Topic: Am I the only dummy paying full US taxes for 2017 on altcoin trades? (Read 140 times)

If you work through the math, you'll realize that the gain/loss on your active trading capital can be calculated by this formula: (sum of the values of each position as of the last trade in 2017) - (sum of the values of each position as of the last trade in 2016). It doesn't matter how many steps there were, the sum of all the little gains and losses will equal the formula. If you added or removed capital, then you'd have to adjust for that. You also have to adjust if positions move between short and long term holdings.

The IRS forms want to see transaction details, and not just an aggregate total. You'll have to deal with this. However, the intermediate values don't have to be exact - you'll just be entering the same value in a later row. I suppose the intermediate steps could even be reconstructed from your "faulty" memory. 

(If in the future you start receiving 1099 forms, then the transactions will need to be listed exactly. Presumably the IRS can check the "total proceeds" number. Usefully though, you don't need to list individual transactions if they've been fully reported to the IRS. Because they already have the details, you can enter their aggregate gain/loss.)

If you have to make variable quarterly estimated payments, then you may need to take four position snapshots a year.

I always thought it was something like capital gains.  If I cash out to USD that's when I take the tax hit.  Decentralized exchanges are going to be huge.

I am not sure if you have to file for every trade at the end of financial year you net should considered for capital gains is my understanding

A lot of the "research" has been hyperbolic misinformation. You are not required to pay taxes on the profit of any given transaction, but you are also not allowed to file for a like-kind exchange. If you are playing the market,  you are not like-kind exchanging, or even if you were, you would still owe taxes on appreciation.

If you are in the US you should do some research on how day-traders pay taxes. If you are trading frequently you might fall under income tax rules and have to pay significantly more tax. You should make good faith efforts to keep detailed records of what you did. At least having day to day asset totals in all currencies and their values in USD (learn Excel, it's a lifesaver). You may need to pay taxes on profits quarterly to avoid a small penalty.

If you just trade every now and then you should keep details of every transaction and the USD values.

The IRS has every conceivable avenue of profit-making covered. When it's clear to any reasonable human being that profit is being made, taxes are owed. Make a good faith effort to pay up or risk the criminality.

Pay your taxes in full.

It isn't possible to "fly under the radar" if you are using an American exchange like Bittrex, which is liable to a ferderal warrant to look at their books. If you don't want jail time, cough up, pay your taxes and be safe.

Just did a little more research, and you're right. It is supposed to be every transaction. Annoying.

Are you supposed to pay on every trade, or just the principle gains? The latter would make a lot more sense, as individual trades could be loss leaders. I'm no tax accountant, but I think you're shooting yourself in the foot.

I made, as many of you have, quite a bit of profit in 2017 on altcoin trading , mainly on Bittrex. Now I am wondering how to pay taxes in the US on this income. There are basically three suggestions I find.

#1 Don't pay anything and fly under the radar
#2 Don't pay anything and file 1031 like-kind exchanges when trading alts for btc (takes filing out form 1031 for each exchange)
#3 Pay taxes on every trade: Of course, there are many accountants out there who basically interpret the law (uhm, just one notice from 2014) such that one should pay taxes every time alt is traded for btc. Surely, their opinion is biased because, with thousands of transactions, they will have a lot of work made for them.

#2 Takes a lot of paperwork if you have a lot of trades, and there is no guarantee that the 1031 will be accepted. You may still owe taxes, possibly penalties.

In view of less than 1000 people in the years 2014-2016 even mentioning crypto in their tax returns (and mostly claiming losses I bet), am I the only dummy thinking of doing the #3, and paying full taxes?