4 ms·

So I buy a small amount of crypto with every paycheck, and this year is the first year I had to report selling some of those transactions that had those tiny pu

So I buy a small amount of crypto with every paycheck, and this year is the first year I had to report selling some of those transactions that had those tiny purchases as a cost basis. It's very annoying to do it manually, as you apparently are supposed to report every single one of those weeks, and calculate what portion is from which cost basis, etc. I was feeling very overwhelmed with the thought of doing it manually. But I tried one of those bitcoin tax websites this year, and was pleasantly surprised how seamless they made it. After paying and importing my data I had the full tax forms in minutes. Thankfully I didn't owe anything for it last year because it was a temporary panic sell during the big dip from the pandemic happened last March or April, so I basically broke even for taxes, but thankfully I came to my senses a week later and bought back in again, so I still got to fully benefit from the bull run this past year. But yeah, it's not worth taking the risk of getting audited, imo. I still wish it weren't a taxable event just for switching which crypto you're in though, especially if it's on the same exchange, and only got taxed when you buy goods or services take it out to USD, but oh well.

klodolph 5y ago
> I still wish it weren't a taxable event just for switching which crypto you're in though, especially if it's on the same exchange, and only got taxed when you buy goods or services take it out to USD, but oh well. You're describing section 1031 "like-kind" exchanges. Not available for crypto, and not available for stocks either, so it's not like crypto's getting unfair treatment here (compared to stocks). You have to do the same detailed reporting you describe for stocks.
- cableshaft 5y ago
  I understand it's not available for crypto (and for stocks), I just wish that weren't the case. Also if I have to report every single 401k purchase I ever made when I'm in my 70s when I finally cash some of it out, that's going to be a pain in the butt (I assume 401k is an exception to the rules). I basically treat my crypto purchases as another form of 401k right now (without the penalties).
  - klodolph 5y ago
    With stocks, your broker just sends you a 1099 at the end of the year. It includes the cost basis of all the stock you sold that year and the date of purchase. If you sell a lot of stocks, you just get it as a CSV file and stick it into your tax software. This means paying for tax software, and probably a "higher-tier" version of it, but it's not much work. The 401k works differently, as you noted. The money goes in pre-tax and then you pay income tax when you take it out. It's basically a way to defer your income, let it grow in the stock market, and pay taxes later. Roth IRA is a little similar--you pay income taxes before you put the money in, you let it grow, but you can take the money out tax-free (subject to conditions).
  - jdavis703 5y ago
    When you’re 70 you’re not going to buy a latte from your 401k. Instead you’ll transfer the money into a regular bank account (say once a month). At the end of the year you’ll get a tax form form that lists out all your 401k withdrawals.
- notyourwork 5y ago
  Generally it seems the crypto tax complaints are from those who don't have any experience paying taxes from capital gains on stock sales or dividends.
- mgkimsal 5y ago
  if I buy and sell rubles, pounds, yen, euros, etc, do I have to pay tax on those? legit question. I've traveled a bit, but never 'exchanged' enough currency where I thought it was an issue.
  - corysama 5y ago
    The IRS wants their cut of your profits. So, if you buy $10 US worth of euros, spend half of them, the dollar tanks, and you exchange the remaining half back for $6 US, then you profited by $1 US and the IRS wants part of that one dollar.
    - Raidion 5y ago
      What happens if you buy Bitcoin, it goes up, and you buy something directly with Bitcoin? Do you get taxed on those "gains?". Or only if the proceeds end up back in USD?
      - deleted 5y ago
        [deleted]
      - smeej 5y ago
        Yes, the IRS expects you to pay taxes on the delta between the value of the coin when you bought it and the value of the good you exchanged it for.
  - klodolph 5y ago
    Yes, you are taxed on these the same way stocks and crypto are taxed. It's called "forex" or the "foreign exchange market" and the relevant search terms to answer your question are "forex capital gains". https://www.investopedia.com/articles/forex/09/forex-taxation-basics.asp https://www.investopedia.com/articles/forex/09/forex-taxatio... There are exceptions for small amounts of money used for personal reasons, I think it's $200. So if you travel to France, buy Euros, and then return to the US, and buy dollars with your leftover Euros, it won't be enough dollars to get taxed.
- kevinventullo 5y ago
  If they’re not “like-kind”, and if I’m not mistaken, that means at least you can do Tax-Loss Harvesting for highly correlated cryptos.
throwkeep 5y ago
It gets even more unwieldy if you have one like Algo that pays staking rewards every day.
- smeej 5y ago
  I've actually stopped staking for exactly this reason. I don't have enough to stake for the rewards to be worth the time hassle of dealing with this.
- sickygnar 5y ago
  I received an unsolicited airdrop which had a spot price of "$20k USD" because there was no liquidity. It's absolutely worthless. Seems like illiquid airdrops are a good way to screw someone over in the eyes of the IRS, lol

klodolph 5y ago

> I still wish it weren't a taxable event just for switching which crypto you're in though, especially if it's on the same exchange, and only got taxed when you buy goods or services take it out to USD, but oh well. You're describing section 1031 "like-kind" exchanges. Not available for crypto, and not available for stocks either, so it's not like crypto's getting unfair treatment here (compared to stocks). You have to do the same detailed reporting you describe for stocks.

cableshaft 5y ago
I understand it's not available for crypto (and for stocks), I just wish that weren't the case. Also if I have to report every single 401k purchase I ever made when I'm in my 70s when I finally cash some of it out, that's going to be a pain in the butt (I assume 401k is an exception to the rules). I basically treat my crypto purchases as another form of 401k right now (without the penalties).
- klodolph 5y ago
  With stocks, your broker just sends you a 1099 at the end of the year. It includes the cost basis of all the stock you sold that year and the date of purchase. If you sell a lot of stocks, you just get it as a CSV file and stick it into your tax software. This means paying for tax software, and probably a "higher-tier" version of it, but it's not much work. The 401k works differently, as you noted. The money goes in pre-tax and then you pay income tax when you take it out. It's basically a way to defer your income, let it grow in the stock market, and pay taxes later. Roth IRA is a little similar--you pay income taxes before you put the money in, you let it grow, but you can take the money out tax-free (subject to conditions).
- jdavis703 5y ago
  When you’re 70 you’re not going to buy a latte from your 401k. Instead you’ll transfer the money into a regular bank account (say once a month). At the end of the year you’ll get a tax form form that lists out all your 401k withdrawals.
notyourwork 5y ago
Generally it seems the crypto tax complaints are from those who don't have any experience paying taxes from capital gains on stock sales or dividends.
mgkimsal 5y ago
if I buy and sell rubles, pounds, yen, euros, etc, do I have to pay tax on those? legit question. I've traveled a bit, but never 'exchanged' enough currency where I thought it was an issue.
- corysama 5y ago
  The IRS wants their cut of your profits. So, if you buy $10 US worth of euros, spend half of them, the dollar tanks, and you exchange the remaining half back for $6 US, then you profited by $1 US and the IRS wants part of that one dollar.
  - Raidion 5y ago
    What happens if you buy Bitcoin, it goes up, and you buy something directly with Bitcoin? Do you get taxed on those "gains?". Or only if the proceeds end up back in USD?
    - deleted 5y ago
      [deleted]
    - smeej 5y ago
      Yes, the IRS expects you to pay taxes on the delta between the value of the coin when you bought it and the value of the good you exchanged it for.
- klodolph 5y ago
  Yes, you are taxed on these the same way stocks and crypto are taxed. It's called "forex" or the "foreign exchange market" and the relevant search terms to answer your question are "forex capital gains". https://www.investopedia.com/articles/forex/09/forex-taxation-basics.asp https://www.investopedia.com/articles/forex/09/forex-taxatio... There are exceptions for small amounts of money used for personal reasons, I think it's $200. So if you travel to France, buy Euros, and then return to the US, and buy dollars with your leftover Euros, it won't be enough dollars to get taxed.
kevinventullo 5y ago
If they’re not “like-kind”, and if I’m not mistaken, that means at least you can do Tax-Loss Harvesting for highly correlated cryptos.

throwkeep 5y ago

It gets even more unwieldy if you have one like Algo that pays staking rewards every day.

smeej 5y ago
I've actually stopped staking for exactly this reason. I don't have enough to stake for the rewards to be worth the time hassle of dealing with this.
sickygnar 5y ago
I received an unsolicited airdrop which had a spot price of "$20k USD" because there was no liquidity. It's absolutely worthless. Seems like illiquid airdrops are a good way to screw someone over in the eyes of the IRS, lol