[2019-08-15] New IRS Warning Target Crypto Investors Who Misreported Trades

timerland

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Seems pointless and petty even to target such smaller streamers, compared to all of the other crypto-based companies out there, it seems counter-intuitive to target the smaller fish, but I guess it had to come sometime.

I have a question though. If you lost 10,000 on a trade, but then, a month or 2 later, you earned 12,000 USD off trading, would these amounts cancel each other out (so, it'll be 2,000 profit), or would you need to report taxes for each of the transactions? I'd much prefer just reporting the total gains over a year, instead of each little transaction.

Quote from: cr1776 on August 15, 2019, 12:39:25 PM

Quote from: bbc.reporter on August 14, 2019, 08:45:12 PM

...
However, what would the IRS say if I have bitcoin to trade to an altcoin and earn profit in bitcoin? Is that taxable?
...

They would say you have a gain and need to report it as taxable income. And depending on the amounts involved you may need to file and make quarterly estimated payments.

I think they are treating altcoins the same as BTC, where if you lose money in it, you can get tax refunds, and if you profit off it, it's like profiting of BTC.

Quote from: 1Referee on August 17, 2019, 05:35:40 PM

Hello, I am the IRS; I do not provide any help when it comes to your tax reports, but when you make a mistake I'll rip your head clean off.

Most of the retailers investing and trading crypto don't have much experience with tax forms and whatnot. This is their first experience with anything related to investments in general. It only makes sense to be a little more lenient here as tax agency. People trying to do the 'good' thing by reporting their gains shouldn't be penalized but helped to correct wrong declarations.

I have zero respect for any tax agency. They expect you to fill their pockets but don't do anything to help you where possible. Get lost you swine!

I agree it's crazy how complex things are like with cryptocurrencies and taxes, and how they offer minimum help when dealing with it, and then forcing you to spend more money to find out how much money you need to pay them.

bbc.reporter

legendary

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Hello, I am a developer. We offer a solution to this problem of taxes imposed through centralized exchanges. Decentralized exchanges.

What are the best decentralized exchanges?

1Referee

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Hello, I am the IRS; I do not provide any help when it comes to your tax reports, but when you make a mistake I'll rip your head clean off.

Most of the retailers investing and trading crypto don't have much experience with tax forms and whatnot. This is their first experience with anything related to investments in general. It only makes sense to be a little more lenient here as tax agency. People trying to do the 'good' thing by reporting their gains shouldn't be penalized but helped to correct wrong declarations.

I have zero respect for any tax agency. They expect you to fill their pockets but don't do anything to help you where possible. Get lost you swine!

figmentofmyass

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Quote from: bbc.reporter on August 16, 2019, 09:11:13 PM

It appears that the IRS should develop another system for investor tax calculation.

the main problem isn't so much the system. it's coinbase.

there is no requirement for coinbase to send a 1099-B so they (for years) have been taking the bizarre approach of sending the 1099-K. they should either report nothing or report properly---instead, they are using a form intended for vendors or contractors and only reporting the gross amount. yet another huge fail for coinbase. a 1099-B with properly calculated basis would be a million times better for customers.

bbc.reporter

legendary

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This article explains what we need to know about form 1099-K. It appears that the IRS should develop another system for investor tax calculation. It might also be good to suspend tax collection until they have evaluated everything and have the new system ready.

They might have none hehehehe.

The IRS has already forced a Coinbase to report users on form 1099-K, the same form home-share and ride-share companies use to report transactions with homeowners and drivers. The federal reporting threshold for the 1099-K is currently set at $20,000 and 200 transactions per year.

The 1099-K lacks the cost basis details required to capture the capital gain/loss calculation that would ultimately determine taxable income and tax revenue for the IRS.

The reason that 1099-K are not usually accurate is that they do not report the relevant cost basis data necessary to accurately calculate capital gains/losses. Additionally, this form does not reconcile trades across multiple exchanges.

Source https://cryptoiq.co/form-1099-k-what-cryptocurrency-investors-need-to-know-in-2019/

figmentofmyass

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Quote from: bbc.reporter on August 14, 2019, 08:45:12 PM

However, what would the IRS say if I have bitcoin to trade to an altcoin and earn profit in bitcoin? Is that taxable?

there's an active congressional bill in committee right now that would allow tax exempt like-kind exchanges between bitcoin and altcoins. for now though, these are taxable transactions, and i suspect the law will remain that way.

Quote from: bbc.reporter on August 14, 2019, 08:45:12 PM

“People that have received a 1099-K from an exchange but have not filed an IRS 8949 in the 2017 tax year are the ones that we’re seeing received the most letters and who this is typically applying to right now,” Woodward said.

In such cases, “we’ve been sending letters back that outline the deficiencies in 1099-Ks … and we’ve helped [traders] and with the proper 8949,” Woodward said.

sounds to me like this is mostly related to people who didn't file the required 8949. i've never understood why coinbase sends 1099-Ks instead of 1099-Bs but either way, it's not uncommon for 1099-Bs not to match your actual tax liability.

bryant.coleman

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The IRS is complicating things unnecessarily by taxing crypto-to-crypto conversions. No one should be having any issue if they tax the profits from cryptocurrency to fiat conversion. But they are not right in taxing crypto-to-crypto, because there is no realized profit as such. Someone who had converted his BTC to altcoin will have to sell a part of this altcoin stash to pay the taxes.

Second issue is that some of the smaller exchanges don't calculate the tax liability for their clients. The users have to do it themselves or they need to take help from a CA. Right now cryptocurrency users have to fill a lot of paperwork to report their income to the IRS. This process should be made simpler, or else the users may just avoid reporting any gains from crypto.

bbc.reporter

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Quote from: buwaytress on August 15, 2019, 07:53:26 AM

Not sure the guys interviewed got it right. I'm very sure losses in trading can be reported properly, because others have done it off and their trading losses have been recorded as eligible for tax write off/relief. And that's to me the point of the article. Help IRS do proper by you by filling out your forms and reporting all income and losses correctly.

Not on the side of IRS or states by any means, but sometimes people make a mountain out of a molehill really.

The IRS might have made a mistake by telling the exchanges to make users fill out 1099-K forms which are for merchants. That form reads any fiat received as taxable, does not matter if the fiat received was a result of a loss in trading.

BitHodler

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Quote from: Theb on August 15, 2019, 10:26:50 AM

As far as I know as long as you don't convert it to the U.S. dollar and withdraw it out from your account it wouldn't be counted as capital gains given that the money you are storing is still being actively traded..

US tax laws are very strict. Bitcoin to altcoin trades are taxable events. You spending your Bitcoin is a taxable event as well. It's not a surprise that with such tax laws people mess up left and right.

I'm pretty sure that if spending Bitcoin was exempted from taxation people would be more willing to use their coins as money. It's not only more convenient but also offers a tax advantage because people can spend coins instead of selling higher to fiat and pay tax.

We can only hope that governments wake up and finally start to implement some important changes. It helps making things simpler for them as well because there is less chance for people to mess up and complain to them.

enhu

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Quote from: cr1776 on August 15, 2019, 12:39:25 PM

Quote from: bbc.reporter on August 14, 2019, 08:45:12 PM

...
However, what would the IRS say if I have bitcoin to trade to an altcoin and earn profit in bitcoin? Is that taxable?
...

They would say you have a gain and need to report it as taxable income. And depending on the amounts involved you may need to file and make quarterly estimated payments.

There was a Cryptocurrency Tax Software which were advertised lately on google ads which they may later be used for it. Did a bit of research and found out Cryptocurrency Tax Software isn't the only but there are several of them actually. IRS is the scariest of all government departments.

Transaction between two individuals may be very common if they'd be taxing Crypto Investors.

cr1776

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Quote from: bbc.reporter on August 14, 2019, 08:45:12 PM

...
However, what would the IRS say if I have bitcoin to trade to an altcoin and earn profit in bitcoin? Is that taxable?
...

They would say you have a gain and need to report it as taxable income. And depending on the amounts involved you may need to file and make quarterly estimated payments.

Theb

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Quote from: bbc.reporter on August 14, 2019, 08:45:12 PM

However, what would the IRS say if I have bitcoin to trade to an altcoin and earn profit in bitcoin? Is that taxable?

As far as I know as long as you don't convert it to the U.S. dollar and withdraw it out from your account it wouldn't be counted as capital gains given that the money you are storing is still being actively traded. But the other methods I see from people are they always account for the fair value of the coins they are trading coin for coin to give a fair estimate of the U.S. Dollar value they will have in each trade, which I think would be more accurate when you will be reporting your capital gains for the year.

buwaytress

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Join the world-leading crypto sportsbook NOW!

Not sure the guys interviewed got it right. I'm very sure losses in trading can be reported properly, because others have done it off and their trading losses have been recorded as eligible for tax write off/relief. And that's to me the point of the article. Help IRS do proper by you by filling out your forms and reporting all income and losses correctly.

Not on the side of IRS or states by any means, but sometimes people make a mountain out of a molehill really.

bbc.reporter

legendary

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I reckon the best solution to avoid this problem is the follow the permabulls' advice. Hodl hehehe. It will also be good for the price because it might discourage active buying and selling and increase stability.

However, what would the IRS say if I have bitcoin to trade to an altcoin and earn profit in bitcoin? Is that taxable?

The U.S. Internal Revenue Service (IRS) is sending another round of warning letters to cryptocurrency users, this time to taxpayers it believes to have misreported income from exchange transactions.

In addition to the three letters sent last month to crypto traders advising them they may have incorrectly filed their taxes, the IRS is now also telling certain investors that they did, in fact, report the wrong amount of income from crypto transactions. And the agency is looking to collect.

According to the letter shared with CoinDesk, the recipient reported $0 in income from crypto transactions to the IRS in the 2017 tax year. However, information through Coinbase indicated the recipient should have reported more than $12,000 in income.

Neither the IRS nor Coinbase immediately responded to requests for comment Wednesday.

It is possible that such discrepancies come from how exchanges are reporting transactions.

Woodward said this likely comes from the exchanges issuing 1099-K forms, rather than 1099-B forms. Because 1099-K forms are typically used to report income for merchants, most transactions would be reported as revenue, rather than any losses that may have occurred.

Aaron Cohen, who received one such letter, confirmed that the IRS based its estimation of his tax burden on a 1099-K which dramatically overestimated how much he made on his trades.

“I’m not sure if it’s a lack of understanding from the IRS or if they’re just blindly sending out these letters hoping people are too scared [or] too lazy to look at the letter and say ‘hey they made $13,000’ when they didn’t make $13,000,” he said.

He worked with CoinTracker to estimate a more accurate total on capital gains, which he plans to report to the IRS, he said.

“People that have received a 1099-K from an exchange but have not filed an IRS 8949 in the 2017 tax year are the ones that we’re seeing received the most letters and who this is typically applying to right now,” Woodward said.

In such cases, “we’ve been sending letters back that outline the deficiencies in 1099-Ks … and we’ve helped [traders] and with the proper 8949,” Woodward said.

He described how filing the merchant form could lead to a trader receiving the CP2000, saying:

“The amounts on the form, what they’re doing is if I make a trade for $100,000 on a platform, I buy 1 bitcoin for $100,000 and I sell it a couple weeks later for $90,000 I could have a $10,000 loss but I have a 1099-K that says I received $90,000.”

Read in full https://www.coindesk.com/new-irs-warning-letters-target-crypto-investors-who-misreported-trades

Topic: [2019-08-15] New IRS Warning Target Crypto Investors Who Misreported Trades (Read 232 times)