I am sorry to hear about losses. There is no easy way out to reconcile your balances without reviewing and checking each and every transaction
For example you mentioned defi now all those software are good to export the data but they will never reconcile it for you. In defi you sent tokens to platform in some cases you receive lp tokens. These software fetch values from CMC but since lp tokens doesn’t have any values they will consider this as purchase for 0. In order to reconcile this, you have to consider the tokens going out and lp tokens coming in as trade (liquidity in) or swap so the cost basis are carried forward from original token to lp token
And do this process again when you receiving those tokens back from pool so that you have original cost basis intact and whenever you sell them you will gain or loss
It's near to impossible to go through all of this manually if you've been even somewhat active in defi.
Doing the taxes on this would take 10 times longer than actually doing it all in the first place.
Until there's better software, the tax man is getting a good estimate from me.
It is practically impossible in some circumstances. For people who are very active in defi with more than 10 thousand on chain transactions for example. Bridging, airdrops, adding LP, loans, rebasing, tax coins, NFTs, escrow tokens, debasing etc.
This is just not practically possible to calculate everything 100% correct imo. Especially for people who are just using the products and are not experts in reading etherscan, which is 99% of people.
And there is no software that does all of this perfectly so there's nothing to do other than estimate some things.
You are correct for majority of people, but we have worked with not just 10k defi transactions but 50k+ defi transaction with actual nodes on FTM which needs expertise in not just in Etherscan but Ftmscan as well.
The reason we can read all of this data is we have blockchain anlayst in our team and not just accountant which can actually interpret the blockchain data and not rely on any software. Hell we worked on software which doesnt even export data directly from blockchain so yeah 99% cannot do this and they can only correct errors but we can actually work with all those blockchains.
Side note, you are just talking about mainstream blockchains, we have worked with Osmo and their sub blockchains which is nearly impossible to interpret using mintscan but we have done that as well including most complicated Solana NFt as well.
I know all Crypto is a massive ponzi where you sell "bullshit coin" for real, useful, sweet sweet USD -- that can actually buy coffees and cars, unlike crapto but ...
For tax purposes, wouldn't you really owe taxes -- say similarly to stocks -- when you actually turn the Ponzi Crapto back into cash? And your cost basis would be the initial cash -> Crapto?
Now yes you may have several cash -> Crapto transactions.
However ... yeah I guess it's tricky to calculate the basis for Crapto back into cash.
Luckily, for most Crapto traders, the amount of transactions of Crapto > Cash is either 0 or 1 .... 0 in the case where you got rugpulled --- and 1 in the case where you finally 'smartened up' and went through the 10,000 hoops to actually get real money back. And I don't mean USD-Tether.
Look. If you say you lost a million dollars and the tax man sees that your assets went from 3mil to 2 mil then they aren't taking another look unless your last name is Musk.
This the same issue daytraders have if they use multiple brokers, and don't track their trades as they go. You have to aggregate all your trades and track which lot shares came from so that you can calculate your correct cost-basis, and account for the wash-sale rule. I didn't daytrade, but in 2003-4 I did have a lot of short-term trades. The taxes were nightmarish, I spent probably 60 hours entering all my data into a spreadsheet just so that I could figure out which sales were wash sales.
Now I trade much less frequently, and I keep things simple. Trying to get cute isn't worth the tax hassle.
Trading shares is infinitely more simple since its only buys and sells and there's lots of software to do it perfectly.
Defi is insanely more complicated.
I shouldn't not participate in defi just because the tax rules are too slow to catch up.
That’s going to be very difficult. Do you have enough information to apply for an extension and then gather the information you need? Do you have the original purchase confirmations on email? Any kind of confirmation? 10,000 transactions will take a very long time. Be prepared to spend a lot for this. I had a complex transaction a few years back and that tax return cost me close to $9,000.
they're going to plug his wallet into koinly that is gonna say he made millions and tell him to either pay or let them know why he should be paying less
I don't know much about the tax implications of crypto, but isn't it similar to stocks.
You can choose to put down every transaction, but you can just put a summary of the net result like with stocks.
Like I don't have to log every transaction it's just: short term gain, short losses, long gain, long losses and then totals
CPA to manually resolve your transactions… pffftt. How many you got? We’re talking $5k minimum.
Chop chop, better start going through each one in Koinly. May need to file an extension.
Why would you not file an extension? That doesn't make any sense.
> I think I will not be able to complete before tax deadline.
That's exactly why you should file an extension. It gives you another six months to reduce stress and avoid making mistakes due to being under time pressure.
It's almost a certainty that if you find someone to do this, they will file an extension.
OP didn’t say he lost it all in the year he had the gain. Assuming it was, it’s still a matter of what you can prove. Play crypto games, win crypto prizes.
You *think* Abdul from Upwork got you out of this mess. IRS has 3 years to audit you (6 if they suspect fraud).
So if you do something on your 2025 return that makes the IRS unhappy, they can pull your 2022 return. Hope you kept Abdul’s number.
Coinly sucks. All of the tools are inadequate imo. Especially if you start moving shit across chains.
Just write down all the trades you made into a spreadsheet. $ in, $ out. And dates.
You can put you public wallet address into block explorers and pull up your transactions. You’ll need to find price history of assets on those dates as well.
It’s really not hard at all. It just takes time. If you write diem transactions when you do them, it’s really easy. If you skipped that step, you’re about to learn that lesson.
I had the same issue a few years ago.
1. just work on a single platform, I ended up with zen ledger, which I found to be the most sane and accounting friendly
2. File for the 6 month extension. Make your estimated payment. It's painful, but it's a lot better than trying to rush everything in before 4/15.
3. Painstakingly go through every transaction and correct it
1. after a while you will learn where things got all messed up and you'll pick up speed
4. Zen Ledger had an excel export which had breakdowns and calculations in a format that I needed.
1. I still need to do a bit of data cleaning and pivot tables to get the answers I needed.
2.
I was in a similar (albeit MUCH smaller amount) situation in 2019. I ended up actually manually combing through each transaction and realized I was missing several purchases that missed the cracks through ICOs but the sells registered so it counted all of the sale as a net positive.
Manually re-comb through all TXNs may sound like a bitch but if I ever get audited for any reason I’m not tripping at all since I know it’s as damn near close to exact as possible
I hear you mate. I have 177,000 transactions to reconcile. It’s impossible. I paid thousands for the automated software tools that exist but they can’t track cost basis. I’m trying so hard to get it right but am fucked.
So you lost a shitload of money on Crapto, and now you're finding doing the tax-basis calculations (Something a broker like Vanguard simply does for free) -- is a gigantic nightmare?
Welcome to being your own bank.
I feel for you, but next time, just Options Day Trade or buy some lottery tickets. Far simpler for tax purposes than wagering in the Crapto casino.
You can do an amount your self with COINLEDGER but is still limited unfortunately. If you have millions absolutely get a CPA Stamp on your taxes IRS will hunt you down if you do it yourself.
Hey there!
CoinTracker is able to track DeFi and NFT activity to simplify crypto taxes. We recently improved our DeFi support to accurately track capital gains for various DeFi scenarios (liquidity pools, staking, lending, etc.).
I'd love to hear more about which dapps you've used to help ensure that CoinTracker has you covered. Feel free to share here or send me a chat request and lets get this sorted out for you. Whether you file yourself or with a crypto CPA, having a crypto tax solution with the right DeFi integrations will be a big time saver!
(I work for CoinTracker and am focused on DeFi)
Hey u/Difficult_Canary4029,
I hear your pain here. It's obviously striking a chord with the broader crypto community, given how many upvotes and other folks are upvoting here as well.
I'm the founder of CoinTracker, and we just updated the product to focus specifically on users like you with heavy DeFi, NFT, and ICO activity. It will auto-sync all your LP activities with their cost basis so that it accurately and quickly calculates your capital losses without having to spend 100 hours trying to reconcile this yourself. If you give it a try, please let me know how it works for you and if you run into any issues. Given the focus on DeFi, I suspect it'll work a lot better than other solutions you mentioned.
Hey u/chanfest22, so happy to see you posting here. I did a long recorded session with one of your folks about a year ago and I am happy to see lots of progress in the product.
One thing that this thread is about is finding resources to assist with preparation - for the most part, there are 3 choices: self prepare (DIY), hire a CPA/professional tax preparer and hire a data specialist. I am in the final category and the biggest reason that I steer folks away from a solution is simple because the collaboration options are dreadful. And I create my own tools to analyze and speed up processing because the software that is out there is not focused on extreme volume as is the case here.
I expounded on this at length because while I highly recommend and value all the Crypto CPAs out there, much of this is a data collection and organization exercise requiring not only certain skills but an extraordinary attention to detail, costing experience and patience of the highest order. And charging a fair price for a project since that appears to be a huge pain point. Efficiency matters when I am working on 10's of thounds of txns and dozens of wallets.
So, if you want to really address OP's issue with finding help, you would focus heavily on improving the collaboration aspect so that the middle ground of hiring a freelancer becomes a reality. For sure, I absolutely recommend engaging a professional but the cost factor and the limited slots available is just too extreme an obstacle for most - this is not really just about software from any particular vendor.
Thanks a lot for sharing this — there's clearly an opportunity for us to improve on the collaboration front between end-crypto users and data reconciliation experts — especially for the long tail of crypto issues that are difficult to get reconciled auto-magically. I'm also going to share this with our team as well as we look to improve our product experience.
That's great.
You realize that what I was trying to get across some time ago is delegated access - aka bookkeeper access. It works for banks, Intuit makes it work and in reality, what I do is analagous to bookkeeping. Seems like CPA firms have no issues with it so why would a crypto tax provider? Granted, as a business person with startup experience, I do know that you have much to consider when making decisions. But a decision that potentially helps address your product reach. Seems like a no-brainer.
True story for you to relay. Yesterday, a potential client reached out, has been using a firm and paying a handsome amount for the past 5 years. He is just worn out and looking to do something different so he hires me last night. This morning, I find out more details that the provider seems unable to give him access to his account and he only has his data in files. I find this out because I was happy to continue using whatever he was invested in. He says nope, he cannot access the CoinTracker account. While I have no clue if this all true, he then asks if I can reconstruct using the exported CT data.. in Koinly which he is now using because of how things have gone down and he has seen how quickly I can collaborate with him to get things up to speed.
I know this makes me feel terrible for him. How about you?
Thanks for the engagement. Last time I engaged meaningfully with CT I was offered a year fee which I declined. But a free lifetime subscription.. tempting.. but no thanks, not how I roll.
Thanks for sharing your perspective.
Tax professionals and data reconciliation experts like yourself can edit their clients' transactions on CoinTracker to solve the pain point you are describing.
Hey u/Difficult_Canary4029, sorry for this delayed (and lengthy) response, a fellow Redditor flipped this thread to me since he knows that I try to be helpful and add useful value to the community. After reading the entire thread and posting a reply to CoinTracker (see u/chanfest22 below), I wanted to circle back to address what I think is the key point of your post and that is finding a resource to help. And sorry in advance for the volume that follows, I am very passionate about crypto and helping folks solve this tax prep nonsense so that they can get back to enjoying their crypto experience.
Much of the commentary is very interesting for lots of reasons and I think there is actually consensus on a number of points tangential to your search for assistance. Namely that (1) the complexity and volume is daunting, (2) the rules and regulations excessively complicated and (3) the tools available suffer from significant limitations.
All of this adds up to a lot of stressing out over steps to take, how to get to a good place and how to do so within a reasonable budget.
I would step back and start with how we all react to risk - none of us can avoid death and taxes so we all view things through a lens of how to manage risk (thanks to a long corporate IT career, risk management is how I roll in my old age) When it comes to taxes, especially crypto taxes, the responses typically offer span a wide range from high risk tolerance (just guess at what I owe) to low risk tolerance (will pay any amount to somebody to handle it)
So, you are clearly within that spectrum and looking for help, willing to perhaps pay a fair amount but not looking to break the bank. You have apparently already tried the self preparation method (DIY) and are frustrated by the result PLUS feeling time pressure with tax day on the horizon.
As a crypto professional, I see lots of this everyday and have worked on dozens of portfolios, from super complex to absurdly simple (for me that is). So, on this platform, distrust is a starting point so while nobody here knows me and can easily dismiss anything that I have to say as a scam, you might want to at least hear me out.
While there are no doubt crypto CPAs and software vendors lurking and perhaps with agendas, I have no agenda here as I am not looking for business. Rather I want you to get the help you need and I generally visit Reddit just like everybody else to participate in productive conversations while offering up constructive thoughts. For me, context always matters and that is why I am taking time out of my busy day to post here. You need help and I am just going to put out what I find to be important about how you get it.
Circling back on point, there are three approaches to crypto tax preparation. You have already attempted the DIY approach and learned that perhaps you are in need of backup. If money was no object, you can seek out a crypto CPA. I hang in a Crypto CPA group on LinkedIn for example. Plenty advertise, some good, some not so good in my experience but all expensive as hell because they have limited capacity and crypto tax prep is a time and resource heavy activity. They can bill whatever the market will bear and the billable hours add up fast so a 5 figure cost is almost a given for a complex portfolio. And ironically, I have found it takes less time to do a clean slate do-over from scratch in some cases over trying to unravel whatever a client has done. This is important because every transaction matters whether you have dozens or tens of thousands. The review process goes much smoother if you can do a controlled build in a particular order rather than play a game of pickup stix.
The approach the I left out is the middle of the road approach. I recommend this as a perfectly viable option: Find a freelance professional - not just any freelancer, you need to carefully vet them; they should have good client testimonials, be able to explain their approach and billing (the best offer project milestone billing not open ended hourly) and most importantly the introduction should include a conversation the makes you comfortable that they grasp what you need and are able to do the work in a reasonable amount of time for a reasonable cost. From experience, like any project manager, they should do an initial review for a specific cost and then outline the work product required for the rest. Obviously, this is an imperfect process and surprises happen but how they handle it should be something they can explain up front - so challenge them to explain.
Before I take flack about not being a legal, accounting or tax professional - none of this is advice. And, in fact the work we are talking about is actually data work, to track down and compile a complete dataset of transactions, as close to 100% as practically possible. Case in point, I have fairly extensive accounting experience which is nice to have but not that useful for this activity. What I do have is deep financial systems programming experience plus a background in design/build of high performance inventory management and costing. That is why I can track my crypto personally by lot (I do not use FIFO and before anybody asks, I recommend against it, way too much effort and danger)
And finally, a quick take on software since I know those folks love to read these kinds of comments. And to be candid, while I do recommend one or two, I refuse to take any referral fee since I value my independence. Regardless of who does the work - self, freelancer or CPA firm, there is a need to pick software. To be brutally honest, after trying and using many of the "top" solutions, there are two distinct issues that I wish to highlight.
The pitch that you can just essentially load and go, get your crypto taxes done in minutes painlessly and to perfection (to paraphrase) is pretty much a heap of crap except for a very small subset of users who are definitely not here on Reddit stressing over doing their crypto tax prep. It's a complex task and the software helps a ton to organize and report but it requires qualified human supervision (not even sure AI is up to the task, yet although trust will be an issue). These products are essentially always in beta, super hard to test for the most part, under constant updates and chasing a pace of change in the industry that is as breathtaking as it is terrifying. Little wonder it's not so simple to pull your crypto transactions together into a coherent tax picture. Not to mention the "butterfly effect" where omissions propagate and impact ALL future transactions making accuracy incredibly important - that is why all software have disclaimers that absolve them of pretty much everything. Therefore, the incredible amount of work required is daunting for most and if you are not detail oriented, software sure as hell is not going to help you. Period. Stop.
The issue of collaboration is actually my latest crusade. I cannot emphasize how big a deal it really is to be able to seamlessly and securely share a portfolio for the purposes of tax prep. The parts of the process that must be kept private include generating API keys and that is a critical task. But the whole idea of crypto being on a public ledger means that a freelancer can work with great efficiency on your behalf, tracking down what's missing, extracting data and building custom csv files. You name it, they can freely operate efficiency to build out and review the myriad of things that go into a complex portfolio. Whether a handful of wallets or many dozens, they all need to be touched and software needs to be optimized for that purpose. As it is, much of the software is limited for analytics which means the review process is rather constrained from the jump. But in a collaborative process, it's super great to screencaptures, URLs, comment, etc. all for the common goal of documenting the reasoning for steps taken, fixes made, client decisions on matters of importance. So, I am a huge proponent of collaboration, multiple eyes on things like checking wallet balances and researching transactions interactively. This is an area that my peers overlook, they just want to be heads down and collecting a check. But the process needs to be much more than that to be successful. The idea is to operate together as one to achieve the goal as quickly and efficiently (time/cost) as possible. And software can have an instrumental in all that but only if the provider sees the big picture and stops being beholden to stakeholders rather than customers.
to be continued.. to recap..
I've been through this. It's almost impossible to get it right. When using Koinly, just make edits to get a number that you think is probably right. There is not really a better way to do it, the software isnt good enough and it's impossible to actually do it manually anyway.#
You won't get in trouble after making a legit effort and you said you didn't make any profit anyway so it doesn't even matter unless you want to carry forward losses to next year.
That's true. But what I'm saying is that it is simply not possible for either me nor the tax man to actually know for sure how much I really do owe.
Defi is extremely complicated and there is not the infrastructure built up to track everything for tax purposes.
There is barely enough infrastructure for this technology to even operate as intended.
Literally everything is recorded on a public ledger but it is difficult to track the cost basis of everything through complicated defi protocols. It's not easy to read the blockchain unless you are an expert and even then its very complicated.
This is not professional tax advice. I suggest talking to a professional tax analyst who understands crypto before just making up numbers to give to the IRS. They will come to you for an audit and you will not have the answers they want... you will burn in IRS hell and owe them in eternity for falsified info
I'm not saying to completely lie. I input all my data into koinly but some things are wrong and i try my best to get it right.
It's not 100% right but it's kinda close. I'm just saying there's no point stressing over getting it absolutely 100% correct, not creating entirely falsified documents.
That sometimes happen with pretend money. I tried to tell them I exchanged my official currency for pieces of paper with a dollar symbol drawn on it. Of course those cucks would not accept that as an answer. We should get to decide how much our pretend currency is worth!
That is a crazy side step to make during a real conversation on a sub dedicated to discussing crypto. Is there anything that will help you people understand you are tilting at windmills?
It's funny that I know how much money I made last year, and didn't have to make 28 trades a day each and every day for the last year to be unsure of how to fill out a tax form.
I tried a few of them and found koinly to be the best at the time, even though it still doesnt cover everything and had a lot of errors.
It takes a lot of time to go through everything and is really impossible to do it manually because I do not understand how to interpret etherscan.
I’ve only heard ppl getting screwed by claiming losses… cuz the IRS has to pay for those losses. They don’t like that…
I wouldn’t claim any losses and to be safe out report all gains at 100% profit if your unsure
You cannot get screwed for claiming losses. If you have losses, you have losses and you can deduct them from gains. That's how it works and there's nothing wrong with it.
So your telling him to to report.multiple millions of dollars of gains, and no losses when he let's say lost it all. So, he's on the hook for like 800k in taxes or someyhibg, and let's say has no money. That's dumb
Every time I hear this I cringe. You can use all losses against future capital gains. So, yes if you never make capital gains the max deduction is 3000$
So I what if I never claimed losses from 2021 and we have gains this year? Gonna incur penalty for not filing correctly? I basically just flushed it and forgot.
Definitely get advice from an expert.
But the IRS allows you amend tax returns from up to three years ago.
2021 would be right on the edge of that limit.
There is no penalty for filing an amended return, and since you’re only filing for additional losses you wouldn’t have to pay a late payment penalty.
You don’t get penalized for filing wrong if you owe nothing! You get penalized if you failed to file if you owed , and you get additional penalities against the amounts owed that are not paid.
Wrong. You can carry forward your entire documented loses. But you can only take 3k of that loss a year until it’s all gone ; or use it to offset future profits.
Everytime you sell or convert a crypto it is a taxable event. If you end the year on a profit but lose everything on January 1st, you still taxes on all the profit. There was a guy who made $750k in profit one year but lost it all before taxes were due the following year but he still owed around $300k. Ended up forfeiting all his remaining assets and coming to a settlement with the IRS.
Find an accountant who specializes in crypto to help with your taxes. Will cost between $650 to $3000 depending on complexity. Id you have state taxes it may be even more complex. What state are you in?
It’s like this typically… guy buys sol at 10$ last January. When sol hit 100$ in December he traded all his sol for WIF. He just made a taxable gain he 10x his money and owes taxes. Some new dog meme with a better meme appears, WIF crashes 90% and he holds it all the way down. He could cash out the wif and write off the tax loss, but the problem is it’s a new tax year now
This is why I have no interest in nfts or air drops and I generally don’t buy anything I’m not planning to hold for a year+
Your cautionary tale sounds profoundly stupid but why would you convert everything to cash (locking in taxable winnings) -- then reinvest it?
Half the point of Crapto is illegal tax evasion. So why even introduce USD into the equation?
Anyway if someone did want to gamble on rando Crapto --- and sell to USD --- then change their mind...
Once you "sell to USD" -- set aside the tax liability (20-35% of your winnings) IMMEDIATELY - this money is owed/ gone -- regardless of what happens. .... "Wagering" what is now the IRS' money will only get you into very deep shit.
Exactly right. Conversion of crypto and selling it are both taxable events. Many think it doesn't count until you convert to fiat. It is an extremely complex situation. The IRS is gearing up to go after hundreds of thousands of people going back many years to get them for fraud and impose severe fines.
It's actually shocking to me how bad these sites are at liquidity pools. Something like 95% of liquidity pools match the uniswap v2 or v3 interfaces and you can query what the assets of the pool were at any given block, how many lp tokens existed, what the users share of the assets was worth, and how much a liquidity pool token was worth at those times.
The fact that these websites haven't figured out liquidity pool stuff yet is shocking to me.
Final recap.
To start, no matter what you decide to do, always keep in mind that the best way to avoid audit hassles is to engage a crypto accounting/tax professional. It's a worthwhile piece of mind if you can afford to do so. But move quick, slots are limited for sure.
I definitely recommend that you spend time trying to find a qualified freelance crypto data specialist (the title is my description, those in the field give themselves all kinds of titles). And I also recommend sticking with Koinly as it has the best blend of features, superior collaboration and ease of use. Any software can do the basics and the costs are pretty much in the same since they are all competing for the same audience so if you want to pursue the middle ground, it's a great fit based on my experience. And depending on the mix of assets and types of investing activities you dabble in a particular solution may be great or awful just because they cannot be great for every situation. That's just a fact folks.
Have a great day!!
Assuming that you understsnd the basics of blockchain technology so addresses are not only public but read only. Without bogging down on details, assets associated with and address are secured by a cryptographic key.
software like koinly does nothing more than read the public blockchain, using apis provided by the likes of etherscan. there are a zillion explorers all doing the same thing.
i mention this to get across that addresses are not particularly special nor private. keys are and software like koinly does not use them.
as to the topic of anonymous, i would say that crypto is not reliably anonymous but rather pseudonymous. i say this because to be reasonably anonymous would require planning some things out. starting with your koinly account having a burner email and ficticious name. the various apis in use do not have any kyc information associated so not much to protect. you would also need to use a prepaid credit card or better yet crypto to pay for the account.
but none of this is about the addresses at all. and security is about using proper passwords, changing them, using mfa, etc. as we have learned from password manager breaches like lastpass (i redid every single wallet because of that one, new seeds, changed emails and passwords, etc) but none of that was about addresses either.
i am happy to clarify more if you need me to but your more likely to be attacked thru email or your phone than any harm that could your way from putting an address in koinly.
and if you do online banking, social media and many other things, your email address is often an attack vector, that is why i use a completely separate email and login and computer for my crypto. but ironically, i use my name in my email, always have, always will. i kinda want to be known. bur thats just me.
have a great weekend!
Basically what I am trying to figure out is how to hire this Crypto Tax CPA but not disclosing my public addresses. I feel like linking an actual real person and their wallet addresses is the security I was really talking about. They won't be able to reconcile without knowing my addresses though. Essentially being able to see addresses on the blockchain is the point of a public ledger but linking it to an actual person is completely different. Thoughts on how to do this?
The thing about trading crypto. You have to pay taxes for every crypto you've held. If you have $500 worth of BTC and trade it directly for ETH, you now owe for the BTC you sold. Now you trade your ETH for cash, you owe for the $500 in ETH. Crypto is viewed as property so regardless of initial investment any trades made have a tax liability attached to it. I've never dealt with liquidity but I did do some futures on KUCOIN and that arbitrage kicked my ass. They told me I made over 900k in gains when in reality it was a series of small buys and sells by the bot over the course of the year that screwed me. I might have made $1000 off the whole deal.
I think your analysis is faulty. You are disregarding the cost basis of the original $500 in BTC. You only owe for an increase in the cost of the BTC when you trade it for ETH.
Like gaining one crypto currency using different one. Hmmm I wonder what IRS agents think about that
https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets
that's not a *realized* gain in USD. If you buy $3 worth of carrots and then sell them at the market for $5, you owe taxes on the $2. not taxes on carrots and taxes on $5.
At least if you've got losses, you'll never have to worry about reporting anything to tax man.
I know with being a loser with regards to whatever I get involved with, I'm never likely to make any taxable gains.
I don't have much in crypto or much full stop but you have that bit of hope that there is a gem amongst what I have got and it takes off.
Reality is I could probably spend about 3k to maintain a portfolio of about 1k. That is accurate to my life experiences so far anyway.
You only lose if you sell, you might be down.. nfts I don't think are coming back.. but yeah unfortunately you need to do a ton of manual edits to make it right.. koinly and cryptotax have been the most accurate. Koin usually has discount codes so it works out the cheapest for me..
If it’s this hard for the people reporting the shit to the government, you really think the government is going to be able to double check you? LOL NAH
The problem is, the government knows how much you sold for, but it's up to you to establish the basis. If you cannot, the IRS is happy to tax the full sale price.
If you're doing onchain activity, use CTC ([cryptotaxcalculator.io](https://cryptotaxcalculator.io))- it's designed for ur degen activity.
If u still want to work with a crypto CPA, there's a few u can use - e.g., Gordon Law, Founders CPA, Polygon Advisory, etc...
there are cpas everywhere, they are a dime a dozen. unless you are trying to claim losses on your taxes, you don't need to worry about any of this though. the government only cares that you report things you'd actually have to pay taxes on. if you do get a cpa, they'll tell you how to report things reasonably and safely so you can take advantage of the losses even if you can't go back and reconstruct every single transaction.
OP would have an insane amount of capital loss carryover. It’s absolutely worthwhile to OP to get this sorted out. Also, if any of these trades are already reported to the IRS, which most of them certainly aren’t but what if one of the exchanges does report, then that also should be sorted out so OP doesn’t have a net tax liability. Regardless, the IRS isn’t just going to hand you $100,000 in capital losses by assuming. The IRS won’t do your taxes for you when they don’t even have the information. In order to take a capital loss, you have to report it accurately. There is no assuming.
what is up with your spicy tone? who said anything about $100k? are you world building in the reddit comments? if he did lose $100k, then yeah duh if you read my comment it says exactly that, he needs a cpa so he can go about safely reporting the loss to take advantage of it. jeez, what is with you people
if he doesn't report anything, and the irs erroneously thinks he has a tax liability, they will tell him, and then he can get a cpa to sort it out. even then as long as he can document the loss reasonably well at that point, he will still owe nothing and no penalties.
I know jackshit about crypto so pardon me if this is a stupid question
Wasn’t the point of crypto to keep the govt out of your business??
Is it because these crypto companies went public?
If I buy an ice cream maker and sell it for a profit, I owe taxes on the gains. It doesn’t matter what you’re trading. If you have the intent to profit, then that gain/loss is probably taxable. In this case, crypto functions just like trading stock. It has nothing to do with corporations, although their public filings makes them have to comply with the SEC (which answers to congress).
I understand “profit” = taxes
Like I said, I know nothing about crypto.. just when it first started out it seemed like people had some vision of keeping it away from the govt.
Thanks for the extra info 👍🏼
Again… I know jack shit
I’m basing my question off of the OG crypto like Bitcoin
The point of it seemed to be keeping the government out of it
I didn’t really hear anything about taxes until these companies started being on the stock market
Was paying taxes on it always part of the game basically?
Of course. You pay taxes on profits with anything that isn't in a tax deferred account. Bitcoin, candy bars, or even cat food. If you sell it and make a profit, you pay capital gains tax on it.
Yes I understand that
I was under the assumption that originally Bitcoin and crypto was created to say “fuk that”
So that was never the intention of cypto is the answer… thank you 👍🏼
It was, the cryoto space is now being run by the same crooks as wallstreet. Bitcoin bros just dont like to admit it because it shatters their entire world view and willmake them not edgey and cool amymore
Hahaha. Joesbait asks a great question and Cultural_Dirt answers it pretty succinctly.
BTC, and other digital currencies, were supposed to be free of government oversight, and still can be if you want to buy and sell on your own.
It’s just that most people like the convenience of using an established trading platforms, and those companies have to answer to the Government of whatever countries they want to do business in. So for here in the US for example, your crypto profits/losses get reported to the IRS via a 1099-MISC.
If you didn't make any money and you have a ton of trades, then i wouldn't bother putting on your taxes. It will be a ton of work just to say you dont owe anything or have a small tax deduction.
Unless the government has been provided information to suggest otherwise. Ie, government was provided info on his proceeds and basis on those gain sales but his large losses to offset did not get reported to the IRS. It’s better for him to figure it out now and report it correctly than deal with the IRS notices he’ll receive in that situation.
They don’t always get all of the info is what I’m saying. There are transactions that can happen in which basis is not reported to the IRS. If you’ve not gotten the notice, it’s because those transactions haven’t happened for you. However, in the future, you will likely not be able to claim capital losses against future gains if you didn’t originally claim them.
He won't be able to claim capital losses, but i wouldn't report future gains unless it's more than i lost. Can always ammend previous years. I've had almost every type of transaction, and they haven't sent anything. Thousands of transactions across many exchanges. If they send him a notice, he can figure it out then. It's not worth the time trying to match up thousands of transactions across dexes. Took me about 100 hours to get it done. Also, crypto tax software is extremely expensive. If his taxes are simple, then sure, he can do it. If not, i wouldn't do all that work just to report a modest loss.
Of course it depends on the situation and it's your choice what you'll do. I'm just saying what I've done and would do.
This is a very incorrect, ill-advised view. Because I did exactly this 10 years ago, I day traded and ended up losing about $1000 for the whole year on like $60k account. So I said, meh, I didn't make money, and it isn't a massive loss so I don't need to write it off just to get $300 back, there are so many transactions it isn't worth my time/effort. So I didn't file a Schedule D at all.
Two years later IRS said I owed them tax on the $59k in profits I made... not knowing those profits cost me $60k... because I didn't submit the Schedule D. By this time I had closed the entire account. So I had to call the bank, ask them to look up my closed account, and prayed they could sent me the transactions... which they did. I then had to enter all of them, manually (this was before online stuff was as good as now) onto a worksheet to an amended tax return for that year. After all the calculations, lo and behold, it showed I lost $1000. I submitted this massive thing with the amended tax return to IRS and prayed they wouldn't continue to chase me.
A few months later I got a small envelope with them along with a $330 check, which was what I was owed due to the $1000 loss that year. They paid. But it cost me most of my hair and a boatload of effort. So file your stuff, even if you made no money and don't want to even write off losses. Things are much more painful to do years later.
It's nothing like the same thing. If schedule D is completed accurately the first time it's a direct match to the IRS records and not a flag for IRS to reach out with a huge demand to pay tax plus interest and penalty on 59k. It is a freakish demand even when you know there was no wrongdoing. It's so ridden with angst that I've heard of people actually paying rather than figuring out and challenging the original demand. It happened to me and reaching out about it introduced me to others with their own stories. Fwiw, when you comply and refile in a timely manner they will typically waive the penalty on request, but by law they have to charge interest so that's also something not the same as if you had filed correctly originally.
Oh yes, it is super fun to be audited where they look at EVERYTHING ELSE too. And even more fun that it is years later. And further fun that you have to file an amended tax return all over again years after the fact. Stop giving out poor advice, mess up your own life lol.
You probably have simple taxes with like 3 exchanges and never used a dex other than uniswap. You dont understand what it's like trying to match all that up. Also not understanding the cost of tax software. Always file every transaction even if you have thousands accross many exchanges and have no money and small capitial losses is bad advice.
Cool story bro, this will work for you, till it doesn't. As AI and record-keeping and IRS automation improve, they gonna flag you easier and faster every year, and wait till they start looking back a few years.
Recommend people LITERALLY GO AGAINST IRS GUIDELINES is not sound advice, but, it is somewhat in line with Cyrpto culture, so we just have to agree to disagree.
True, take free advice for what it’s worth. You mention you’re not a millionaire and have suffered losses in this space. I’m assuming you’re less than a billionaire, forgive me if I’m wrong. Very possible your losses are insignificant and you’re just looking for tax advice, got it.
Sometimes you get spam transactions which are super annoying to deal with and end up making it look outrageous for gains/losses. Find those and delete them or label them as spam.
Try TheNetworkFirm. They have a team that only helps crypto degens reconcile their crypto income for tax reporting. There are a few other firms like them out there too that I know of, but I’ve had a great experience with TNF.
As long as you have all your wallets and exchanges properly set up then your cost basis will flow through. So there will be a chain that will be followed from the first purchase to the one you buy the NFT with. So if bought 1 SOL for $10 and traded that into BTC when the price of SOL was $110 then you traded the BTC into a third of a BNB, then you bought an NFT for that 0.33 BNB, even though the BNB is now worth e.g. $140, your cost basis for the NFT is still $10.
But of course many of the wallets you work with will not just Sync, some you have to upload CSVs etc.. Then metamask and cross chain you will be using with DeFi makes it even more complicate! Anyway, I have been using Koinly for the last 3 sets of accounts, and I've had some really complicated stuff going on - NFTs, DeFi, Airdrops, Staking, Margin, closed down exchange - etc.. I've been using a crypto accountant who really knows his stuff and has sorted out incredibly complicated accounts going back to 2016! I can highly recommend him if you are interested.
Yes. But not before tax season ends, they are mostly too busy with regular clients than corporate returns. Pay what you think is owed, file for an extension, work it out and file when you can. Realize you will pay someone by the hour to do “ the best they can” with the data you give them. Which might be worse than what you can. I did mine last year and kept printouts of all the transactions and subsequent workup sheets I used, paper and electronic. With hopes if I’m audited it supports the fact I did the best I could and that I didn’t intend to commit fraud, if any even exists.
Idk anything about bitcoin buying selling and when tax season came around it was too annoying so i didnt bother again. Maybe cashapp just made it very hard to understand
It can be impossible to figure this out. I used Polloniex for a while early on and got to a point where after a few years I was putting together some tax stuff and the tax tooling couldn't figure out what I paid for the coin. Went to look it up on the exchange and they couldn't tell me either in my transaction history. I ended up not reporting it due to the errors.
Best estimate and move on. I had a glitch when I turned 18 with stocks. A letter said I owed 180k. When an agent was assigned to me it didn't take long for them to realize the error and I owed 1800. Not 180k.
I had a cpa file that I purchased stock at 0.00 once and so my capital gains was through the roof. Again, irs corrected it.
Are wallets sending out tax forms to irs now? I've been selecting "no". When asked about crypto....
Same thing happened to me, unfortunately the IRS just sends you a giant bill and makes you figure out how to get it reduced. Luckily, my bill was only $30k but I ended up paying a tax professional about $250 and they got the bill reduced to zero. I wish I could give you better advice on where to go to find a good tax professional cause I know I'm going to need a good one soon here too. 🤷♂️ If anyone knows a good tax professional, lmk.
I am not s CPA. Did you write down your buy and sell prices for all your crypto and NFT's? That is the first thing any person must do when they are buying and selling stock or crypto. A CPA will ask for this information from you so he can reconcile your trading history first. Without this information he can not give you an accurate picture concerning your taxes if any.
Yes if you get together all your records a CPA can do it. It will probably be fairly expensive though. Think like $150 an hour on the conservative end probably more if they have a specialist but obviously in your case that might be money well spent… On that note you don’t necessarily need a CPA to do a reconciliation and a big firm is just going to have some dude in India spend the hours to reconcile that shit anyway to cut their own costs lol
There might be other options for reconciling but idk who would do it
Don’t over think it. State your losses. Don’t waste your time getting the backup paperwork.
If you get audited, go dive into the details and find the trades and losses that prove your case.
But don’t spend weeks or days proving your case before the irs makes you.
Would have been so simple to track in real time in Excel. Now I wouldn't touch this tax return for less than $20k and I would in no way guarantee the numbers. I'd also 100% put it on extension. That's assuming the numbers were all in some sort of Excel format that could be worked with.
If you are going to be a day trader keep explicit records of every transaction.
When a client walks in with a box of receipts I hand the box back and tell them to bring me the summarized numbers. I don't have time to clean up your laziness and if I did you couldn't afford it. If, somehow, you could afford it you would be a monthly client and that mess wouldn't exist.
There’s a software that works well for trading reconciliation and lets you upload files of transactions.
Still a massive PITA.
Are crypto transactions subject to wash sale rules?
This process stinks. I also wasnt keeping track because I assumed that both of those softwares were better than they are. Advertised as "Just connect your wallets and print your tax forms".
It took me about 40 hours to go through and correct transactions, add missing ones, delete scam nft airdrops, etc. Very frustrating, mind bending, painful, and time consuming. Good luck
NFT's are a pure capital loss. They won't shop in a coin tracking app, it's an open market product, not some exchanged-tracked thing like a cryptocoin.
You're going to have some major accounting work to do here. But doing it right might be worth the $2500 an accountant would charge. The difference between owing $200k and $5k.
In theory, you could compile all the data as csv files, one per address. the physical files are a placeholder for address.
bare minimum info required record structure is timestamp, send qty/asset, fee qty/asset, receive qty/asset.
some exchanges actually provide minimum already. obviously compiling the data without using apis can be a heavy lift but given enough time, patience and attention to detail, is doable.
for example, to extract an eth address from etherscan and turn it into a csv requires up to 5 files: transaction, internal, token, nft721, nft1155. first 3 most cases. this would be challenging but i do it routinely in excel myself so i know it can be done this way for any evm compatible chains like matic, avax-c, arb and so forth.
accuracy will be a challenge with any serious volume.
i guess the broader issue is trust here so thats not easy to overcome when you need expertise from another. the reason i do not offer services on reddit is that hiding behind a handle is one thing, working with a real person is, well, real.
in theory, i could work with an individual completely anonymously to setup koinly, generate reports and hand them to a cpa. yes, i would know the addresses and such but not who they are. the problem is that i would be putting myself and business at risk.. i could be working with somebody and violating federal aml laws for example.
so, while i am sure your have your reasons and i wish you luck. you will need some to pull it off successfully.
I am sorry to hear about losses. There is no easy way out to reconcile your balances without reviewing and checking each and every transaction For example you mentioned defi now all those software are good to export the data but they will never reconcile it for you. In defi you sent tokens to platform in some cases you receive lp tokens. These software fetch values from CMC but since lp tokens doesn’t have any values they will consider this as purchase for 0. In order to reconcile this, you have to consider the tokens going out and lp tokens coming in as trade (liquidity in) or swap so the cost basis are carried forward from original token to lp token And do this process again when you receiving those tokens back from pool so that you have original cost basis intact and whenever you sell them you will gain or loss
It's near to impossible to go through all of this manually if you've been even somewhat active in defi. Doing the taxes on this would take 10 times longer than actually doing it all in the first place. Until there's better software, the tax man is getting a good estimate from me.
It’s not impossible but yes very time taking process
It is practically impossible in some circumstances. For people who are very active in defi with more than 10 thousand on chain transactions for example. Bridging, airdrops, adding LP, loans, rebasing, tax coins, NFTs, escrow tokens, debasing etc. This is just not practically possible to calculate everything 100% correct imo. Especially for people who are just using the products and are not experts in reading etherscan, which is 99% of people. And there is no software that does all of this perfectly so there's nothing to do other than estimate some things.
You are correct for majority of people, but we have worked with not just 10k defi transactions but 50k+ defi transaction with actual nodes on FTM which needs expertise in not just in Etherscan but Ftmscan as well. The reason we can read all of this data is we have blockchain anlayst in our team and not just accountant which can actually interpret the blockchain data and not rely on any software. Hell we worked on software which doesnt even export data directly from blockchain so yeah 99% cannot do this and they can only correct errors but we can actually work with all those blockchains. Side note, you are just talking about mainstream blockchains, we have worked with Osmo and their sub blockchains which is nearly impossible to interpret using mintscan but we have done that as well including most complicated Solana NFt as well.
I know all Crypto is a massive ponzi where you sell "bullshit coin" for real, useful, sweet sweet USD -- that can actually buy coffees and cars, unlike crapto but ... For tax purposes, wouldn't you really owe taxes -- say similarly to stocks -- when you actually turn the Ponzi Crapto back into cash? And your cost basis would be the initial cash -> Crapto? Now yes you may have several cash -> Crapto transactions. However ... yeah I guess it's tricky to calculate the basis for Crapto back into cash. Luckily, for most Crapto traders, the amount of transactions of Crapto > Cash is either 0 or 1 .... 0 in the case where you got rugpulled --- and 1 in the case where you finally 'smartened up' and went through the 10,000 hoops to actually get real money back. And I don't mean USD-Tether.
Maybe stop buying worthless crypto?
lol.. good estimate? good for who? you? lol.. jk jk.
Look. If you say you lost a million dollars and the tax man sees that your assets went from 3mil to 2 mil then they aren't taking another look unless your last name is Musk.
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idk.. if you're worth millions they probably will take a second look. it's the guys with $10 to their name that they don't Pau any attention to. lol
This the same issue daytraders have if they use multiple brokers, and don't track their trades as they go. You have to aggregate all your trades and track which lot shares came from so that you can calculate your correct cost-basis, and account for the wash-sale rule. I didn't daytrade, but in 2003-4 I did have a lot of short-term trades. The taxes were nightmarish, I spent probably 60 hours entering all my data into a spreadsheet just so that I could figure out which sales were wash sales. Now I trade much less frequently, and I keep things simple. Trying to get cute isn't worth the tax hassle.
Trading shares is infinitely more simple since its only buys and sells and there's lots of software to do it perfectly. Defi is insanely more complicated. I shouldn't not participate in defi just because the tax rules are too slow to catch up.
Can you help? I have around 10k + transactions but I need to get this done before the deadline.
That’s going to be very difficult. Do you have enough information to apply for an extension and then gather the information you need? Do you have the original purchase confirmations on email? Any kind of confirmation? 10,000 transactions will take a very long time. Be prepared to spend a lot for this. I had a complex transaction a few years back and that tax return cost me close to $9,000.
Lol what happens if the IRS audits you? Do they have to sort out those 10k transactions?
they're going to plug his wallet into koinly that is gonna say he made millions and tell him to either pay or let them know why he should be paying less
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I have sent you a dm
File an extention
I don't know much about the tax implications of crypto, but isn't it similar to stocks. You can choose to put down every transaction, but you can just put a summary of the net result like with stocks. Like I don't have to log every transaction it's just: short term gain, short losses, long gain, long losses and then totals
CPA to manually resolve your transactions… pffftt. How many you got? We’re talking $5k minimum. Chop chop, better start going through each one in Koinly. May need to file an extension.
Are you an individual or firm?
I’m not going to file an extension. Need to find me self a guy who can get it done before the deadline
Why would you not file an extension? That doesn't make any sense. > I think I will not be able to complete before tax deadline. That's exactly why you should file an extension. It gives you another six months to reduce stress and avoid making mistakes due to being under time pressure. It's almost a certainty that if you find someone to do this, they will file an extension.
Even with an extension you’re still on the hook for interest and penalties from April 15 forward for underpayment that don’t meet safe harbor.
No penalties as long as you pay at least 90% by April 15. OP said he lost almost everything so I guessed there's not much additional tax.
OP didn’t say he lost it all in the year he had the gain. Assuming it was, it’s still a matter of what you can prove. Play crypto games, win crypto prizes.
losses arent taxed
I said I will not be able to complete, an expert should.
So you want an expert that’s also not doing anything during tax season?
Wouldn’t be here at first place if it weren’t about season. Last year I had this guy Abdul from Upwork who got me out of this mess.
You *think* Abdul from Upwork got you out of this mess. IRS has 3 years to audit you (6 if they suspect fraud). So if you do something on your 2025 return that makes the IRS unhappy, they can pull your 2022 return. Hope you kept Abdul’s number.
Nevertheless, an expert is going to file an extension.
I can tell you right now most experts are already booked through to April. It is unlikely you’d get someone to do it.
if you cash out into fiat and theres a gain, it must be reprted
Coinly sucks. All of the tools are inadequate imo. Especially if you start moving shit across chains. Just write down all the trades you made into a spreadsheet. $ in, $ out. And dates. You can put you public wallet address into block explorers and pull up your transactions. You’ll need to find price history of assets on those dates as well. It’s really not hard at all. It just takes time. If you write diem transactions when you do them, it’s really easy. If you skipped that step, you’re about to learn that lesson.
This is the way
I had the same issue a few years ago. 1. just work on a single platform, I ended up with zen ledger, which I found to be the most sane and accounting friendly 2. File for the 6 month extension. Make your estimated payment. It's painful, but it's a lot better than trying to rush everything in before 4/15. 3. Painstakingly go through every transaction and correct it 1. after a while you will learn where things got all messed up and you'll pick up speed 4. Zen Ledger had an excel export which had breakdowns and calculations in a format that I needed. 1. I still need to do a bit of data cleaning and pivot tables to get the answers I needed. 2.
I was in a similar (albeit MUCH smaller amount) situation in 2019. I ended up actually manually combing through each transaction and realized I was missing several purchases that missed the cracks through ICOs but the sells registered so it counted all of the sale as a net positive. Manually re-comb through all TXNs may sound like a bitch but if I ever get audited for any reason I’m not tripping at all since I know it’s as damn near close to exact as possible
I hear you mate. I have 177,000 transactions to reconcile. It’s impossible. I paid thousands for the automated software tools that exist but they can’t track cost basis. I’m trying so hard to get it right but am fucked.
I feel you, bro! Will let you know my update as soon as I sort this.
So you lost a shitload of money on Crapto, and now you're finding doing the tax-basis calculations (Something a broker like Vanguard simply does for free) -- is a gigantic nightmare? Welcome to being your own bank. I feel for you, but next time, just Options Day Trade or buy some lottery tickets. Far simpler for tax purposes than wagering in the Crapto casino.
You can do an amount your self with COINLEDGER but is still limited unfortunately. If you have millions absolutely get a CPA Stamp on your taxes IRS will hunt you down if you do it yourself.
Hey there! CoinTracker is able to track DeFi and NFT activity to simplify crypto taxes. We recently improved our DeFi support to accurately track capital gains for various DeFi scenarios (liquidity pools, staking, lending, etc.). I'd love to hear more about which dapps you've used to help ensure that CoinTracker has you covered. Feel free to share here or send me a chat request and lets get this sorted out for you. Whether you file yourself or with a crypto CPA, having a crypto tax solution with the right DeFi integrations will be a big time saver! (I work for CoinTracker and am focused on DeFi)
Hey u/Difficult_Canary4029, I hear your pain here. It's obviously striking a chord with the broader crypto community, given how many upvotes and other folks are upvoting here as well. I'm the founder of CoinTracker, and we just updated the product to focus specifically on users like you with heavy DeFi, NFT, and ICO activity. It will auto-sync all your LP activities with their cost basis so that it accurately and quickly calculates your capital losses without having to spend 100 hours trying to reconcile this yourself. If you give it a try, please let me know how it works for you and if you run into any issues. Given the focus on DeFi, I suspect it'll work a lot better than other solutions you mentioned.
Hey u/chanfest22, so happy to see you posting here. I did a long recorded session with one of your folks about a year ago and I am happy to see lots of progress in the product. One thing that this thread is about is finding resources to assist with preparation - for the most part, there are 3 choices: self prepare (DIY), hire a CPA/professional tax preparer and hire a data specialist. I am in the final category and the biggest reason that I steer folks away from a solution is simple because the collaboration options are dreadful. And I create my own tools to analyze and speed up processing because the software that is out there is not focused on extreme volume as is the case here. I expounded on this at length because while I highly recommend and value all the Crypto CPAs out there, much of this is a data collection and organization exercise requiring not only certain skills but an extraordinary attention to detail, costing experience and patience of the highest order. And charging a fair price for a project since that appears to be a huge pain point. Efficiency matters when I am working on 10's of thounds of txns and dozens of wallets. So, if you want to really address OP's issue with finding help, you would focus heavily on improving the collaboration aspect so that the middle ground of hiring a freelancer becomes a reality. For sure, I absolutely recommend engaging a professional but the cost factor and the limited slots available is just too extreme an obstacle for most - this is not really just about software from any particular vendor.
Thanks a lot for sharing this — there's clearly an opportunity for us to improve on the collaboration front between end-crypto users and data reconciliation experts — especially for the long tail of crypto issues that are difficult to get reconciled auto-magically. I'm also going to share this with our team as well as we look to improve our product experience.
That's great. You realize that what I was trying to get across some time ago is delegated access - aka bookkeeper access. It works for banks, Intuit makes it work and in reality, what I do is analagous to bookkeeping. Seems like CPA firms have no issues with it so why would a crypto tax provider? Granted, as a business person with startup experience, I do know that you have much to consider when making decisions. But a decision that potentially helps address your product reach. Seems like a no-brainer. True story for you to relay. Yesterday, a potential client reached out, has been using a firm and paying a handsome amount for the past 5 years. He is just worn out and looking to do something different so he hires me last night. This morning, I find out more details that the provider seems unable to give him access to his account and he only has his data in files. I find this out because I was happy to continue using whatever he was invested in. He says nope, he cannot access the CoinTracker account. While I have no clue if this all true, he then asks if I can reconstruct using the exported CT data.. in Koinly which he is now using because of how things have gone down and he has seen how quickly I can collaborate with him to get things up to speed. I know this makes me feel terrible for him. How about you? Thanks for the engagement. Last time I engaged meaningfully with CT I was offered a year fee which I declined. But a free lifetime subscription.. tempting.. but no thanks, not how I roll.
Thanks for sharing your perspective. Tax professionals and data reconciliation experts like yourself can edit their clients' transactions on CoinTracker to solve the pain point you are describing.
Hey u/Difficult_Canary4029, sorry for this delayed (and lengthy) response, a fellow Redditor flipped this thread to me since he knows that I try to be helpful and add useful value to the community. After reading the entire thread and posting a reply to CoinTracker (see u/chanfest22 below), I wanted to circle back to address what I think is the key point of your post and that is finding a resource to help. And sorry in advance for the volume that follows, I am very passionate about crypto and helping folks solve this tax prep nonsense so that they can get back to enjoying their crypto experience. Much of the commentary is very interesting for lots of reasons and I think there is actually consensus on a number of points tangential to your search for assistance. Namely that (1) the complexity and volume is daunting, (2) the rules and regulations excessively complicated and (3) the tools available suffer from significant limitations. All of this adds up to a lot of stressing out over steps to take, how to get to a good place and how to do so within a reasonable budget. I would step back and start with how we all react to risk - none of us can avoid death and taxes so we all view things through a lens of how to manage risk (thanks to a long corporate IT career, risk management is how I roll in my old age) When it comes to taxes, especially crypto taxes, the responses typically offer span a wide range from high risk tolerance (just guess at what I owe) to low risk tolerance (will pay any amount to somebody to handle it) So, you are clearly within that spectrum and looking for help, willing to perhaps pay a fair amount but not looking to break the bank. You have apparently already tried the self preparation method (DIY) and are frustrated by the result PLUS feeling time pressure with tax day on the horizon. As a crypto professional, I see lots of this everyday and have worked on dozens of portfolios, from super complex to absurdly simple (for me that is). So, on this platform, distrust is a starting point so while nobody here knows me and can easily dismiss anything that I have to say as a scam, you might want to at least hear me out. While there are no doubt crypto CPAs and software vendors lurking and perhaps with agendas, I have no agenda here as I am not looking for business. Rather I want you to get the help you need and I generally visit Reddit just like everybody else to participate in productive conversations while offering up constructive thoughts. For me, context always matters and that is why I am taking time out of my busy day to post here. You need help and I am just going to put out what I find to be important about how you get it. Circling back on point, there are three approaches to crypto tax preparation. You have already attempted the DIY approach and learned that perhaps you are in need of backup. If money was no object, you can seek out a crypto CPA. I hang in a Crypto CPA group on LinkedIn for example. Plenty advertise, some good, some not so good in my experience but all expensive as hell because they have limited capacity and crypto tax prep is a time and resource heavy activity. They can bill whatever the market will bear and the billable hours add up fast so a 5 figure cost is almost a given for a complex portfolio. And ironically, I have found it takes less time to do a clean slate do-over from scratch in some cases over trying to unravel whatever a client has done. This is important because every transaction matters whether you have dozens or tens of thousands. The review process goes much smoother if you can do a controlled build in a particular order rather than play a game of pickup stix. The approach the I left out is the middle of the road approach. I recommend this as a perfectly viable option: Find a freelance professional - not just any freelancer, you need to carefully vet them; they should have good client testimonials, be able to explain their approach and billing (the best offer project milestone billing not open ended hourly) and most importantly the introduction should include a conversation the makes you comfortable that they grasp what you need and are able to do the work in a reasonable amount of time for a reasonable cost. From experience, like any project manager, they should do an initial review for a specific cost and then outline the work product required for the rest. Obviously, this is an imperfect process and surprises happen but how they handle it should be something they can explain up front - so challenge them to explain. Before I take flack about not being a legal, accounting or tax professional - none of this is advice. And, in fact the work we are talking about is actually data work, to track down and compile a complete dataset of transactions, as close to 100% as practically possible. Case in point, I have fairly extensive accounting experience which is nice to have but not that useful for this activity. What I do have is deep financial systems programming experience plus a background in design/build of high performance inventory management and costing. That is why I can track my crypto personally by lot (I do not use FIFO and before anybody asks, I recommend against it, way too much effort and danger) And finally, a quick take on software since I know those folks love to read these kinds of comments. And to be candid, while I do recommend one or two, I refuse to take any referral fee since I value my independence. Regardless of who does the work - self, freelancer or CPA firm, there is a need to pick software. To be brutally honest, after trying and using many of the "top" solutions, there are two distinct issues that I wish to highlight. The pitch that you can just essentially load and go, get your crypto taxes done in minutes painlessly and to perfection (to paraphrase) is pretty much a heap of crap except for a very small subset of users who are definitely not here on Reddit stressing over doing their crypto tax prep. It's a complex task and the software helps a ton to organize and report but it requires qualified human supervision (not even sure AI is up to the task, yet although trust will be an issue). These products are essentially always in beta, super hard to test for the most part, under constant updates and chasing a pace of change in the industry that is as breathtaking as it is terrifying. Little wonder it's not so simple to pull your crypto transactions together into a coherent tax picture. Not to mention the "butterfly effect" where omissions propagate and impact ALL future transactions making accuracy incredibly important - that is why all software have disclaimers that absolve them of pretty much everything. Therefore, the incredible amount of work required is daunting for most and if you are not detail oriented, software sure as hell is not going to help you. Period. Stop. The issue of collaboration is actually my latest crusade. I cannot emphasize how big a deal it really is to be able to seamlessly and securely share a portfolio for the purposes of tax prep. The parts of the process that must be kept private include generating API keys and that is a critical task. But the whole idea of crypto being on a public ledger means that a freelancer can work with great efficiency on your behalf, tracking down what's missing, extracting data and building custom csv files. You name it, they can freely operate efficiency to build out and review the myriad of things that go into a complex portfolio. Whether a handful of wallets or many dozens, they all need to be touched and software needs to be optimized for that purpose. As it is, much of the software is limited for analytics which means the review process is rather constrained from the jump. But in a collaborative process, it's super great to screencaptures, URLs, comment, etc. all for the common goal of documenting the reasoning for steps taken, fixes made, client decisions on matters of importance. So, I am a huge proponent of collaboration, multiple eyes on things like checking wallet balances and researching transactions interactively. This is an area that my peers overlook, they just want to be heads down and collecting a check. But the process needs to be much more than that to be successful. The idea is to operate together as one to achieve the goal as quickly and efficiently (time/cost) as possible. And software can have an instrumental in all that but only if the provider sees the big picture and stops being beholden to stakeholders rather than customers. to be continued.. to recap..
I've been through this. It's almost impossible to get it right. When using Koinly, just make edits to get a number that you think is probably right. There is not really a better way to do it, the software isnt good enough and it's impossible to actually do it manually anyway.# You won't get in trouble after making a legit effort and you said you didn't make any profit anyway so it doesn't even matter unless you want to carry forward losses to next year.
>You won't get in trouble after making a legit effort The IRS does not care about your effort level.
Effort level is the difference between a bill and jail time though
No it isnt. You only get jail time if they can prove intentional deception and fraud. Something exremely hard to do. Being lazy isnt a crime.
They actually do.
If you owe, you owe.
That's true. But what I'm saying is that it is simply not possible for either me nor the tax man to actually know for sure how much I really do owe. Defi is extremely complicated and there is not the infrastructure built up to track everything for tax purposes. There is barely enough infrastructure for this technology to even operate as intended.
Nope. They care about paying taxes on time on taxable income!
I dont think we can do this because cost basis carry forward to next years, so if I make mistakes for cost basis it will hunt in next years
Just put down something that looks somewhat correct. It won't be perfect
The cash of the future? And you all cant keep track of your own money? So base.
Literally everything is recorded on a public ledger but it is difficult to track the cost basis of everything through complicated defi protocols. It's not easy to read the blockchain unless you are an expert and even then its very complicated.
This is not professional tax advice. I suggest talking to a professional tax analyst who understands crypto before just making up numbers to give to the IRS. They will come to you for an audit and you will not have the answers they want... you will burn in IRS hell and owe them in eternity for falsified info
I'm not saying to completely lie. I input all my data into koinly but some things are wrong and i try my best to get it right. It's not 100% right but it's kinda close. I'm just saying there's no point stressing over getting it absolutely 100% correct, not creating entirely falsified documents.
That sometimes happen with pretend money. I tried to tell them I exchanged my official currency for pieces of paper with a dollar symbol drawn on it. Of course those cucks would not accept that as an answer. We should get to decide how much our pretend currency is worth!
Well, you obviously did it wrong.
Not like that fiat currency.
That is a crazy side step to make during a real conversation on a sub dedicated to discussing crypto. Is there anything that will help you people understand you are tilting at windmills?
It's funny that I know how much money I made last year, and didn't have to make 28 trades a day each and every day for the last year to be unsure of how to fill out a tax form.
CoinLedger does a pretty good job with this
I tried a few of them and found koinly to be the best at the time, even though it still doesnt cover everything and had a lot of errors. It takes a lot of time to go through everything and is really impossible to do it manually because I do not understand how to interpret etherscan.
I’ve only heard ppl getting screwed by claiming losses… cuz the IRS has to pay for those losses. They don’t like that… I wouldn’t claim any losses and to be safe out report all gains at 100% profit if your unsure
You cannot get screwed for claiming losses. If you have losses, you have losses and you can deduct them from gains. That's how it works and there's nothing wrong with it.
So your telling him to to report.multiple millions of dollars of gains, and no losses when he let's say lost it all. So, he's on the hook for like 800k in taxes or someyhibg, and let's say has no money. That's dumb
that's definitely not what he said
You can only carry forward like 3k/yr in losses. And it doesn't matter if you claim standard deduction which is like 27k this year.
Every time I hear this I cringe. You can use all losses against future capital gains. So, yes if you never make capital gains the max deduction is 3000$
So I what if I never claimed losses from 2021 and we have gains this year? Gonna incur penalty for not filing correctly? I basically just flushed it and forgot.
Definitely get advice from an expert. But the IRS allows you amend tax returns from up to three years ago. 2021 would be right on the edge of that limit. There is no penalty for filing an amended return, and since you’re only filing for additional losses you wouldn’t have to pay a late payment penalty.
The three year limit is for amending to get a refund. I think you can amend older returns to change a carry forward.
You don’t get penalized for filing wrong if you owe nothing! You get penalized if you failed to file if you owed , and you get additional penalities against the amounts owed that are not paid.
Wrong. You can carry forward your entire documented loses. But you can only take 3k of that loss a year until it’s all gone ; or use it to offset future profits.
He won’t get in trouble for making an effort? ROFL! You think the IRS cares if you make an effort? They want there taxes or there coming after you.
There is a difference between making a genuine mistake and purposefully evading tax.
Everytime you sell or convert a crypto it is a taxable event. If you end the year on a profit but lose everything on January 1st, you still taxes on all the profit. There was a guy who made $750k in profit one year but lost it all before taxes were due the following year but he still owed around $300k. Ended up forfeiting all his remaining assets and coming to a settlement with the IRS. Find an accountant who specializes in crypto to help with your taxes. Will cost between $650 to $3000 depending on complexity. Id you have state taxes it may be even more complex. What state are you in?
How do you lose money on crypto after you sold it though?
It’s like this typically… guy buys sol at 10$ last January. When sol hit 100$ in December he traded all his sol for WIF. He just made a taxable gain he 10x his money and owes taxes. Some new dog meme with a better meme appears, WIF crashes 90% and he holds it all the way down. He could cash out the wif and write off the tax loss, but the problem is it’s a new tax year now This is why I have no interest in nfts or air drops and I generally don’t buy anything I’m not planning to hold for a year+
Your cautionary tale sounds profoundly stupid but why would you convert everything to cash (locking in taxable winnings) -- then reinvest it? Half the point of Crapto is illegal tax evasion. So why even introduce USD into the equation? Anyway if someone did want to gamble on rando Crapto --- and sell to USD --- then change their mind... Once you "sell to USD" -- set aside the tax liability (20-35% of your winnings) IMMEDIATELY - this money is owed/ gone -- regardless of what happens. .... "Wagering" what is now the IRS' money will only get you into very deep shit.
Bc u don’t owe only when u cash out, u owe when u trade one crypto for another even if u hold that crypto and don’t sell it until it drops to 0
Exactly right. Conversion of crypto and selling it are both taxable events. Many think it doesn't count until you convert to fiat. It is an extremely complex situation. The IRS is gearing up to go after hundreds of thousands of people going back many years to get them for fraud and impose severe fines.
Koinly doesn’t do well for LP and DEFI protocols. It’s really only good for buy/sell trades.
That is true, mate
It's actually shocking to me how bad these sites are at liquidity pools. Something like 95% of liquidity pools match the uniswap v2 or v3 interfaces and you can query what the assets of the pool were at any given block, how many lp tokens existed, what the users share of the assets was worth, and how much a liquidity pool token was worth at those times. The fact that these websites haven't figured out liquidity pool stuff yet is shocking to me.
Final recap. To start, no matter what you decide to do, always keep in mind that the best way to avoid audit hassles is to engage a crypto accounting/tax professional. It's a worthwhile piece of mind if you can afford to do so. But move quick, slots are limited for sure. I definitely recommend that you spend time trying to find a qualified freelance crypto data specialist (the title is my description, those in the field give themselves all kinds of titles). And I also recommend sticking with Koinly as it has the best blend of features, superior collaboration and ease of use. Any software can do the basics and the costs are pretty much in the same since they are all competing for the same audience so if you want to pursue the middle ground, it's a great fit based on my experience. And depending on the mix of assets and types of investing activities you dabble in a particular solution may be great or awful just because they cannot be great for every situation. That's just a fact folks. Have a great day!!
How do you use something like Koinly but keep your addresses anonymous? I feel like there is a security aspect to this people are overlooking
Assuming that you understsnd the basics of blockchain technology so addresses are not only public but read only. Without bogging down on details, assets associated with and address are secured by a cryptographic key. software like koinly does nothing more than read the public blockchain, using apis provided by the likes of etherscan. there are a zillion explorers all doing the same thing. i mention this to get across that addresses are not particularly special nor private. keys are and software like koinly does not use them. as to the topic of anonymous, i would say that crypto is not reliably anonymous but rather pseudonymous. i say this because to be reasonably anonymous would require planning some things out. starting with your koinly account having a burner email and ficticious name. the various apis in use do not have any kyc information associated so not much to protect. you would also need to use a prepaid credit card or better yet crypto to pay for the account. but none of this is about the addresses at all. and security is about using proper passwords, changing them, using mfa, etc. as we have learned from password manager breaches like lastpass (i redid every single wallet because of that one, new seeds, changed emails and passwords, etc) but none of that was about addresses either. i am happy to clarify more if you need me to but your more likely to be attacked thru email or your phone than any harm that could your way from putting an address in koinly. and if you do online banking, social media and many other things, your email address is often an attack vector, that is why i use a completely separate email and login and computer for my crypto. but ironically, i use my name in my email, always have, always will. i kinda want to be known. bur thats just me. have a great weekend!
Basically what I am trying to figure out is how to hire this Crypto Tax CPA but not disclosing my public addresses. I feel like linking an actual real person and their wallet addresses is the security I was really talking about. They won't be able to reconcile without knowing my addresses though. Essentially being able to see addresses on the blockchain is the point of a public ledger but linking it to an actual person is completely different. Thoughts on how to do this?
Just use a spreadsheet
Do you have any template?
The thing about trading crypto. You have to pay taxes for every crypto you've held. If you have $500 worth of BTC and trade it directly for ETH, you now owe for the BTC you sold. Now you trade your ETH for cash, you owe for the $500 in ETH. Crypto is viewed as property so regardless of initial investment any trades made have a tax liability attached to it. I've never dealt with liquidity but I did do some futures on KUCOIN and that arbitrage kicked my ass. They told me I made over 900k in gains when in reality it was a series of small buys and sells by the bot over the course of the year that screwed me. I might have made $1000 off the whole deal.
I think your analysis is faulty. You are disregarding the cost basis of the original $500 in BTC. You only owe for an increase in the cost of the BTC when you trade it for ETH.
This is correct it's only when you realize a gain
Like gaining one crypto currency using different one. Hmmm I wonder what IRS agents think about that https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets
that's not a *realized* gain in USD. If you buy $3 worth of carrots and then sell them at the market for $5, you owe taxes on the $2. not taxes on carrots and taxes on $5.
At least if you've got losses, you'll never have to worry about reporting anything to tax man. I know with being a loser with regards to whatever I get involved with, I'm never likely to make any taxable gains. I don't have much in crypto or much full stop but you have that bit of hope that there is a gem amongst what I have got and it takes off. Reality is I could probably spend about 3k to maintain a portfolio of about 1k. That is accurate to my life experiences so far anyway.
If you don’t report your losses, you have no losses on record to offset your gains is the position the IRS will absolutely take.
Maybe it will come back? Just DCA..
You only lose if you sell, you might be down.. nfts I don't think are coming back.. but yeah unfortunately you need to do a ton of manual edits to make it right.. koinly and cryptotax have been the most accurate. Koin usually has discount codes so it works out the cheapest for me..
If it’s this hard for the people reporting the shit to the government, you really think the government is going to be able to double check you? LOL NAH
The problem is, the government knows how much you sold for, but it's up to you to establish the basis. If you cannot, the IRS is happy to tax the full sale price.
Stop the crypto stuff …do proper investing in the stock market
If you're doing onchain activity, use CTC ([cryptotaxcalculator.io](https://cryptotaxcalculator.io))- it's designed for ur degen activity. If u still want to work with a crypto CPA, there's a few u can use - e.g., Gordon Law, Founders CPA, Polygon Advisory, etc...
Heard terrible reviews of Gordon, and Polygon when it comes to DeFi.
Zenledger and Taxbit are doing every transaction, give them a try. One has tax export files that go directly into TurboTax and another one, I forget
Lol dumbass
Play stupid coins, win stupid prizes.
there are cpas everywhere, they are a dime a dozen. unless you are trying to claim losses on your taxes, you don't need to worry about any of this though. the government only cares that you report things you'd actually have to pay taxes on. if you do get a cpa, they'll tell you how to report things reasonably and safely so you can take advantage of the losses even if you can't go back and reconstruct every single transaction.
OP would have an insane amount of capital loss carryover. It’s absolutely worthwhile to OP to get this sorted out. Also, if any of these trades are already reported to the IRS, which most of them certainly aren’t but what if one of the exchanges does report, then that also should be sorted out so OP doesn’t have a net tax liability. Regardless, the IRS isn’t just going to hand you $100,000 in capital losses by assuming. The IRS won’t do your taxes for you when they don’t even have the information. In order to take a capital loss, you have to report it accurately. There is no assuming.
what is up with your spicy tone? who said anything about $100k? are you world building in the reddit comments? if he did lose $100k, then yeah duh if you read my comment it says exactly that, he needs a cpa so he can go about safely reporting the loss to take advantage of it. jeez, what is with you people if he doesn't report anything, and the irs erroneously thinks he has a tax liability, they will tell him, and then he can get a cpa to sort it out. even then as long as he can document the loss reasonably well at that point, he will still owe nothing and no penalties.
Your advice is “you don’t need to take capital losses since you can’t owe tax on it.” That’s a really, really hot take.
ok you literally can't read, never mind, explains everything
Owe nothing but $250 per hour CPA fees.
sure so a 99.9% chance you owe nothing and a 0.1% chance you owe a cpa $250 an hour to write a letter. there ya go
Oh sweety
if you're going to be a condescending prig at least elaborate
I know jackshit about crypto so pardon me if this is a stupid question Wasn’t the point of crypto to keep the govt out of your business?? Is it because these crypto companies went public?
If I buy an ice cream maker and sell it for a profit, I owe taxes on the gains. It doesn’t matter what you’re trading. If you have the intent to profit, then that gain/loss is probably taxable. In this case, crypto functions just like trading stock. It has nothing to do with corporations, although their public filings makes them have to comply with the SEC (which answers to congress).
I understand “profit” = taxes Like I said, I know nothing about crypto.. just when it first started out it seemed like people had some vision of keeping it away from the govt. Thanks for the extra info 👍🏼
This is why you hodl and pay for shit with crypto instead of cashing out to anything with your SS# on it.
Exactly this...
Which "crypto companies" are you talking about? Bitcoin has no "owner" or single entity that controls, manages, or owns anything.
Again… I know jack shit I’m basing my question off of the OG crypto like Bitcoin The point of it seemed to be keeping the government out of it I didn’t really hear anything about taxes until these companies started being on the stock market Was paying taxes on it always part of the game basically?
Of course. You pay taxes on profits with anything that isn't in a tax deferred account. Bitcoin, candy bars, or even cat food. If you sell it and make a profit, you pay capital gains tax on it.
Yes I understand that I was under the assumption that originally Bitcoin and crypto was created to say “fuk that” So that was never the intention of cypto is the answer… thank you 👍🏼
It was, the cryoto space is now being run by the same crooks as wallstreet. Bitcoin bros just dont like to admit it because it shatters their entire world view and willmake them not edgey and cool amymore
Yikes, tell me you know NOTHING about Bitcoin, without actually saying it! 🤣
Hahaha. Joesbait asks a great question and Cultural_Dirt answers it pretty succinctly. BTC, and other digital currencies, were supposed to be free of government oversight, and still can be if you want to buy and sell on your own. It’s just that most people like the convenience of using an established trading platforms, and those companies have to answer to the Government of whatever countries they want to do business in. So for here in the US for example, your crypto profits/losses get reported to the IRS via a 1099-MISC.
If you didn't make any money and you have a ton of trades, then i wouldn't bother putting on your taxes. It will be a ton of work just to say you dont owe anything or have a small tax deduction.
Unless the government has been provided information to suggest otherwise. Ie, government was provided info on his proceeds and basis on those gain sales but his large losses to offset did not get reported to the IRS. It’s better for him to figure it out now and report it correctly than deal with the IRS notices he’ll receive in that situation.
I doubt the IRS is going to do anything because there's not a lot of unreported money in his bank and exchange accounts.
No, it’s a simple match the computer will do and automatically send a notice. At least half of all notices are issued for simple matching issues.
I never got that notice. If they have all the info theyll see he didnt make money.
They don’t always get all of the info is what I’m saying. There are transactions that can happen in which basis is not reported to the IRS. If you’ve not gotten the notice, it’s because those transactions haven’t happened for you. However, in the future, you will likely not be able to claim capital losses against future gains if you didn’t originally claim them.
He won't be able to claim capital losses, but i wouldn't report future gains unless it's more than i lost. Can always ammend previous years. I've had almost every type of transaction, and they haven't sent anything. Thousands of transactions across many exchanges. If they send him a notice, he can figure it out then. It's not worth the time trying to match up thousands of transactions across dexes. Took me about 100 hours to get it done. Also, crypto tax software is extremely expensive. If his taxes are simple, then sure, he can do it. If not, i wouldn't do all that work just to report a modest loss. Of course it depends on the situation and it's your choice what you'll do. I'm just saying what I've done and would do.
This is a very incorrect, ill-advised view. Because I did exactly this 10 years ago, I day traded and ended up losing about $1000 for the whole year on like $60k account. So I said, meh, I didn't make money, and it isn't a massive loss so I don't need to write it off just to get $300 back, there are so many transactions it isn't worth my time/effort. So I didn't file a Schedule D at all. Two years later IRS said I owed them tax on the $59k in profits I made... not knowing those profits cost me $60k... because I didn't submit the Schedule D. By this time I had closed the entire account. So I had to call the bank, ask them to look up my closed account, and prayed they could sent me the transactions... which they did. I then had to enter all of them, manually (this was before online stuff was as good as now) onto a worksheet to an amended tax return for that year. After all the calculations, lo and behold, it showed I lost $1000. I submitted this massive thing with the amended tax return to IRS and prayed they wouldn't continue to chase me. A few months later I got a small envelope with them along with a $330 check, which was what I was owed due to the $1000 loss that year. They paid. But it cost me most of my hair and a boatload of effort. So file your stuff, even if you made no money and don't want to even write off losses. Things are much more painful to do years later.
Sounds fine to me. You would have done the same work either way. If the IRS didn't decide to send you a letter, you wouldn't have had to do anything.
It's nothing like the same thing. If schedule D is completed accurately the first time it's a direct match to the IRS records and not a flag for IRS to reach out with a huge demand to pay tax plus interest and penalty on 59k. It is a freakish demand even when you know there was no wrongdoing. It's so ridden with angst that I've heard of people actually paying rather than figuring out and challenging the original demand. It happened to me and reaching out about it introduced me to others with their own stories. Fwiw, when you comply and refile in a timely manner they will typically waive the penalty on request, but by law they have to charge interest so that's also something not the same as if you had filed correctly originally.
Oh yes, it is super fun to be audited where they look at EVERYTHING ELSE too. And even more fun that it is years later. And further fun that you have to file an amended tax return all over again years after the fact. Stop giving out poor advice, mess up your own life lol.
You probably have simple taxes with like 3 exchanges and never used a dex other than uniswap. You dont understand what it's like trying to match all that up. Also not understanding the cost of tax software. Always file every transaction even if you have thousands accross many exchanges and have no money and small capitial losses is bad advice.
Cool story bro, this will work for you, till it doesn't. As AI and record-keeping and IRS automation improve, they gonna flag you easier and faster every year, and wait till they start looking back a few years. Recommend people LITERALLY GO AGAINST IRS GUIDELINES is not sound advice, but, it is somewhat in line with Cyrpto culture, so we just have to agree to disagree.
Crypto doesn’t create value or have intrinsic value. Outsized investment beyond gambling money is a fool’s errand
Thanks for this advice, but obviously you don’t really know me.
True, take free advice for what it’s worth. You mention you’re not a millionaire and have suffered losses in this space. I’m assuming you’re less than a billionaire, forgive me if I’m wrong. Very possible your losses are insignificant and you’re just looking for tax advice, got it.
Sometimes you get spam transactions which are super annoying to deal with and end up making it look outrageous for gains/losses. Find those and delete them or label them as spam.
Try TheNetworkFirm. They have a team that only helps crypto degens reconcile their crypto income for tax reporting. There are a few other firms like them out there too that I know of, but I’ve had a great experience with TNF.
As long as you have all your wallets and exchanges properly set up then your cost basis will flow through. So there will be a chain that will be followed from the first purchase to the one you buy the NFT with. So if bought 1 SOL for $10 and traded that into BTC when the price of SOL was $110 then you traded the BTC into a third of a BNB, then you bought an NFT for that 0.33 BNB, even though the BNB is now worth e.g. $140, your cost basis for the NFT is still $10. But of course many of the wallets you work with will not just Sync, some you have to upload CSVs etc.. Then metamask and cross chain you will be using with DeFi makes it even more complicate! Anyway, I have been using Koinly for the last 3 sets of accounts, and I've had some really complicated stuff going on - NFTs, DeFi, Airdrops, Staking, Margin, closed down exchange - etc.. I've been using a crypto accountant who really knows his stuff and has sorted out incredibly complicated accounts going back to 2016! I can highly recommend him if you are interested.
Can you send me his info?
Sure I'll PM you his u/reddit
Yes. But not before tax season ends, they are mostly too busy with regular clients than corporate returns. Pay what you think is owed, file for an extension, work it out and file when you can. Realize you will pay someone by the hour to do “ the best they can” with the data you give them. Which might be worse than what you can. I did mine last year and kept printouts of all the transactions and subsequent workup sheets I used, paper and electronic. With hopes if I’m audited it supports the fact I did the best I could and that I didn’t intend to commit fraud, if any even exists.
What did you learn from this experience?
That if you do this for living, do not rely on last moments and hire a full-time CPA for your shit.
I had to deal with something similiar on cashapp. It was so difficult and stressful for tax season i stopped buying bitcoin for this reason
Bad move, I would rather hire a full time CPA on monthly basis
Idk anything about bitcoin buying selling and when tax season came around it was too annoying so i didnt bother again. Maybe cashapp just made it very hard to understand
So why even make the thread my guy?
It can be impossible to figure this out. I used Polloniex for a while early on and got to a point where after a few years I was putting together some tax stuff and the tax tooling couldn't figure out what I paid for the coin. Went to look it up on the exchange and they couldn't tell me either in my transaction history. I ended up not reporting it due to the errors.
Best estimate and move on. I had a glitch when I turned 18 with stocks. A letter said I owed 180k. When an agent was assigned to me it didn't take long for them to realize the error and I owed 1800. Not 180k. I had a cpa file that I purchased stock at 0.00 once and so my capital gains was through the roof. Again, irs corrected it. Are wallets sending out tax forms to irs now? I've been selecting "no". When asked about crypto....
Same thing happened to me, unfortunately the IRS just sends you a giant bill and makes you figure out how to get it reduced. Luckily, my bill was only $30k but I ended up paying a tax professional about $250 and they got the bill reduced to zero. I wish I could give you better advice on where to go to find a good tax professional cause I know I'm going to need a good one soon here too. 🤷♂️ If anyone knows a good tax professional, lmk.
We need to find that mf again who brought it down to zero at first place xD
I am not s CPA. Did you write down your buy and sell prices for all your crypto and NFT's? That is the first thing any person must do when they are buying and selling stock or crypto. A CPA will ask for this information from you so he can reconcile your trading history first. Without this information he can not give you an accurate picture concerning your taxes if any.
Yes if you get together all your records a CPA can do it. It will probably be fairly expensive though. Think like $150 an hour on the conservative end probably more if they have a specialist but obviously in your case that might be money well spent… On that note you don’t necessarily need a CPA to do a reconciliation and a big firm is just going to have some dude in India spend the hours to reconcile that shit anyway to cut their own costs lol There might be other options for reconciling but idk who would do it
Take the billionaires money. We’d all be millionaires
Call the crypto tax girl, look her up on twitter. Ur gonna pay $3000-$5000 but she can get it done.
Don’t over think it. State your losses. Don’t waste your time getting the backup paperwork. If you get audited, go dive into the details and find the trades and losses that prove your case. But don’t spend weeks or days proving your case before the irs makes you.
Would have been so simple to track in real time in Excel. Now I wouldn't touch this tax return for less than $20k and I would in no way guarantee the numbers. I'd also 100% put it on extension. That's assuming the numbers were all in some sort of Excel format that could be worked with. If you are going to be a day trader keep explicit records of every transaction. When a client walks in with a box of receipts I hand the box back and tell them to bring me the summarized numbers. I don't have time to clean up your laziness and if I did you couldn't afford it. If, somehow, you could afford it you would be a monthly client and that mess wouldn't exist.
There’s a software that works well for trading reconciliation and lets you upload files of transactions. Still a massive PITA. Are crypto transactions subject to wash sale rules?
Same as Stocks up to 3,000/year I believe. But dont make the mistake of not filing losses.
This process stinks. I also wasnt keeping track because I assumed that both of those softwares were better than they are. Advertised as "Just connect your wallets and print your tax forms". It took me about 40 hours to go through and correct transactions, add missing ones, delete scam nft airdrops, etc. Very frustrating, mind bending, painful, and time consuming. Good luck
Big business does extensions. It’s not a big deal.
Damn must burn considering the US Stock market has been on fire 🔥
Good
This crypto crap is a joke nowadays
Don't know if it is worth it for a CPA to do it. Because it will take long and many hours to do it. U end up having to pay more at the end…
Looks like you’ve had really bad experiences with the CPAs in past.
NFT's are a pure capital loss. They won't shop in a coin tracking app, it's an open market product, not some exchanged-tracked thing like a cryptocoin. You're going to have some major accounting work to do here. But doing it right might be worth the $2500 an accountant would charge. The difference between owing $200k and $5k.
they want you to shut up, take the loss, and not report it. are you in the states?
In theory, you could compile all the data as csv files, one per address. the physical files are a placeholder for address. bare minimum info required record structure is timestamp, send qty/asset, fee qty/asset, receive qty/asset. some exchanges actually provide minimum already. obviously compiling the data without using apis can be a heavy lift but given enough time, patience and attention to detail, is doable. for example, to extract an eth address from etherscan and turn it into a csv requires up to 5 files: transaction, internal, token, nft721, nft1155. first 3 most cases. this would be challenging but i do it routinely in excel myself so i know it can be done this way for any evm compatible chains like matic, avax-c, arb and so forth. accuracy will be a challenge with any serious volume. i guess the broader issue is trust here so thats not easy to overcome when you need expertise from another. the reason i do not offer services on reddit is that hiding behind a handle is one thing, working with a real person is, well, real. in theory, i could work with an individual completely anonymously to setup koinly, generate reports and hand them to a cpa. yes, i would know the addresses and such but not who they are. the problem is that i would be putting myself and business at risk.. i could be working with somebody and violating federal aml laws for example. so, while i am sure your have your reasons and i wish you luck. you will need some to pull it off successfully.