5 ms·

Hate to be this guy all the time, but if your case is anything other than straightforward, and there are large amounts at stake, talk to a tax attorney (grain o

Hate to be this guy all the time, but if your case is anything other than straightforward, and there are large amounts at stake, talk to a tax attorney (grain of salt: I am one). Form websites and tutorials are all well and good, and will probably work out for more people than they don't, but you super don't want to screw up your taxes. When the bill comes due, it'll be years down the line, and for an unrecognizable sum. Your state bar can put you in touch with one. Avoid folks marketing themselves as something like "tHe CrYpTo LaWyER."

rawtxapp 5y ago
Out of curiosity, what's your recommendation on how to differentiate a very competent tax lawyer from one that's merely good? Also, what's wrong with "crypto lawyer" people?
- tldrthelaw 5y ago
  Domain-specific knowledge. You can't go point to point with even a marginally competent lawyer on the law (probably), but you know a lot about your issue. Can they hang? In the case of crypto, do their eyes glaze over if you refer to an altcoin? Do they use "bitcoin" and "blockchain" interchangeably? Use same process for whatever your issue is -- SaaS contracts, tech trans, etc. The crypto lawyer folks are, by and large, claiming to be experts in a practice that is so new and so without firm guidance as to be practically the tax wild west. Right now we are in the metaphor stage, we're defining everything involved with cryptocurrency (from a tax perspective) with metaphors to other things: currency, stock, digital goods, etc. The cases that will be cited forever to define crypto for tax purposes are going to be litigated in the next few years, don't be one of them. TLDR: Look for a tax attorney that knows the tech behind cryptocurrency well enough and doesn't make any promises or guarantees. Edit: One additional point, merely competent attorneys won't be published in their field. If you're looking for an expert find someone who is contributing to the discussion in their area.
  - t0mbstone 5y ago
    TL;DR: Find a good crypto lawyer
  - vmception 5y ago
    Yeah dont listen to this guy unless you want to spend 15 hours telling a licensed professional that digital assets have price charts and are extremely liquid for the needs of 99% of people and easily convertible to fiat, all while they keep deflecting to some old irrelevant headline that has nothing to do with you paying taxes on assets received and traded. Find a lawyer that is advertising competency in this field, is willing to look at the nature of transactions instead of just assuming everything is capital gains or losses. I’ve handheld many financial professionals on crypto topics over the last 5 years. It is a godsend that so many have moved to fill in a niche now.
    - tldrthelaw 5y ago
      None of this means anything. "Nature of the transaction" is not a thing. Like-kind exchanges no longer exist. Transacting in crypto, to buy something or to sell it, is a taxable transaction of a capital asset and results in a capital gain or capital loss. As for the "licensed professional" dig, they're the only people who are going to represent you in front of the IRS when bad advice gets you in trouble. Do with that information what you will. So FWIW, look out for ^ these guys too. Talk to your state or the federal bar taxation section.
      - vmception 5y ago
        This is uninspired, the nature of the transaction includes vesting schedules, 83(b) elections, 83(i) elections, donations to tax exempt organizations, and much much more. Nobody said anything about like-kind nonsense but for some reason thats the entire universe of your meta considerations. Yeah, I’m not really responding to you at this point, everyone else that makes it this far in The thread, the point is clear: find someone inspired enough and willing enough to look at the nature of a transaction and its associated tax compliance even if they are unfamiliar with the assets used in the transaction but ideally are familiar with crypto assets being used instead of cash or securities. On this point, both of us are saying the same thing, except that the other person thinks that someone advertising domain expertise will give bad guidance. There is no way of gauging that from that assumption alone.
adabyron 5y ago
In your opinion, does the IRS give leniency towards people who make their best effort by either hiring a tax person, paying for software or both? Cryptocurrency taxes are insanely awful, even if you're not talking big money. Just trying to be accurate is near impossible if you've moved your money around exchanges a few times & spent some on goods. Unless you have lots of money in Crypto it seems like trying to do honest taxes on it costs more than any money you would have made over the past few years.
- tldrthelaw 5y ago
  IMO, not legal advice, the investigators are human beings. Good faith efforts to comply with the law will net you better results than avoidance. This is also reflected in the tax code which is replete with examples of higher fines for, say, undeclared income as against under-declared income.
- mikestew 5y ago
  As one who probably should hire an accountant more often than I do, I've underpaid the IRS a few times. Look, despite whatever image popular media might want to portray, the IRS just wants what's owed and not to anally violate you. You'll get a letter in the mail stating "here's how much you owed" (sidenote: then WTF didn't you tell me that to begin with? Could have saved both of us a lot of trouble.) You write the IRS a check, along with some extra for penalty, and you never hear from them again. My anecdata relate to stock trades, so kinda relevant to your question. Do the best you can (and really, hire an accountant), and it'll be fine. Now, if one is blatantly practicing quasi-legal "tax avoidance" then you're on your own. But my experience, as a person who did the best they could and still screwed it up, is that the IRS is not nearly the scary monster it is made out to be.
  - tldrthelaw 5y ago
    Mostly agreed, with the exception that if you're construed to have been engaging in tax avoidance -- regardless of whether you are or not -- you'll just as soon be on your own.
joshstrange 5y ago
What are your thoughts on the various Crypto-tax services? For the first time in a while I'm going to have to deal with Crypto on my 2021 returns and my plan was to use on of the SaaS' out there for it. We are talking <100 (probably <40) trades max for my use-case and they seemed to be a good choice (as they import trades from major exchanges and spit out the needed IRS form) to use in addition to my normal tax preparing software. Also, if it's not too much to ask, how should one handle crypto that they mined 6+ years ago, never declared (it was worth <$100 at the time of mining), and now want to cash out? My understanding is I was supposed to declare it as income way back then and now I would just pay capital gains (long term in my case) taxes on it. I'm happy to file some kind of an addendum but is it needed for <$100?
- megameter 5y ago
  I have been dealing with a similar problem: Very old holdings that I first traded for back in 2013. It's unfeasible to record what I traded then since it goes through a trail of dead exchanges. I've been filing them as capital gains as I trade them now, dating their purchase time back to the year I originally traded for them(thus making them long-term), and their acquisition price as $0. Marking acquisition price on trades to $0 is consistent with how I've seen the IRS behave in the past when I failed to report stock trades accurately($1mm volume = $1mm taxable when this occurs), and since the prices have increased 1000% in most instances(I buy and hold for years, and while I traded in 2017-2019, I did not trade at all in 2020) the initial cost is easy for me to write off. I plan to use Cointracker's reports going forward.
  - tldrthelaw 5y ago
    This tracks. Being transparent if you're audited will be key. You're trying to keep track of things, and trying to pay what you owe based on the information you have. Just as a heads up for other folks reading this, having a basis of $0 isn't the same as paying tax on the mined value at ordinary income rates (cap gains rate differs from ordinary income rates). Mined coins and bought coins are treated differently owing to how they're acquired.
- tldrthelaw 5y ago

rawtxapp 5y ago

Out of curiosity, what's your recommendation on how to differentiate a very competent tax lawyer from one that's merely good? Also, what's wrong with "crypto lawyer" people?

tldrthelaw 5y ago
Domain-specific knowledge. You can't go point to point with even a marginally competent lawyer on the law (probably), but you know a lot about your issue. Can they hang? In the case of crypto, do their eyes glaze over if you refer to an altcoin? Do they use "bitcoin" and "blockchain" interchangeably? Use same process for whatever your issue is -- SaaS contracts, tech trans, etc. The crypto lawyer folks are, by and large, claiming to be experts in a practice that is so new and so without firm guidance as to be practically the tax wild west. Right now we are in the metaphor stage, we're defining everything involved with cryptocurrency (from a tax perspective) with metaphors to other things: currency, stock, digital goods, etc. The cases that will be cited forever to define crypto for tax purposes are going to be litigated in the next few years, don't be one of them. TLDR: Look for a tax attorney that knows the tech behind cryptocurrency well enough and doesn't make any promises or guarantees. Edit: One additional point, merely competent attorneys won't be published in their field. If you're looking for an expert find someone who is contributing to the discussion in their area.
- t0mbstone 5y ago
  TL;DR: Find a good crypto lawyer
- vmception 5y ago
  Yeah dont listen to this guy unless you want to spend 15 hours telling a licensed professional that digital assets have price charts and are extremely liquid for the needs of 99% of people and easily convertible to fiat, all while they keep deflecting to some old irrelevant headline that has nothing to do with you paying taxes on assets received and traded. Find a lawyer that is advertising competency in this field, is willing to look at the nature of transactions instead of just assuming everything is capital gains or losses. I’ve handheld many financial professionals on crypto topics over the last 5 years. It is a godsend that so many have moved to fill in a niche now.
  - tldrthelaw 5y ago
    None of this means anything. "Nature of the transaction" is not a thing. Like-kind exchanges no longer exist. Transacting in crypto, to buy something or to sell it, is a taxable transaction of a capital asset and results in a capital gain or capital loss. As for the "licensed professional" dig, they're the only people who are going to represent you in front of the IRS when bad advice gets you in trouble. Do with that information what you will. So FWIW, look out for ^ these guys too. Talk to your state or the federal bar taxation section.
    - vmception 5y ago
      This is uninspired, the nature of the transaction includes vesting schedules, 83(b) elections, 83(i) elections, donations to tax exempt organizations, and much much more. Nobody said anything about like-kind nonsense but for some reason thats the entire universe of your meta considerations. Yeah, I’m not really responding to you at this point, everyone else that makes it this far in The thread, the point is clear: find someone inspired enough and willing enough to look at the nature of a transaction and its associated tax compliance even if they are unfamiliar with the assets used in the transaction but ideally are familiar with crypto assets being used instead of cash or securities. On this point, both of us are saying the same thing, except that the other person thinks that someone advertising domain expertise will give bad guidance. There is no way of gauging that from that assumption alone.

adabyron 5y ago

In your opinion, does the IRS give leniency towards people who make their best effort by either hiring a tax person, paying for software or both? Cryptocurrency taxes are insanely awful, even if you're not talking big money. Just trying to be accurate is near impossible if you've moved your money around exchanges a few times & spent some on goods. Unless you have lots of money in Crypto it seems like trying to do honest taxes on it costs more than any money you would have made over the past few years.

tldrthelaw 5y ago
IMO, not legal advice, the investigators are human beings. Good faith efforts to comply with the law will net you better results than avoidance. This is also reflected in the tax code which is replete with examples of higher fines for, say, undeclared income as against under-declared income.
mikestew 5y ago
As one who probably should hire an accountant more often than I do, I've underpaid the IRS a few times. Look, despite whatever image popular media might want to portray, the IRS just wants what's owed and not to anally violate you. You'll get a letter in the mail stating "here's how much you owed" (sidenote: then WTF didn't you tell me that to begin with? Could have saved both of us a lot of trouble.) You write the IRS a check, along with some extra for penalty, and you never hear from them again. My anecdata relate to stock trades, so kinda relevant to your question. Do the best you can (and really, hire an accountant), and it'll be fine. Now, if one is blatantly practicing quasi-legal "tax avoidance" then you're on your own. But my experience, as a person who did the best they could and still screwed it up, is that the IRS is not nearly the scary monster it is made out to be.
- tldrthelaw 5y ago
  Mostly agreed, with the exception that if you're construed to have been engaging in tax avoidance -- regardless of whether you are or not -- you'll just as soon be on your own.

joshstrange 5y ago

What are your thoughts on the various Crypto-tax services? For the first time in a while I'm going to have to deal with Crypto on my 2021 returns and my plan was to use on of the SaaS' out there for it. We are talking <100 (probably <40) trades max for my use-case and they seemed to be a good choice (as they import trades from major exchanges and spit out the needed IRS form) to use in addition to my normal tax preparing software. Also, if it's not too much to ask, how should one handle crypto that they mined 6+ years ago, never declared (it was worth <$100 at the time of mining), and now want to cash out? My understanding is I was supposed to declare it as income way back then and now I would just pay capital gains (long term in my case) taxes on it. I'm happy to file some kind of an addendum but is it needed for <$100?

megameter 5y ago
I have been dealing with a similar problem: Very old holdings that I first traded for back in 2013. It's unfeasible to record what I traded then since it goes through a trail of dead exchanges. I've been filing them as capital gains as I trade them now, dating their purchase time back to the year I originally traded for them(thus making them long-term), and their acquisition price as $0. Marking acquisition price on trades to $0 is consistent with how I've seen the IRS behave in the past when I failed to report stock trades accurately($1mm volume = $1mm taxable when this occurs), and since the prices have increased 1000% in most instances(I buy and hold for years, and while I traded in 2017-2019, I did not trade at all in 2020) the initial cost is easy for me to write off. I plan to use Cointracker's reports going forward.
- tldrthelaw 5y ago
  This tracks. Being transparent if you're audited will be key. You're trying to keep track of things, and trying to pay what you owe based on the information you have. Just as a heads up for other folks reading this, having a basis of $0 isn't the same as paying tax on the mined value at ordinary income rates (cap gains rate differs from ordinary income rates). Mined coins and bought coins are treated differently owing to how they're acquired.
tldrthelaw 5y ago