thanks!
- kbaker 9y ago
  Also https://bitcoin.tax https://bitcoin.tax, does everything for you pretty much.
  - hesdeadjim 9y ago
    Worked well for me. I imagine when most people import their trades they will be very surprised by what they owe. I had no idea (but it makes sense) that when I gave some bitcoin gifts it followed the FIFO rules despite the fact that I had just purchased some to gift.
TallGuyShort 9y ago
The government needs to fix the problem that it's so difficult to know what you're required to pay without just paying the maximum guess (and then pay more ahead of time to avoid penalties). I've reported an instance of 2 conflicting statements in 2 separate IRS forms to the IRS, and rather than clarifying what was required they referred me to a tax advisor, who also didn't know the answer to the question. So we took the more liberal guess, and filed. And then had to rework it anyway because the law for how much tax I was required to pay in 2017 changed in 2018 anyway. The principles that we consider "rule of law" don't seem to apply to tax law.
- s73v3r_ 9y ago
  It's not the government's fault you lost track of your records.
  - TallGuyShort 9y ago
    I'm not even talking about that - parent comment talks about requirements that are literally impossible to comply with, and I talk about laws that are put into place after a tax year ends and apply retroactively, and official documents that contradict one another and the inability to get an official explanation from the government prior to the filing deadline. How is any of that even remotely "losing track of my records"? edit: Let me be even more detailed. I had to have my accountant rework my taxes 3 times. Once because of a retroactive law change after the end of the tax year. Once because of the inconsistency I discovered in official documents. And once because ETrade's documents and my employer's conflicted. Both of the latter were prepared by professionals. That's pretty typical of my filings. If it's so complex that all of that is fairly routine, that IS the government's problem. I have no problem keeping track of my own records; in fact my own record keeping and fastidiousness led to the discovery of all 3 of those problems.
    - adrianratnapala 9y ago
      > in fact my own record keeping and fastidiousness led to the discovery of all 3 of those problems. Does that mean it might be safer to be less fastidious so that no-one can uncover records that never existed?
      - TallGuyShort 9y ago
        The records exist in all these cases. I operate under the assumption that the IRS is better at noticing these discrepancies than I am and that the cost of reworking it with my accountant is less than the cost of getting audited by an agency that gets off on this.
    - deleted 9y ago
      [deleted]
Htyv 9y ago
Why do people put up with that extortion?
tzs 9y ago
> 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”. Shouldn't that be "pay the minimum amount that (1) you can reasonably argue you believe is what you owe, and (2) is close enough to the maximum possible under the worst case scenario that you will not be subject to underpayment penalties if you are audited and they determine you owe the maximum"?
cmurf 9y ago
Not maximum possible. This isn't that difficult to compute. Not so long ago, 1099-B only showed the sale price of stocks (funds, etc) and you had to go back and compute basis yourself from the confirmations, even if the asset purchase was 50 years ago. It's no different for a house sale. Having a CPA doesn't help at all whatsoever to compensate for bad record keeping. There are other ways to do this that would be simpler, e.g. tax equals 1-2% of the asset value per year, rather than taxing the income. This isn't fundamentally different from property tax computation.
- zdragnar 9y ago
  > tax equals 1-2% of the asset value per year, rather than taxing the income So penalize everyone in down years when their stocks lose money, plus wipe out a ton of potential growth in 401k accounts? At least, that's what it sounds like to me.
  - cmurf 9y ago
    Lack of imagination. First, the biggest complaint sould be that it's regressive. Second, no one would accept 1-2% tax on retirement assets, even though this would actually benefit them over a long haul: grow tax free for 40 years, and then pay a n% asset tax, where n=asset pool (your retirement account) age? Almost everyone does better with Roth versions of IRAs and 401(k)'s anyway. Pay the tax up front, no tax at the back end, and thus basis and record keeping isn't even relevant. There's a bunch of ways to simplify this while also making it fair if it weren't for the greedy rich people who want regressive taxes, i.e. flat tax.
anonymous5133 9y ago
I work as a tax auditor and this is completely false. Taxpayers only need to pay the MINIMUM amount of tax required by law, not the maximum. If you are audited then we will tell you why you owe additional tax. No, you will not go to jail for paying less tax but upon audit you will be required to pay the deficiency or provide additional explanations/documents etc. Then you can introduce any counter arguments like you didn't know such a law exists, the tax code is ambiguous etc. Making these types of claims will help to provide case law to clarify it for others as well as for auditors. I agree that the taxation of crypto related transaction is quite ambiguous when you start getting into the theoretical nature of how the transaction is conducted.
- throwawaybbqed 9y ago
  I have two questions: 1) If one had used bitcoin as a currency (bought pizza, bubblegum, etc.), are these new "treatments" of cryptocurrency implying one has to report each of these purchases and the tax implication there in? 2) Lets say you are a miner and mine a bitcoin a month (I know not realistic but helps simplify question). Now, lets say you buy pizza with bitcoins from your wallet every month. What is the cost basis to use? The price is pretty volatile .. so what the heck are you supposed to do?
  - spookthesunset 9y ago
    Of course you need to report them. If you used AMZN stock to buy bubble gum or shoes, you'd have to report it too. Just because it is named crypto "currency" doesn't actually make it a currency...
    - deleted 9y ago
      [deleted]
    - ricardobeat 9y ago
      You can’t possibly buy bubblegum using stock. Having the properties of a currency makes them currencies!

chanfest22 9y ago

+1 There are also tools like www.cointracker.io out there to simplify the complexity of these crypto taxation rules

Baeocystin 9y ago
Oh, that looks useful. Thanks!
kbaker 9y ago
Also https://bitcoin.tax https://bitcoin.tax, does everything for you pretty much.
- hesdeadjim 9y ago
  Worked well for me. I imagine when most people import their trades they will be very surprised by what they owe. I had no idea (but it makes sense) that when I gave some bitcoin gifts it followed the FIFO rules despite the fact that I had just purchased some to gift.

TallGuyShort 9y ago

The government needs to fix the problem that it's so difficult to know what you're required to pay without just paying the maximum guess (and then pay more ahead of time to avoid penalties). I've reported an instance of 2 conflicting statements in 2 separate IRS forms to the IRS, and rather than clarifying what was required they referred me to a tax advisor, who also didn't know the answer to the question. So we took the more liberal guess, and filed. And then had to rework it anyway because the law for how much tax I was required to pay in 2017 changed in 2018 anyway. The principles that we consider "rule of law" don't seem to apply to tax law.

s73v3r_ 9y ago
It's not the government's fault you lost track of your records.
- TallGuyShort 9y ago
  I'm not even talking about that - parent comment talks about requirements that are literally impossible to comply with, and I talk about laws that are put into place after a tax year ends and apply retroactively, and official documents that contradict one another and the inability to get an official explanation from the government prior to the filing deadline. How is any of that even remotely "losing track of my records"? edit: Let me be even more detailed. I had to have my accountant rework my taxes 3 times. Once because of a retroactive law change after the end of the tax year. Once because of the inconsistency I discovered in official documents. And once because ETrade's documents and my employer's conflicted. Both of the latter were prepared by professionals. That's pretty typical of my filings. If it's so complex that all of that is fairly routine, that IS the government's problem. I have no problem keeping track of my own records; in fact my own record keeping and fastidiousness led to the discovery of all 3 of those problems.
  - adrianratnapala 9y ago
    > in fact my own record keeping and fastidiousness led to the discovery of all 3 of those problems. Does that mean it might be safer to be less fastidious so that no-one can uncover records that never existed?
    - TallGuyShort 9y ago
      The records exist in all these cases. I operate under the assumption that the IRS is better at noticing these discrepancies than I am and that the cost of reworking it with my accountant is less than the cost of getting audited by an agency that gets off on this.
  - deleted 9y ago
    [deleted]

Htyv 9y ago

Why do people put up with that extortion?

tzs 9y ago

> 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”. Shouldn't that be "pay the minimum amount that (1) you can reasonably argue you believe is what you owe, and (2) is close enough to the maximum possible under the worst case scenario that you will not be subject to underpayment penalties if you are audited and they determine you owe the maximum"?

cmurf 9y ago

Not maximum possible. This isn't that difficult to compute. Not so long ago, 1099-B only showed the sale price of stocks (funds, etc) and you had to go back and compute basis yourself from the confirmations, even if the asset purchase was 50 years ago. It's no different for a house sale. Having a CPA doesn't help at all whatsoever to compensate for bad record keeping. There are other ways to do this that would be simpler, e.g. tax equals 1-2% of the asset value per year, rather than taxing the income. This isn't fundamentally different from property tax computation.

zdragnar 9y ago
> tax equals 1-2% of the asset value per year, rather than taxing the income So penalize everyone in down years when their stocks lose money, plus wipe out a ton of potential growth in 401k accounts? At least, that's what it sounds like to me.
- cmurf 9y ago
  Lack of imagination. First, the biggest complaint sould be that it's regressive. Second, no one would accept 1-2% tax on retirement assets, even though this would actually benefit them over a long haul: grow tax free for 40 years, and then pay a n% asset tax, where n=asset pool (your retirement account) age? Almost everyone does better with Roth versions of IRAs and 401(k)'s anyway. Pay the tax up front, no tax at the back end, and thus basis and record keeping isn't even relevant. There's a bunch of ways to simplify this while also making it fair if it weren't for the greedy rich people who want regressive taxes, i.e. flat tax.

anonymous5133 9y ago

I work as a tax auditor and this is completely false. Taxpayers only need to pay the MINIMUM amount of tax required by law, not the maximum. If you are audited then we will tell you why you owe additional tax. No, you will not go to jail for paying less tax but upon audit you will be required to pay the deficiency or provide additional explanations/documents etc. Then you can introduce any counter arguments like you didn't know such a law exists, the tax code is ambiguous etc. Making these types of claims will help to provide case law to clarify it for others as well as for auditors. I agree that the taxation of crypto related transaction is quite ambiguous when you start getting into the theoretical nature of how the transaction is conducted.

throwawaybbqed 9y ago
I have two questions: 1) If one had used bitcoin as a currency (bought pizza, bubblegum, etc.), are these new "treatments" of cryptocurrency implying one has to report each of these purchases and the tax implication there in? 2) Lets say you are a miner and mine a bitcoin a month (I know not realistic but helps simplify question). Now, lets say you buy pizza with bitcoins from your wallet every month. What is the cost basis to use? The price is pretty volatile .. so what the heck are you supposed to do?
- spookthesunset 9y ago
  Of course you need to report them. If you used AMZN stock to buy bubble gum or shoes, you'd have to report it too. Just because it is named crypto "currency" doesn't actually make it a currency...
  - deleted 9y ago
    [deleted]
  - ricardobeat 9y ago
    You can’t possibly buy bubblegum using stock. Having the properties of a currency makes them currencies!