Reporting Bitcoin on taxes

[CalmSeeker]

@Lordy
I use wasabi, and their fastest transaction fees are never more than a buck. Usually ranges from 25 - 75 cents. Your confirmations for purchases will be made usually in 20 minutes or so.

 

[Gullible]

The government wants to not only get every dime of taxes out of you, they also want to monitor and control you. Did you know that the bill the dems slipped through says that all transactions over $600 now get reported to the govt? That includes paypal, checks, mg, wu, etc. I have no intention of reporting every single transaction I make and if I buy something with bitcoin, its my business and no one else's

I did sell a couple coins in oct - nov and just sent in a check to cover expected taxes. So that will make me check the yes box on that form and I will write down the dates and so on. I'll do that for something big which they are going to see anyway but a $50 or any size purchase is just going to fall through the cracks. At some point I think we need to push back against govt overreach. I do my small part

Speaking of bitcoin, those who followed my advice to invest in it and not just enough to buy something have made a pile of profit. It went from around $9k per coin a little over a year ago to 66k at a peak, back down to 43k now and soon back up. But even selling right now let alone a few months ago when it was high, gave you a huge return on your money.

Cash is going to steadily lose its buying power and bitcoin, while its volatile and scary, will go up in value as the dollar/pound/euro goes down

 

[CalmSeeker]

I finally asked my wife, who is a CPA, about this. First of all, do we know what the exact wording of the question is, and has it changed from last year? I ask this because when my wife did our taxes last she interpreted the question more about did you do any trading and were gains or losses made. She knows what I’m up to with BTC and answered no, and is probably going to answer no again, unless the wording has become more specific. But for right now, unless you’re trading large amounts through exchanges, the suggestion is to answer no.

 

[Name taken]

I think the language from last year’s TurboTax asked if I purchased, sold or used crypto for payment but my memory is very fuzzy and I don’t have my 2021 tax year form started yet. I am in agreement with what others have said, unless you have spent a large amount of money and made a large amount of money they don’t go after you but you still I think you have to report it. Now I need to go look up exactly what turbo tax asks for that question. To me, as long as I’m not using it as an investment that generates capital gains it shouldn’t be any of their business. But the government doesn’t work the way I want it to😏

Edited to add: I think the question was about buying selling and spending crypto. Apart from people who are making taxable capital gains on it I don’t think it should be any of their business but unfortunately that’s the way the IRS is going.

 

[Dee420Bard978]

@Japaholic can you buy Btc or etherum? With prepaid visas and also I Have no income from a job & loaded 380 do i have to report to the IRS i loaded that cause hahaha within the next year ill be purchasing 10s pf thousands screw the IRS whats capitalism with them standin in the way thats the only reason they made BTC a currency so they can screw you !

 

[Dee420Bard978]

Hey wussup yall im currently using coinstar to purchase im really trying to learn the stocks of crypto but i thought when you put you're money in your wallet it doesn't fluctuate and i lost lik 30 40 bucks plus fees is their a better way to buy btc can i use a prepaid visa to purchase btc or crypto online and put it in a more "stable wallet"
TY

 

[rhodes23]

Crypto has fallen in the past couple of months so if you sold anything at a loss from your previous purchases then you can declare the loss on your taxes. It's like stocks, real estate or any other financial asset. You pay taxes on your profits but also you can deduct your losses. It only applies if you sold your holdings during the tax year for a loss or a gain.
If you're someone who just keeps a $100 or so in the account for online purchases I don't think you really need to declare anything. That's my take on it anyway. Any tax accountants out there who can confirm?

 

[rhodes23]

Hey wussup yall im currently using coinstar to purchase im really trying to learn the stocks of crypto but i thought when you put you're money in your wallet it doesn't fluctuate and i lost lik 30 40 bucks plus fees is their a better way to buy btc can i use a prepaid visa to purchase btc or crypto online and put it in a more "stable wallet"
TY

No such thing as stable in the crypto-world. The markets have been in decline recently so that will affect your holdings regardless of whatever wallet you use. Your wallet should allow you to transfer back and forth from crypto to dollars. Anything held in the dollar account shouldn't fluctuate but any crypto you hold will constantly fluctuate along with the crypto markets.

Also no reason to report anything in crypto useless you've converted back to USD.
It's like stocks, which go up and down. You haven't really lost or gained anything until you've sold the stock and converted back to cash dollars.

So if your crypto has fallen in value it might be best to just sit tight and wait for it to rise again as it may likely do before too long.

 

[heavymetalviolet]

This is also concerning to me. Aside from using items like Paypal to purchase what I need, I also do side hustles where clients pay me through Paypal and Zelle. I'm surely not rolling in the dough, but the fact that this is being tracked is a bit nerve wracking, especially if they start asking me what am I buying, etc. A few of my clients have already tumbled to this and have advised me that they will be using the friends and family setting, which I think (?) protects somewhat, but also doesn't give you any recourse if someone runs off with your money (I actually got scammed by a friend this way and she ran off with the cash). Meh. Just another way to screw the small guys if you ask me.

 

[CalmSeeker]

@Dee420Bard978
You can’t control whether the value of crypto currency will fluctuate or not. Having it stored in a wallet means nothing; it’s value will always be what the market value is.

 

[Lordy]

@Lordy
I use wasabi, and their fastest transaction fees are never more than a buck. Usually ranges from 25 - 75 cents. Your confirmations for purchases will be made usually in 20 minutes or so.

thank you calmseeker I will look into using them

 

[sleeper]

The actual question posed to you by the IRS is: "at any time during 2021, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?" And again, the actual question at hand is did you buy crypto and generate a profit from it. That is the issue. NOT whether you used crypto as a form of payment (I know the question makes it sound otherwise). But even the IRS is acknowledging that, for instance, if you purchased crypto with cash, and did nothing else they do NOT expect you to answer "yes" to this question.

In 2014, the IRS issued Public Notice 2014-21, 2014-16 I.R.B. 938 acknowledging this. You can look that up. The matter is actually quite simple; the IRS treats virtual currency as property. Thats all. And with ANY property, the IRS considers whether that property appreciated in value while you owned it and when you sold it. That is called a profit and they want a piece. Crypto is no different than other type of property.

But please, to be clear, they have absolutely no interest whatsoever in simply tracking you to track you. This is nonsense. Widespread nonsense, but nonsense. This is about profit from equity growth and nothing more. All this business of who you sent it to, how much, why... this is entirely irrelevant.

With that in mind, most all of us can simply respond "no" regardless. Exception is the day that you sell your crypto at a huge profit. That may be... never. Hope this helps.

 

[sleeper]

And I failed to mention; there are two other ways crypto can become involved. 1) if you sell merchandise and are paid in crypto, or 2) if you perform work and are paid in crypto. The first is simple revenue from sales as a merchant, and the second is ordinary income, and would be reported and taxed as such. Both of those cases are treated exactly as other income, crypto or other currency, it is all treated the same.

 

[Name taken]

So I did my taxes and there was a point where it asked if I conducted any transactions in cryptocurrency. I answered yes or I think I did anyway, but TurboTax did not ask for any additional information. It’s normally pretty good about checking for everything that could be missing. I don’t want to run afoul of tax laws but on the other hand I don’t want to report what’s none of their business. I’m not an investor, I just used it to make purchases. Has anyone else done their taxes yet this year (United States)?

 

[Gullible]

I sold some coin in oct, nov for a nice profit. I sent in a check but it seems I sent too much. I forgot that btc profits are considered long term capital gains rather than ordinary income, assuming you hold it for a year or more. The tax on that is only 15% and you can sell up to about $450k each year and only pay 15% tax on it. Thats a good deal because otherwise a big selloff will push you into a higher tax bracket and you have to pay more on your other income as well

You can only deduct losses if you sell. With btc in a low point right now, you could sell some at a loss and the next day buy it back. You are able to deduct the loss right away even though you are back to where you started. When you sell later, your cost basis will be lower so you pay more taxes then but you are able to put it off a long time.

They have a 'wash rule' for stocks that you can't do that but for property I think its ok. If you sell a house and take a big deduction you can buy another house and still take the deduction on profits from the first.

 

[CalmSeeker]

Hey, I got an email from coinbase today. In the last paragraph, I think it definitively states that we don't have to report anything, unless you've bought more than 15k worth.

BRASS TAX

Which crypto transactions are taxable (and which aren’t!)
If you’re one of the 16 percent of Americans who say they’ve used crypto, and you’re unsure how to report certain transactions on your federal income tax return, now’s the time to learn. The last thing you want is an “educational” letter from the Internal Revenue Service (IRS) asking for back taxes or interest because of improperly reported crypto transactions. With our help, you’ll be able to file confidently and set yourself up for success. Here are some key basics you’ll need to know.

• Many types of crypto transactions are taxable events, each with its own set of rules and exceptions. If you sold, converted, spent, earned, or staked crypto, for example — you’ll need to report your transactions to the IRS.
• The money you gain from crypto is taxed at different rates, either as capital gains or as ordinary income, depending on how you got your crypto and how long you held on to it, among other factors. The IRS treats selling crypto a lot like selling stock — you’ll generally pay a lower rate if you held onto it for a year or more before you sold it.
• Converting crypto, like swapping BTC for ETH, is taxable. This is because you’ve technically sold your BTC to buy ETH, “realizing” either a gain or a loss. Same goes for spending. If you bought $10,000 in BTC and, after its value increased to $30,000, used your BTC to buy a car worth $30,000 — you’ll have a taxable gain.
• Simply buying crypto with cash isn’t taxable, so you won’t have to report it on your federal tax return. You also won’t need to report transferring coins between wallets you own or gifting up to $15,000 (for 2021) in crypto to a friend or family member. And if you’ve donated crypto directly to a 501(c)(3) charitable organization, you might even be able to claim a deduction according to the latest IRS guidance.

 

[seashells]

@fundus Those are the ones I use and as I understand it I didn't make money off bitcoin so why would I have to report it? See there's more then one way you can take that plus loop holes? I didn't profit off bitcoin so why do I have to claim it? It's BS I think.

 

[fundus]

Coinbase bought out Breadwallet and I was forced to migrate all my funds into a CB wallet, which I wasn't happy about. I then got another wallet not connected to CB and transferred all my funds. As @CalmSeeker stated they are really only tracking large amounts or a high volume number of transactions. What I use BTC for is less than peanuts, so if they want to go through the trouble of auditing people that use crypto three or four times a year, that's going to cost them more time and money than it's worth. They're looking for whales, we're just plankton or bottom feeders at the most.

 

[CalmSeeker]

Yep, we're not whales, nothing to worry about, and even if they wanted to track ALL of our transaction, they definitely don't have the resources to do so, it would be an impossible task. Just answer "no" on that question this year.

• Simply buying crypto with cash isn’t taxable, so you won’t have to report it on your federal tax return. You also won’t need to report transferring coins between wallets you own or gifting up to $15,000 (for 2021) in crypto to a friend or family member. And if you’ve donated crypto directly to a 501(c)(3) charitable organization, you might even be able to claim a deduction according to the latest IRS guidance.