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It sounds like the tax software you used screwed something up and did not account for your cost basis correctly. I would just pay an accountant who has experien

It sounds like the tax software you used screwed something up and did not account for your cost basis correctly. I would just pay an accountant who has experience with crypto trades to file it for you properly. The IRS is pretty reasonable if you provide documentation correcting mistakes.

alephnan 5y ago
Well, the numbers output by the program are reasonable. Total proceeds - total cost basis = taxable income My theory is that the IRS is interpreting the total cost basis as $0. They are ignoring all my BUY events and that the crypto is appearing out of thin air (without regard for law of conservation of energy and costs Elon Musk is complaining about). The reason I didn’t originally go to a tax professional is because my computer program made 100,000 trades. I didn’t trust a mom and pop shop to properly account this this, especially since there were trades between different cryptocurrencies which makes the situation even more complicated. Atleast the service’s output is within the same order of magnitude as the money I withdrew from the exchange, less the money I deposited in. Whereas the IRS liability is 20x this
- tldrthelaw 5y ago
  A lot of this is reflective of bad tax advice. Not blaming you just observing. >Total proceeds - total cost basis = taxable income Not taxable income but capital gains (unless you're talking about coins you mined, which is indeed ordinary income). >I didn’t trust a mom and pop shop to properly account this this, especially since there were trades between different cryptocurrencies which makes the situation even more complicated. It really doesn't make it much more complicated for taxes owed purposes. As far as the IRS is concerned, you can't "buy" anything with cryptocurrency. Its akin to a bartering of capital assets. So if you buy $10 worth of BTC and it appreciates and you use it to buy $100 worth of ETH and then you sell the ETH at $200 you have $190 of short or long term capital gains, depending on how long that all took. Cryptocurrency is property, not currency, for IRS purposes. Each of those transfers is a taxable event, but the tabulations is relatively straightforward and should be well within the grasp of a moderately with-the-times CPA. As I mention above, get a tax attorney now if these values are anything you can't afford just straight up having to pay, plus fines, at the end of all this.
alephnan 5y ago
I used these guys. https://bitcoin.tax/home https://bitcoin.tax/home You can choose different accounting algorithms ( FIFO, LIFO, average cost )

alephnan 5y ago

Well, the numbers output by the program are reasonable. Total proceeds - total cost basis = taxable income My theory is that the IRS is interpreting the total cost basis as $0. They are ignoring all my BUY events and that the crypto is appearing out of thin air (without regard for law of conservation of energy and costs Elon Musk is complaining about). The reason I didn’t originally go to a tax professional is because my computer program made 100,000 trades. I didn’t trust a mom and pop shop to properly account this this, especially since there were trades between different cryptocurrencies which makes the situation even more complicated. Atleast the service’s output is within the same order of magnitude as the money I withdrew from the exchange, less the money I deposited in. Whereas the IRS liability is 20x this

tldrthelaw 5y ago
A lot of this is reflective of bad tax advice. Not blaming you just observing. >Total proceeds - total cost basis = taxable income Not taxable income but capital gains (unless you're talking about coins you mined, which is indeed ordinary income). >I didn’t trust a mom and pop shop to properly account this this, especially since there were trades between different cryptocurrencies which makes the situation even more complicated. It really doesn't make it much more complicated for taxes owed purposes. As far as the IRS is concerned, you can't "buy" anything with cryptocurrency. Its akin to a bartering of capital assets. So if you buy $10 worth of BTC and it appreciates and you use it to buy $100 worth of ETH and then you sell the ETH at $200 you have $190 of short or long term capital gains, depending on how long that all took. Cryptocurrency is property, not currency, for IRS purposes. Each of those transfers is a taxable event, but the tabulations is relatively straightforward and should be well within the grasp of a moderately with-the-times CPA. As I mention above, get a tax attorney now if these values are anything you can't afford just straight up having to pay, plus fines, at the end of all this.

alephnan 5y ago

I used these guys. https://bitcoin.tax/home https://bitcoin.tax/home You can choose different accounting algorithms ( FIFO, LIFO, average cost )