FBAR Reporting Requirements for Cryptocurrency ...

Daily Discussion March 4 - We fail at automod edition

Yesterday's thread: https://www.reddit.com/CryptoCurrency/comments/awvjdi/daily_discussion_march_3/
submitted by jwinterm to CryptoCurrency [link] [comments]

Possible Implications of Treasury Regulation Announcement?

So mnuchin's latest threat is pretty vague, but they are harping more on how the Treasury and FinCen isn't going to allow crypto to be used as a anonymous swiss account. Now we all know that even the pseudoanonymouty of ethereum and bitcoin is totally incompatible with the travel rule and any attempt to dox people. The feds basically have to criminilize you into reporting yourself, they can't actually control the technology.

I'd love to hear any legal hot takes or legal experts or monero experts on how they think this will go over or affect long term hodlers. How is the FinCen going to compel people to dox themselves.

I can't think of anything other than them forcing you to disclose addresses, chain of custody, audit and invoice history, and basically oppressing retail with reporting requirements and requiring people to file accounts with the treasury the way you have to file foreign bank accounts through FBAR. But I often worry about them criminally persecuting hardware wallet manufacturers, software developers, and vendors and anyone who uses an unregistered address or a native address. I think it's almost inevitable that FinCen and the Treasury will need to be challenged in the Supreme Court. Mnuchin is by far the most hostile person in the country to crypto.
submitted by samdane7777 to Monero [link] [comments]

Hi /r/ethtrader! I quit my job to start Cointaxes to answer questions about taxes and digital currencies so you can have confidence even if you're not a HODLer! Sharing our first comprehensive article on the Coinbase & Gemini 1099-K. Would love your input on ANY other topics or questions! :)

Hi /ethtrader! Thank you for reading this.
I felt the world of digital currencies is a bit too uncertain, so I want to do what I can to create more confidence and certainty! Please let me know if you have any questions or comments (I'll probably respond to every comment here!)
Check out our first comprehensive article on the Coinbase / Gemini 1099-K
Some "fun" facts you may not know about digital currency taxes
Here's two quick "fun" facts you may not know. We will be posting in-depth articles on these, too. Consider subscribing to our newsletter to hear first when they've been published!
About Cointaxes
Cointaxes was formed and funded with the mission to establish confidence and certainty around cryptocurrency.
We see global adoption of digital currencies as an inevitability. The uncertainty lies in how effectively and smoothly this once-in-a-lifetime shift occurs. As a tax preparation service, we have a special seat in the cryptocurrency ecosystem directly related to this uncertainty: it is our job to help both citizens and governments around the world understand how to use and treat digital currencies.
If our mission excites you
Disclaimers
Important Disclaimers: This is NOT tax advice and should NOT be relied upon for making any tax decisions. We always recommend speaking to a tax professional before making decisions related to your taxes and our guides are not a substitute for tax advice. While I have assembled and provided this information to the best of its knowledge, I make no representations or warranties as to the accuracy or timeliness of the information contained herein. You can read the full disclaimers here.
submitted by StopTheVok to ethtrader [link] [comments]

Update: Hi /r/Bitcoin! I quit my job to start Cointaxes. Here to answer questions about taxes and digital currencies! I published a YouTube series on top questions, launched crypto tax tools and would love your input on ANY other topics or questions! :)

Hi /Bitcoin! Thank you for reading!
In the last two months since I posted here, my team and I have been hard at work trying to make everyone's lives a bit easier for cryptocurrency and tax. In fact, we will be able to launch some tools this summer that will help optimize your trades from a tax perspective - as you make them. We think there's a chance we could even make it tax advantageous to use crypto vs. fiat... more on that later. For now, we would love to get your feedback on what we're working on.
The TLDR: We made Cointaxes so you can estimate your tax liability and whether or not you have FINCEN obligations for free on our site. It was important to make this summary information free because our mission is create confidence and certainty around cryptocurrencies.
Please let me know if you have any questions or comments (I'll probably respond to every comment here!)
Watch a Cointaxes' YouTube Series answering the top questions How are cryptocurrencies taxed? Why should you pay this year? Am I taxed when I convert into fiat or pull money out of my exchanges? What about mining and airdrops? All this and more is covered!
We launched a tool to help measure your FINCEN requirements for FBAR & FATCA
In my last post, I mentioned a "fun" fact around FINCEN requirements. The media is talking about this more (i.e. CNBC - "How cryptocurrency investors could find themselves behind bars"). The good news is it's really simple for the ledger technology we built to check if you cross the $10,000 or $50,000 thresholds. On our site, Cointaxes, you can add your exchanges and then check if you have crossed the threshold. Importantly, we wanted to make this critical information available for free. Particularly because the the deadline is April 15.
If you fail to file the FBAR, the deadline will be extended to October 15. You can read more about this on official government sites General FBAR information, FBAR FAQS (not super helpful IMO) and the online form itself.
About Cointaxes
Cointaxes was formed and funded with the mission to establish confidence and certainty around cryptocurrency. We have a base tax preparation tool with support for Coinbase, GDAX, Binance, Bittrex, Poloniex, and Kraken.
We made Cointaxes so you can estimate your tax liability and whether or not you have FINCEN obligations for free on our site. Your detailed reports or Form 8949 for tax filing is behind a modest paywall compared to what we've seen other tools out there charging.
We see global adoption of digital currencies as an inevitability. The uncertainty lies in how effectively and smoothly this once-in-a-lifetime shift occurs. As a tax preparation service, we have a special seat in the cryptocurrency ecosystem directly related to this uncertainty: it is our job to help both citizens and governments around the world understand how to use and treat digital currencies.
If our mission excites you
Newsletter update
If you want to stay on top of regulatory and tax related crypto news (as well as when we roll out shiny new tools) then consider subscribing to our newsletter.
If you signed up for our newsletter two months ago - sorry for the lack of content! We've been too focused on trying to get this product up and running in time for the deadline (barely made it!) We recently expanded our team and will be able to be much more consistent about the content we're creating!
Important Disclaimers: For this post and any of my replies to your questions below... this is not tax advice and should not be relied upon for making any tax decisions. We always recommend speaking to a tax professional before making decisions related to your taxes and our guides are not a substitute for tax advice.
submitted by StopTheVok to Bitcoin [link] [comments]

Hi /r/Bitcoin! I quit my job to start Cointaxes to answer questions about taxes and digital currencies so you can have confidence even if you're not a HODLer! Sharing our first comprehensive article on the Coinbase & Gemini 1099-K. Would love your input on ANY other topics or questions! :)

Hi /Bitcoin! Thank you for reading this.
I felt the world of digital currencies is a bit too uncertain, so I want to do what I can to create more confidence and certainty! Please let me know if you have any questions or comments (I'll probably respond to every comment here!)
Check out our first comprehensive article on the Coinbase / Gemini 1099-K
Some "fun" facts you may not know about digital currency taxes
Here's two quick "fun" facts you may not know. We will be posting in-depth articles on these, too. Consider subscribing to our newsletter to hear first when they've been published!
About Cointaxes
Cointaxes was formed and funded with the mission to establish confidence and certainty around cryptocurrency.
We see global adoption of digital currencies as an inevitability. The uncertainty lies in how effectively and smoothly this once-in-a-lifetime shift occurs. As a tax preparation service, we have a special seat in the cryptocurrency ecosystem directly related to this uncertainty: it is our job to help both citizens and governments around the world understand how to use and treat digital currencies.
If our mission excites you
Disclaimers
Important Disclaimers: This is NOT tax advice and should NOT be relied upon for making any tax decisions. We always recommend speaking to a tax professional before making decisions related to your taxes and our guides are not a substitute for tax advice. While I have assembled and provided this information to the best of its knowledge, I make no representations or warranties as to the accuracy or timeliness of the information contained herein. You can read the full disclaimers here.
submitted by StopTheVok to Bitcoin [link] [comments]

Hi /r/CryptoCurrency! I quit my job to start Cointaxes to answer questions about taxes and digital currencies so you can have confidence even if you're not a HODLer! Sharing our first comprehensive article on the Coinbase & Gemini 1099-K. Would love your input on ANY other topics or questions! :)

Hi /CryptoCurrency! Thank you for reading this.
I felt the world of digital currencies is a bit too uncertain, so I want to do what I can to create more confidence and certainty! Please let me know if you have any questions or comments (I'll probably respond to every comment here!)
Check out our first comprehensive article on the Coinbase / Gemini 1099-K
Some "fun" facts you may not know about digital currency taxes
Here's two quick "fun" facts you may not know. We will be posting in-depth articles on these, too. Consider subscribing to our newsletter to hear first when they've been published!
About Cointaxes
Cointaxes was formed and funded with the mission to establish confidence and certainty around cryptocurrency.
We see global adoption of digital currencies as an inevitability. The uncertainty lies in how effectively and smoothly this once-in-a-lifetime shift occurs. As a tax preparation service, we have a special seat in the cryptocurrency ecosystem directly related to this uncertainty: it is our job to help both citizens and governments around the world understand how to use and treat digital currencies.
If our mission excites you
Disclaimers
Important Disclaimers: This is NOT tax advice and should NOT be relied upon for making any tax decisions. We always recommend speaking to a tax professional before making decisions related to your taxes and our guides are not a substitute for tax advice. While I have assembled and provided this information to the best of its knowledge, I make no representations or warranties as to the accuracy or timeliness of the information contained herein. You can read the full disclaimers here.
submitted by StopTheVok to CryptoCurrency [link] [comments]

Hi /r/Ethereum! I quit my job to start Cointaxes to answer questions about taxes and digital currencies so you can have confidence even if you're not a HODLer! Sharing our first comprehensive article on the Coinbase & Gemini 1099-K. Would love your input on ANY other topics or questions! :)

Hi /Ethereum! Thank you for reading this.
I felt the world of digital currencies is a bit too uncertain, so I want to do what I can to create more confidence and certainty! Please let me know if you have any questions or comments (I'll probably respond to every comment here!)
Check out our first comprehensive article on the Coinbase / Gemini 1099-K
Some "fun" facts you may not know about digital currency taxes
Here's two quick "fun" facts you may not know. We will be posting in-depth articles on these, too. Consider subscribing to our newsletter to hear first when they've been published!
About Cointaxes
Cointaxes was formed and funded with the mission to establish confidence and certainty around cryptocurrency.
We see global adoption of digital currencies as an inevitability. The uncertainty lies in how effectively and smoothly this once-in-a-lifetime shift occurs. As a tax preparation service, we have a special seat in the cryptocurrency ecosystem directly related to this uncertainty: it is our job to help both citizens and governments around the world understand how to use and treat digital currencies.
If our mission excites you
Disclaimers
Important Disclaimers: This is NOT tax advice and should NOT be relied upon for making any tax decisions. We always recommend speaking to a tax professional before making decisions related to your taxes and our guides are not a substitute for tax advice. While I have assembled and provided this information to the best of its knowledge, I make no representations or warranties as to the accuracy or timeliness of the information contained herein. You can read the full disclaimers here.
submitted by StopTheVok to ethereum [link] [comments]

I am a tax attorney, here is why you should strongly consider filing an FBAR by the June 30th deadline if you had an account at MtGox prior to its collapse (US taxpayers only).

RETRACTED 4/3/2018: I have decided to retract and revise this position on FBAR filings for cryptocurrency assets in light of inaction by the IRS and unofficial statements by IRS personnel. This post should not be relied upon in determining whether you have an obligation to report your cryptocurrency assets or trading accounts on the FBAR or Form 8938. I am leaving the original post unedited below for posterity's sake, but it should not be considered my current view or opinion.
Hey Guys,
I know that many people in the bitcoin community don't really care about complying with US reporting requirements. While I generally don't recommend that course of action, I especially urge you to reconsider if you had an account at MtGox prior to its collapse. That's because MtGox is no longer in a position to safeguard your confidentiality (if it ever was in the first place). The US has been ruthless in recent years in chasing down US taxpayers with undisclosed foreign accounts, and bitcoin holders are not likely to catch any breaks. The US Attorney's office has already issued a subpoena to MtGox for it's records, and given that Japan already cooperates with US account holder disclosure initiatives, I find it unlikely that the subpoena will go unenforced. Additionally, many large bitcoin holders have joined the class action lawsuit against MtGox/Karpeles for their lost coins, or at the very least filed a claim with the court-appointed bankruptcy trustee. These are tacit admissions in open court of your prior bitcoin holdings. It would take almost no effort on the part of the US Justice Department to obtain and cross-check these records. So, those with qualifying account balances at MtGox prior to it's collapse should strong consider filing an FBAR by the June 30th deadline.
Before anyone says it, I am not trying to spread FUD. I care about this community and do not want to see any of you go to prison or pay outrageous fines that can easily wipe out your bitcoin holdings (and then some). To say the US Government has been ruthless when it comes to FBAR non-filers is an understatement. The MtGox fiasco provides a perfect opportunity for the government to crackdown on the wide spread non-compliance among the bitcoin community. I wouldn't bet against it.
Here is some additional information for those who want to know more:
How do I know if I need to file an FBAR? The FBAR requirement applies if you have more than $10,000 in foreign accounts at any given time during the year. This test looks at the total of all your foreign accounts, not just MtGox. So, you're technically required to look at the daily account balance of the BTC and USD in all your foreign financial accounts and add them up. If the total exceeds $10,000 on any given day, then you are supposed to disclose each account on the FBAR form (even if the individual accounts are less than $10,000). Now, I'm sure many will consider disclosing just their MtGox accounts and leaving off other foreign bitcoin accounts, but recognize that your FBAR in this case would be false and you could be subject to additional criminal prosecution. More information on FBAR filings are available on the [IRS website]
What are the penalties for failing to file an FBAR? The penalty for failure to file an FBAR starts out at $10,000 for non-willful violations. If your failure was willful, the penalty is the greater of $100,000 or 50% of the highest account balance for each account per year. Criminal prosecution is also known to occur.
Willfulness is defined generally as the intentional disregard of a known legal duty. The IRS will typically asserts willfulness if you fail to file FBARs in multiple years. Otherwise, the determination will depend on your knowledge, sophistication, and experience as an investor.
How do I file the form? The FBAR form is actually called FinCEN Form 114 and is e-filed with FinCEN. Here is the link. Note that you will also have to amend your 2013 tax return to check the disclosure box on line 7a of Schedule B. You should also add any unreported income while you're at it, see below.
Which bitcoin exchanges are "foreign?" Most bitcoin exchanges to my knowledge are foreign. MtGox, Bitstamp, BTC-e, BTC-China, BitFinex, and OKcoin are just a few that come to mind. You'll have to do some research if your account is with a different bitcoin exchange. One redditor suggested in the comments that http://bitcoinx.io provides the country information of various bitcoin exchanges.
What if my MtGox account was worth more than $10,000 for just one day? That's all it takes, one-day is enough. You need to file.
What if I can't access my MtGox records? Many former MtGox account holders may find that their records are unavailable. If you are certain that your account balance exceeded $10,000 even without being able to look at your prior records, then I suggest you make a good-faith estimate of your highest account balance. Although guessing is not ideal, it is all you can do under the circumstances and filing your best-guess is better than not filing at all.
Is my paper wallet a "foreign account?" Probably not. It's pretty difficult to imagine that a paper wallet containing would qualify as a “financial account” held at “foreign financial institution”.
Is my blockchain.info or similar online wallet a "foreign account?" These are probably not subject to the reporting requirements either, although it depends on the nature of your account. The most important factor is whether you give custody of your bitcoins to the e-wallet provider. If you do, then your e-wallet is likely subject to the reporting requirements.
On the other hand, if you maintain control of the e-wallet and the provider has no access to your bitcoins, then it’s unlikely your e-wallet is a “financial account.” Without a financial account, you cannot be subject to the reporting requirements.
A simple test is to check if you are given a personal key for the wallet. Most custodial e-wallets do not provide you with a personal key, meaning that you must request a transfer of your bitcoin, which they then execute on your behalf. A noncustodial e-wallet, on the other hand, gives you the personal key and you can transfer bitcoins out of the wallet without any interaction with the e-wallet provider. They have no access to your bitcoins and essentially just generate a valid wallet address for you without keeping any control over your account. Therefore, it would be unlikely that they are maintaining an account on your behalf.
What if I need to file an FBAR for 2012 also? Since the value of bitcoins was much lower in 2012, this is not a problem for most people. However, if you were over the $10,000 minimum in 2012 (or earlier) and did not file an FBAR, I suggest you talk to a tax attorney about your next step. Late FBARs implicate some very serious penalties, and it would be wise to consider all of your options with a knowledgeable attorney before choosing the best course of action.
What if I didn't report the income from my MtGox account (and/or other bitcoin exchange accounts)? You're going to need to amend your returns to include the missing gains, in addition to filing the FBAR forms. If you situation extends back to 2012 or earlier, I suggest you discuss the matter with a tax attorney. Unreported income and missing FBARs for multiple years can trigger criminal prosecution.
Conclusion
FBARs are tricky business and the stakes are exceptionally high. If you are in doubt about your situation, I strongly suggest you contact a tax attorney to discuss your options, particular if your case involves multiple years of missing FBARs with unreported income. Also, this post does not discuss Form 8938, which is an additional foreign disclosure requirement for higher balance accounts and was due April 15th.
Legal Disclaimer
This post was created for general guidance on matters of interest only, and does not constitute legal advice. You should not act upon the information contained in this publication without obtaining specific advice from a tax professional. No representation or warranty (expressed or implied) is given as to the accuracy or completeness of the information contained in this post, and I do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this post or for any decision based on it.
CIRCULAR 230 DISCLOSURE To ensure compliance with requirements imposed by the IRS, I inform you that any U.S. federal tax advice in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
THE AUTHOR Tyson P. Cross is a tax attorney in Reno, Nevada. He can be reached at Tel: +1 775-376-5690 or Email: [email protected].
submitted by dblcross121 to Bitcoin [link] [comments]

03-02 21:02 - 'Is there a list for the address of each cryptocurrency exchange?' (self.Bitcoin) by /u/patrotor20 removed from /r/Bitcoin within 4140-4150min

'''
I'm looking at the Fincen 114 FBAR reporting requirements and it requires you to put in the address of Binance or Kucoin.
Is there a way to find a physical address for each crypto exchange?
'''
Is there a list for the address of each cryptocurrency exchange?
Go1dfish undelete link
unreddit undelete link
Author: patrotor20
submitted by removalbot to removalbot [link] [comments]

I am a tax attorney, here are my answers to common questions about bitcoin losses and the rule against wash sales.

Introduction
Hey guys, you might remember my post on bitcoin taxation last year, and a couple follow up posts I made on 1099s, FBARs, and the IRS Notice.
I've been getting a lot of questions about losses on bitcoins and other virtual currencies. So, I thought I'd share some answers here with all of you. I hope this post is helpful given that bitcoin is hovering around 12 month lows and you might be holding bitcoins that have dropped substantially in value or have already sold those coins and realized a loss for the year.
Keep in mind this post is intended for a layman audience. If you are a tax professional or want a detailed examination of this topic, you find this post lacking. Please don't nit pick this post with technicalities or narrow exceptions, I purposely excluded such nuances for the sake of readability.
Legal Disclaimers
This post was created for general guidance on matters of interest only, and does not constitute legal advice. You should not act upon the information contained in this publication without obtaining specific advice from a tax professional. No representation or warranty (expressed or implied) is given as to the accuracy or completeness of the information contained in this post, and I do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this post or for any decision based on it.
CIRCULAR 230 DISCLOSURE To ensure compliance with requirements imposed by the IRS, I inform you that any U.S. federal tax advice in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
THE AUTHOR Tyson Cross is a tax attorney licensed in California and Nevada. He represents individuals and businesses with tax issues related to Bitcoin and other cryptocurrencies , including tax return preparation, tax planning, and FinCEN compliance. He can be reached at Tel: +1 775-376-7306 or Email: [email protected]. (this information is required by attorney advertising rules).
Topic 1: Losses
Beginning Assumption: This post deals only with "capital losses." If your bitcoin losses are characterized as "ordinary losses," then these rules wouldn't apply. However, very, very few people will have "ordinary losses" from bitcoin. Unless you qualify as a "day trader" (which is not easy to do) and have elected to use the mark to market method for determining your gains/losses, it's very likely that your bitcoin losses are "capital losses." If you're unsure, talk to a tax professional to determine whether your losses are ordinary or capital.
#1 Do capital losses offset capital gains? Yes. We'll get more into the mechanics of calculating gains and losses below, but for now all that matters is that capital gains are determined on a net basis. This means that all your gains and losses for the year are added against each other to reach either a "net gain" or a "net loss." So, yes, losses do offset gains.
Example: Bob owns three bitcoins and sells all of them in 2014. He had a gain of $600 on coin #1, a gain of $400 on coin #2, and a loss of ($900) on coin #3. Bob has a net gain of $100 for the year.
#2 What about long-term vs. short-term? Do these apply to losses also?
Yes. This is where the mechanics of the calculation start to come into play. Remember that when calculating gain or loss, all gains and losses are sorted into either "short-term" or "long-term" depending on whether the underlying bitcoin was held for more than one year. So, this means that there are actually four categories of gains and losses: (1) short-term gains, (2) short-term losses, (3) long-term gains, and (4) long-term losses.
The short-term gains and short-term losses are added together to reach a net short-term gain or a net short-term loss.
The long-term gains and long-term losses are also added together to reach a net long-term gain or a net long-term loss.
Finally, the long-term and short-term gain/loss are added together to reach one final number: your "net capital gain or loss."
#3 So what does that even mean? Can long-term losses be used to offset short-term gains? Or visa-versa?
Yes. The above calculation boils down to one important point: If you end up with a net loss in one category, that loss will carryover and offset your gains in the other category. So, yes, long-term losses can be used to offset short-term gains.
Keep in mind that this is all handled by your tax preparation software, so if your head is spinning a little bit, don't worry about it. All you need to remember is that losses offset gains of the same character first, and then any excess will carryover to offset gains of the other character second.
Example: Bob sold 2 bitcoins in 2014 that he's owned for 2 years. He had a gain of $1,000 on this sale. Bob also sold 3 bitcoins that he's owned for 13 months. He had a loss of ($1,500) on this sale. Finally, Bob sold 1 bitcoin that he's owned for 9 months. He had a gain $750 on this sale.
Bob has a long-term loss of ($500). Bob has a short-term gain of $750. * *Bob will report a net capital gain of $250 on his tax return (characterized as short-term).
note: For the sake of simplicity, I'm going to purposely disregard the short-term/long-term distinction for the rest of this post since it has very little impact on the issue of losses and would unnecessarily complicate the examples.
#4 Can bitcoin losses offset gains from other types of assets?
Yes. Bitcoins are a capital asset (except in a few limited circumstances), and therefore gains and losses from bitcoins are mixed together with the gains and losses from other capital assets.
Example: Bob sold 2 bitcoins in 2014 for a total loss of ($1,000.) Bob also sold shares of stock in Apple Corporation for a gain of $600 and shares of stock in Netflix for a gain of $400.
Bob has zero capital gains in 2014. Note: Bob still needs to include a Schedule D with his tax return, which will show these transactions and the calculation of his $0 net capital gain.
#5 What happens if my losses exceed my gains?
If you had more losses than gains during the taxable year, then the above calculation will result in a "net capital loss." A net capital loss is reported on your tax return as a negative number.
However, there is a ($3,000) limitation on capital losses. No matter how big your capital loss ends up being, you can only use $3,000 of it on your tax return.
Example: Bob decided that he made a bad investment in bitcoins and decided to cash out entirely. He sells all of his bitcoins for a loss of ($12,000) at the end of the year. Bob also sold some shares of stock for a $2,000 gain earlier in the year.
When Bob calculates his capital gains for the year, he ends up with a ($10,000) net capital loss for the year. However, he can only take ($3,000) of the loss on his tax return. The remaining ($7,000) of losses are put on hold and again carried forward to future years.
#6 What do I do with carried losses in the future? Can I use them to offset future gains?
Yes. Any losses in excess of the $3,000 limitation are carried forward and included in the net gain calculation in future years. There is no limit to how long you carry your capital losses.
*Example: Bob has ($7,000) of carried losses from 2013. In 2014, Bob sold shares of stock for a gain of $7,000. *
Bob will include his carried losses of ($7,000) in the calculation of his net capital gain for 2014. So, Bob has zero capital gains for 2014. Remember: bitcoins are a capital asset, and therefore gains/losses are combined with other capital assets like shares of stock.
Suppose instead that Bob had carried losses of ($15,000) from last year. When Bob's carried losses are included in the calculation of his net capital gains, he'll end up with a capital loss of ($8,000). Bob can report ($3,000) of this loss on his tax return, and the remaining ($5,000) becomes a carried loss and will be carried forward once again.
#7 Can I carry losses backwards to earlier tax years?
Unfortunately, the answer is no. Capital losses can only be carried forward. So, for example, losses realized in 2014 from the price collapse in bitcoin cannot be used to offset gains in 2013 (when bitcoin hit all-time highs).
Topic #2: Wash Sales
#8 What is a Wash Sale?
A wash sale is a transaction where an investor sells stocks or securities for a loss, but then repurchases the same stocks or securities within 30 days. The investor gets to claim a capital loss for tax purposes, but he or she is in essentially the exact same economic position. The loss really only exists on paper, nothing else about the investors position has changed.
Wash sales are prohibited by Section 1091 of the Internal Revenue Code. If a transaction qualifies as a "wash sale," it is essentially disregarded and the investor is not allowed to use the loss it generated (I'm choosing to skip the mechanics of the wash sale rule and how exactly it disallows the loss for the sake of simplicity). This led to a lot of gamesmanship over the years to get around the rules, with the result that Section 1091 and the Regulations cover just about every possible trick you can imagine.
Example: Bob owns 100 shares of Apple stock. On May 1st, Bob sells 50 shares for a loss of ($500). Three weeks later on May 21st, Bob purchases 50 shares of Apple stock. This second purchase of Apple stock triggers the wash sale rule under Section 1091 and Bob will not be allowed to use the $500 loss when calculating his gain/loss at the end of the year.
Note that the rule also applies backwards. So, if Bob tried to get around the 30 day rule by buying the 50 shares of replacement stock ahead of time on April 15th, the wash sale rules would still apply.
#9 Do the wash sale rules apply to bitcoin?
Probably not. The wash sale rules under Section 1091 apply only to "shares of stock or securities." Therefore, they do not apply to bitcoins unless bitcoins (and virtual currencies in general) qualify as "shares of stock or securities." This qualification would seem highly unlikely. There's just really no argument that bitcoins are "shares of stock or securities." The definition for these terms (taken from Section 1236, for example) is "any share of stock in any corporation, certificate of stock or interest in any corporation, note, bond, debenture, or evidence of indebtedness, or any evidence of an interest in or right to subscribe to or purchase any of the foregoing." Bitcoins would not appear to meet this definition.
So, as it's currently written, it does not look like Section 1091 applies to bitcoins and other virtual currencies. That could change in the future of course, but for the moment it seems to be the case.
#10 So can I use a wash sale to generate losses on bitcoin?
Yes. If bitcoins do not qualify as "shares of stock or securities" under Section 1091, then the rules do not apply. This mean that you can sell bitcoins to realize a loss, and then buy them back again to preserve your investment. However, that's not the end of the story. The IRS can attack this transaction with the "economic substance" doctrine, discussed below.
Example: Bob has capital gains from the sale of stock in Apple. He also has some bitcoins that he purchased for $1,200 each last November, but are worth only $300 currently. In order to offset the gains on his shares of stock, Bob sells his bitcoins for a loss of $900 each. He immediately repurchases the same amount of bitcoin, thereby creating a tax loss but not actually giving up his investment in bitcoin.
#11 What is the Economic Substance Doctrine?
The "economic substance doctrine" is a doctrine in US tax law that says a transaction must have economic significance aside from it's tax effects. Basically, a transaction that does nothing else but generate tax benefit is invalid under this doctrine. The parties to the transaction must actually incur some economic benefit or suffer some economic loss in order for it to be recognized by the IRS. A transaction that does neither, but still manages to generate some kind of tax benefit, will be invalid under this doctrine. It's become a very powerful tool for the IRS in attacking tax shelters and the courts are generally pretty supportive of the doctrine.
Because a bitcoin wash sale leaves you in the same economic position, but has generated a tax loss for your benefit, I wouldn't be surprised to see the Economic Substance Doctrine used to invalidate wash sales of bitcoins that would otherwise avoid Section 1091.
Example: The IRS audit's Bob from the previous example and discovers that he sold bitcoins in order to generate a tax loss, and then immediately repurchased the same amount of coins just moments later. The IRS will claim the transaction lacked economic substance and will disallow the loss.
#12 Is it possible to generate tax losses without running afoul of the Economic Substance Doctrine?
It's possible, yes. There is a tried a true principle of the Economic Substance Doctrine under which a transaction has "economic substance" if it exposes the parties to "market risk." This is true even if the market risk doesn't end up doing anything to change the economic position of the parties. As long as the parties put their economic interests at risk, the transaction has economic significant apart from the tax benefits it created.
So, this means that you can avoid the economic substance doctrine by waiting to repurchase your bitcoins. This waiting period exposes you to market risk due to the fact that you might be forced to repurchase at a higher price, and therefore it adds economic substance to the transaction.
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submitted by dblcross121 to Bitcoin [link] [comments]

Highlights from yesterdays cryptocurrencies & taxes AMA over at /r/cryptocurrencies

Full AMA: https://np.reddit.com/CryptoCurrencies/comments/7u2irv/ama_on_cryptocurrencies_and_taxes/
HappyTax: "Hi, I’m Mario. I’m the CEO of Happy Tax and CryptoTaxPrep.com. I’ve been in the tax preparation business for 16 years and a crypto enthusiast for 3 years. We saw the need for a dedicated crypto tax service so we started Crypto Tax Prep earlier last year to help out you new participants in the crypto world figure out the confusing ordeal that is your 2017 crypto taxes. This is especially important because there are a LOT of misconceptions swirling around about like-kind exchanges, foreign exchanges, and more. Ask Me Anything!"

P.S. If anyone is interested in hiring us, you can use coupon code REDDIT100 at checkout to get $100 off on our services that include full service bookkeeping, accounting and tax prep of your crypto transactions by our US based licensed CPAs as well as advisory and 1 year access to our crypto reporting tools. ;)

Q: If I make a purchase with my crypto, what does that mean for taxes?
A: Since crypto is property, if you use it to make a purchase, that is the sale of that property and it has to be reconciled and reported as a capital gain/loss. Basically what you sold it for minus what you bought it for minus any costs of the transactions. They all need to be documented and tallied up in the year end tax return. Coin to fiat sales, coin to coin sales, coin to purchase goods or services sales. We have tools and a team that help make this process more manageable.
Q: If you're trading account showed a profit of 15k on December 31 but on January 25 it was only 5k, you have never withdrew a penny, the irs expects you to pay tax on 10k that you don't have? This has to be somewhat common due to the fact of the current bear market now. Would the answer be you should of taken the money out at the end of the year taxed it and re-deposit it back to you account and "start from scratch"?
A: Correct. The thought process is that you are supposed to pay it as you are making the money. Taking it out at the end of year would have created more sales and potentially profits to add into the mix so it wouldn't give you any ability to "start from scratch". Every transaction is always reportable. We advise our clients to pay their taxes quarterly and keep track of profits throughout the year so that they don't get hit with surprise tax bills that they are not prepared for.
Q: Will holding onto coins or tokens for longer than 365 days allow gains from their sale to be taxed as capital gains instead of ordinary income?
A: Yes, short term gains (crypto HODL'd for less than 1 year) are taxed at your ordinary income tax rates which are between 0% and 39.6% (depending on your overall income with most people being in the 0-25% range). Long term gains (crypto HODL'd for more than 1 year) are taxed at the lower, capital gains rate of 0-20% (with most people towards the lower end of that spectrum).
Q: Can you comment on how the new tax law in the US will impact cryptocurrency trading in 2018 compared to prior years?
A: It will lower tax rates, other than that, no change to crypto.
Q:Apparently there is a rule that US taxpayers are supposed to report foreign accounts over $10,000. Can you comment on whether this applies to cryptocurrency accounts? If so, how do we know what counts as a foreign or domestic exchange or account?
A: Correct. FBAR requirements state that anyone having any funds over 10,000 in any overseas institution (exchanges) has to file a Fincen 114 form. The penalties for not doing so range from $10,000 PER instance (each exchange, each year) to the greater of $100,000 or 50% of the balance in an unreported foreign account. If someone wasn't compliant in previous years and comes forward, there are ways to mitigate those fines. Checking if they are foreign or not is usually available on the exchanges site on where they are located. Decentralized exchanges are in a grey area, chances are that they are not part of this requirement if you are in the US when working with them however it may be better to just file the form. We file it for all of our clients to make sure they stay in compliance if they have anything in an overseas exchange.
Q: If i lost money, would i be able to claim capitol loss?
A: Correct, only if there there is a total net loss - subject to only being able to claim up to $3k per year in losses with the rest carrying forward to future years to offset income or future gains). In either case, all the trades need to be reported in order to determine any total net loss or gain from the trades.
Q: I always wondered how taxes worked if you mined bitcoin years ago and made a killing... would you be taxed on the full thing? What if you were paid in BTC for a service long ago?
A: Hey, if someone was mining years ago, they should have been reporting that mining income in the years they earned it. The way it works on mining income is that it is self employment income if you are doing it personally (not in a Corp or LLC). It flows to your schedule C where you put the total mining income you had for the year, then you can deduct any direct expenses you had for the mining. Those would be the portion of your electricity that you used for those rig(s), the ability to depreciate your equipment purchase costs and even possibly a portion of your rent or mortgage that is exclusively used for housing the mining equipment (whether it is a space in your living room or basement or a full warehouse). Then the net amount of profit is taxed at your ordinary tax rate (which is determined by your total income from all sources). Additionally, self employment income is subject to Self Employment taxes which are 15.3% althoguh you do then get to deduct 1/2 of your self employment taxes as an above the line deduction (adjustment to income). If someone wasn't claming their mining income, it is recccomended to do so and catch up as the IRS is working with Chainanalysis to get forensic data from the chain and could tie everything together with their other data sources. US law requires that all citizens and residents income; whether from a job, investment, in cash, or in crypto be reported and taxed from your worldwide income be reported and taxed. Otherwise it would be illegal tax evasion and subject to penalties, interest and possibly fines. If someone was making a killing and not claiming it, it could also be subject to criminal penalties.
If you were paid in BTC for a service a long time ago, that should have been included in Schedule C as well. If it weren't, the penalties and interest can be much lower for self reporting and amending it rather than waiting to possibly get caught.
submitted by Haramburglar to CryptoCurrency [link] [comments]

[uncensored-r/CryptoCurrency] Hi /r/CryptoCurrency! I quit my job to start Cointaxes to answer questions about taxes and digita...

The following post by StopTheVok is being replicated because some comments within the post(but not the post itself) have been openly removed.
The original post can be found(in censored form) at this link:
np.reddit.com/ CryptoCurrency/comments/7w500o
The original post's content was as follows:
Hi /CryptoCurrency! Thank you for reading this.
I felt the world of digital currencies is a bit too uncertain, so I want to do what I can to create more confidence and certainty! Please let me know if you have any questions or comments (I'll probably respond to every comment here!)
Check out our first comprehensive article on the Coinbase / Gemini 1099-K
Some "fun" facts you may not know about digital currency taxes
Here's two quick "fun" facts you may not know. We will be posting in-depth articles on these, too. Consider subscribing to our newsletter to hear first when they've been published!
  • Non-deductible personal loss: You should never exchange your digital currency directly for ANY goods or services. If you happen to have a loss on that trade, it will be non-deductable as capital gains losses ONLY apply to "investment" not "personal use" activity. You can read more about this on Forbes, Time and the IRS website.
  • FBAR requirements: This isn't explicitly tax related, actually, but a LOT of my US friends do not know about this important filing. If you ever on a single day, even, held $10,000 USD worth of value overseas (Binance, for example), you must meet your FBAR online filing requirements. The penalties can be severe for failure to disclose. The deadline is April 15, but it will be extended to October 15 if you fail to file on time. You can read more about this on official government sites General FBAR information, FBAR FAQS (not super helpful IMO) and the online form itself.
About Cointaxes
Cointaxes was formed and funded with the mission to establish confidence and certainty around cryptocurrency.
We see global adoption of digital currencies as an inevitability. The uncertainty lies in how effectively and smoothly this once-in-a-lifetime shift occurs. As a tax preparation service, we have a special seat in the cryptocurrency ecosystem directly related to this uncertainty: it is our job to help both citizens and governments around the world understand how to use and treat digital currencies.
  • We will regularly invite regulators, lawyers and tax experts to private discussions and public webinars to ensure you will have a firm understanding with each regulatory shift as the world adopts cryptocurrencies.
  • We will conduct proprietary research and publish Cointaxes Guides to answer questions you may have about using your digital currency.
  • We will provide high quality cryptocurrency tax preparation software for individuals and tax professionals.
If our mission excites you
  • Please know that we are hiring. Contact [email protected] with a resume and cover letter.
  • If you're are regulator or a crypto-experienced legal or tax professional, please contact [email protected] with some background information and reason for connecting.
  • Please consider following us on Twitter and liking our Facebook page!
Disclaimers
Important Disclaimers: This is NOT tax advice and should NOT be relied upon for making any tax decisions. We always recommend speaking to a tax professional before making decisions related to your taxes and our guides are not a substitute for tax advice. While I have assembled and provided this information to the best of its knowledge, I make no representations or warranties as to the accuracy or timeliness of the information contained herein. You can read the full disclaimers here.
submitted by censorship_notifier to noncensored_bitcoin [link] [comments]

[uncensored-r/Bitcoin] Hi /r/Bitcoin! I quit my job to start Cointaxes to answer questions about taxes and digital curre...

The following post by StopTheVok is being replicated because some comments within the post(but not the post itself) have been silently removed.
The original post can be found(in censored form) at this link:
np.reddit.com/ Bitcoin/comments/7w4xj4
The original post's content was as follows:
Hi /Bitcoin! Thank you for reading this.
I felt the world of digital currencies is a bit too uncertain, so I want to do what I can to create more confidence and certainty! Please let me know if you have any questions or comments (I'll probably respond to every comment here!)
Check out our first comprehensive article on the Coinbase / Gemini 1099-K
Some "fun" facts you may not know about digital currency taxes
Here's two quick "fun" facts you may not know. We will be posting in-depth articles on these, too. Consider subscribing to our newsletter to hear first when they've been published!
  • Non-deductible personal loss: You should never exchange your digital currency directly for ANY goods or services. If you happen to have a loss on that trade, it will be non-deductable as capital gains losses ONLY apply to "investment" not "personal use" activity. You can read more about this on Forbes, Time and the IRS website.
  • FBAR requirements: This isn't explicitly tax related, actually, but a LOT of my US friends do not know about this important filing. If you ever on a single day, even, held $10,000 USD worth of value overseas (Binance, for example), you must meet your FBAR online filing requirements. The penalties can be severe for failure to disclose. The deadline is April 15, but it will be extended to October 15 if you fail to file on time. You can read more about this on official government sites General FBAR information, FBAR FAQS (not super helpful IMO) and the online form itself.
About Cointaxes
Cointaxes was formed and funded with the mission to establish confidence and certainty around cryptocurrency.
We see global adoption of digital currencies as an inevitability. The uncertainty lies in how effectively and smoothly this once-in-a-lifetime shift occurs. As a tax preparation service, we have a special seat in the cryptocurrency ecosystem directly related to this uncertainty: it is our job to help both citizens and governments around the world understand how to use and treat digital currencies.
  • We will regularly invite regulators, lawyers and tax experts to private discussions and public webinars to ensure you will have a firm understanding with each regulatory shift as the world adopts cryptocurrencies.
  • We will conduct proprietary research and publish Cointaxes Guides to answer questions you may have about using your digital currency.
  • We will provide high quality cryptocurrency tax preparation software for individuals and tax professionals.
If our mission excites you
  • Please know that we are hiring. Contact [email protected] with a resume and cover letter.
  • If you're are regulator or a crypto-experienced legal or tax professional, please contact [email protected] with some background information and reason for connecting.
  • Please consider following us on Twitter and liking our Facebook page!
Disclaimers
Important Disclaimers: This is NOT tax advice and should NOT be relied upon for making any tax decisions. We always recommend speaking to a tax professional before making decisions related to your taxes and our guides are not a substitute for tax advice. While I have assembled and provided this information to the best of its knowledge, I make no representations or warranties as to the accuracy or timeliness of the information contained herein.
submitted by censorship_notifier to noncensored_bitcoin [link] [comments]

How are my crypto sales taxed? Do I have to file an FBAR because of my bitcoin? Overseas Cryptocurrency & FBAR: Is Bitcoin & other Virtual ... ⭐How The IRS Audits FBAR Foreign BANK Accounts ✅[FBAR FILING]✅ CRYPTO TAXES 2020 - New Rules, Form 8949, FBAR, Bitcoin ... FinCEN Releases Rules Classifying Bitcoin Exchanges, Buyers And Miners As Money Transmittors

FBAR Cryptocurrency & Overseas Bitcoin Reporting. FBAR Bitcoin: Neither the IRS nor FinCEN have provided definitive guidance on the FBAR reporting of Cryptocurrency (commonly referred to as ‘Bitcoin’). While Bitcoin is often treated as currency, the IRS does not deem it as currency per se.. Therefore, the tax treatment is different than other currency. Even though FinCEN did not issue a guidance saying that cryptocurrency needs to be reported under FBAR, the agency also did not issue any statement saying that you will not be implicated for FBAR violations in the future if you don’t report cryptocurrency on your FBAR now. In other words, FinCEN can look back and penalize you in the future, and there is no way for you to go back to change ... International FBAR Lawyers for Bitcoin and Cryptocurrency Tax Issues. It is vital to be aware that, despite the latest FinCEN guidance, Bitcoin tax regulations are likely to continue fluctuating. In its own words, FinCEN remains “in consultation with the IRS… to evaluate the value of incorporating virtual currency held offshore into the FBAR regulatory reporting requirements.” In other ... A question I often receive is whether clients holding Bitcoin or other cryptocurrency are required to file Form FinCen 114 (colloquially called the “FBAR”).. Unfortunately, as with many cryptocurrency tax issues, the answer isn’t fully clear. FBAR reports are required of all “United States persons” who have an account with a foreign financial institution. And, FinCEN’s prior advice was not incomplete and not specific enough to take the firm position that cryptocurrency is not reportable. Since cryptocurrency and bitcoin are oftentimes used interchangeably, we may refer to both within the article, but we are not referring to bitcoin specifically, but rather cryptocurrency generally.

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How are my crypto sales taxed? Do I have to file an FBAR because of my bitcoin?

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