5 ms·

I don't think most people are underreporting out of malice. I'm guessing most with money in cryptocurrencies fall into one of two buckets: 1) People - esp. mil

I don't think most people are underreporting out of malice. I'm guessing most with money in cryptocurrencies fall into one of two buckets: 1) People - esp. millennials who have never paid capital gains taxes - who don't even realize that crypto gains are taxed. (They should, but that's a different issue.) 2) People who put money into crypto and had some decent gains (<$10,000). Come tax season, they realized how difficult it would be to report their gains and just gave up, betting that they wouldn't be audited by the IRS. Obviously if you realized massive gains and are actively evading taxes, that's a problem. But I feel for the little players here - a whole lot of people would report their capital gains if there was an easier mechanism in place. The current process of trying to figure out the dollar value of each individual trade on exchanges lacking basic reporting infrastructure is a mess. I'm not surprised that a lot of people just throw up their hands and give up. (And yes, I realize that putting an easier mechanism in place to pay taxes on crypto is inviting the sort of financial regulation that runs counter to the ethos of blockchain...but let's be honest, in their current form, cryptocurrencies are not what we were promised. They have by and large been co-opted by financial institutions and the very intermediaries they were meant to supplant.)

tfandango 9y ago
I wonder if there's an aspect of being in too deep already. I'm not sure I would have thought about reporting Bitcoin gains years ago when it was more of a technical interest. Now that it has skyrocketed, I can imagine scenarios where people wouldn't have enough USD to cover the taxes so instead of selling their Bitcoin they just keep quiet. Oklahoma had a similar thing on their state tax forms for internet sales tax, everyone just checked the "I didn't shop online" box to the tune of about 90%.
- tathougies 9y ago
  You aren't taxed on the estimated value of your bitcoin. If you bought bitcoin at $2 (for example) five years ago, and now it's worth $5000, you owe no taxes. However, if you sell the bitcoin for a gain of $4998 USD, now you owe tax on the $4998 you realized in gain. Unless, you sell your bitcoin and just spend all the money, you should be fine just keeping your money in bitcoin.
jraines 9y ago
It's nearly impossible. Here's just a few situations that are unclear (no i'm not asking for advice, nor do I think HN is my personal CPA) 1. You buy into an ICO and it exit scams 2. You get staking / masternode payouts (but don't sell them to $ or another coin) 3. You trade futures - can you use Form 6781? 4. What's your cost basis on a futures trade if not (selling/buying bitcoin with borrowed bitcoin)? 5. You receive funding/interest payouts on an open leveraged trade 6. One of your coins forks 7. You have trades on a DEX with no downloadable history 8. You have trades on an exchange which no longer exists 9. You are awarded coins as part of an airdrop to holders of (other coin) 10. You get hacked (are you sure you aren't faking that to avoid taxes, citizen?)
- defen 9y ago
  > 6. One of your coins forks I've been advised to report these as regular income, using the value of the asset on the day you received it. For example, if you were holding 1 Bitcoin on August 1 (and therefore received 1 Bitcoin Cash due to the fork) you would report regular income of $294.60 (value of Bitcoin Cash at time of fork). If you eventually sell it, your cost basis is then $294.60.
  - panarky 9y ago
    What if there's no active market at the time of the fork? For example, on October 24, 2017 for Bitcoin Gold, or on December 12, 2017 for UnitedBitcoin, there was no market. What do you do? What if there's an illiquid market with crazy prices at the time of the fork. Do you use that market price even if you're physically unable to sell your forked coins on that market?
    - sushid 9y ago
      I'm not a CPA either but considering it income on the day of the fork is assured not a burden on you. That means you have tax obligations on all potential future forks, regardless of whether you know it or do anything with that information. IIRC the suggestion I found online was to pay capital gains tax on the full amount you sold or exchanged the coin for.

tfandango 9y ago

I wonder if there's an aspect of being in too deep already. I'm not sure I would have thought about reporting Bitcoin gains years ago when it was more of a technical interest. Now that it has skyrocketed, I can imagine scenarios where people wouldn't have enough USD to cover the taxes so instead of selling their Bitcoin they just keep quiet. Oklahoma had a similar thing on their state tax forms for internet sales tax, everyone just checked the "I didn't shop online" box to the tune of about 90%.

tathougies 9y ago
You aren't taxed on the estimated value of your bitcoin. If you bought bitcoin at $2 (for example) five years ago, and now it's worth $5000, you owe no taxes. However, if you sell the bitcoin for a gain of $4998 USD, now you owe tax on the $4998 you realized in gain. Unless, you sell your bitcoin and just spend all the money, you should be fine just keeping your money in bitcoin.

jraines 9y ago

It's nearly impossible. Here's just a few situations that are unclear (no i'm not asking for advice, nor do I think HN is my personal CPA) 1. You buy into an ICO and it exit scams 2. You get staking / masternode payouts (but don't sell them to $ or another coin) 3. You trade futures - can you use Form 6781? 4. What's your cost basis on a futures trade if not (selling/buying bitcoin with borrowed bitcoin)? 5. You receive funding/interest payouts on an open leveraged trade 6. One of your coins forks 7. You have trades on a DEX with no downloadable history 8. You have trades on an exchange which no longer exists 9. You are awarded coins as part of an airdrop to holders of (other coin) 10. You get hacked (are you sure you aren't faking that to avoid taxes, citizen?)

defen 9y ago
> 6. One of your coins forks I've been advised to report these as regular income, using the value of the asset on the day you received it. For example, if you were holding 1 Bitcoin on August 1 (and therefore received 1 Bitcoin Cash due to the fork) you would report regular income of $294.60 (value of Bitcoin Cash at time of fork). If you eventually sell it, your cost basis is then $294.60.
- panarky 9y ago
  What if there's no active market at the time of the fork? For example, on October 24, 2017 for Bitcoin Gold, or on December 12, 2017 for UnitedBitcoin, there was no market. What do you do? What if there's an illiquid market with crazy prices at the time of the fork. Do you use that market price even if you're physically unable to sell your forked coins on that market?
  - sushid 9y ago
    I'm not a CPA either but considering it income on the day of the fork is assured not a burden on you. That means you have tax obligations on all potential future forks, regardless of whether you know it or do anything with that information. IIRC the suggestion I found online was to pay capital gains tax on the full amount you sold or exchanged the coin for.