Bitcoin Tax Implications Question

**Arky** · 01-25-19, 03:25 AM

That's kinda tricky and I'm not a CPA but, you started with $2200 "cash" and doubled your money and "cashed" out. I think it could (or should) be treated like any other taxable gambling gain..... different from a crypto property gain. Just doesn't seem right to pay tax on $4400 when you only profited $2200..... Save those credit card statements if you can....

**wildemu** · 01-25-19, 01:32 PM

Originally posted by Arky

That's kinda tricky and I'm not a CPA but, you started with $2200 "cash" and doubled your money and "cashed" out. I think it could (or should) be treated like any other taxable gambling gain..... different from a crypto property gain. Just doesn't seem right to pay tax on $4400 when you only profited $2200..... Save those credit card statements if you can....

From what I gathered that another forum poster told me:

1. The bookmaker payout itself is considered a BTC buy and then if I sell afterwards, i calculate the short term gain/loss on this.

2. i need to record the actual gambling winnings, and this will have to be reported as MISC income.

So it looks like I will have to keep track of 2 things, but the gambling winnings is where most of the tax will come from.

**MrCavalier** · 01-25-19, 02:03 PM

Why would you report offshore gambling winning? If you bet 1 dollar and won 2.. you pay tax on the win not the bet.. Find a bitcoin atm by your house.. Buy a prepaid mobile from Walmart cash only.. take the 6-9% hit from atm and forget about the IRS

**Arky** · 01-26-19, 05:44 PM

Originally posted by wildemu

From what I gathered that another forum poster told me:

1. The bookmaker payout itself is considered a BTC buy and then if I sell afterwards, i calculate the short term gain/loss on this.

2. i need to record the actual gambling winnings, and this will have to be reported as MISC income.

So it looks like I will have to keep track of 2 things, but the gambling winnings is where most of the tax will come from.

That sounds right. In the case of #1, that's probably only going to be a few cents to a few dollars difference if you do it quickly. In my world, not worth reporting.....

I see where Turbo Tax has a new entry this year:

Note it says, "sold or traded". Nothing about "buying". I take that to mean if you're a buyer and hodler, might be nothing to fret. 2018 was a bad year for buyers/hodlers like myself. However, if you're gambling, have crypto gains and want to play honest, then it looks like you have that option, now....

**LGR** · 01-28-19, 09:40 AM

By any chance are any of you guys Washington residents? Or know anyone online gamblers who is? Reason I ask is because I am one, and want to file taxes so that I'm not evading taxes. However, I do not know about how the strict the state is when it comes to online gambling. So how do I file without getting in trouble as a WA resident?

**kufan11** · 12-22-20, 05:43 PM

Hey i also am curious about this, i see it has been awhile and wanted to know if there was any clarity on the issue. In my situation i deposited via CC and then withdraw via bitcoin, goes to wallet and then sent to cashapp, cashapp automatically sends i believe its called a 1099-B to IRS for sales over 20K so lets say i have 35K bitcoin sold, and cashapp probably (havent seen form yet) doesnt show any purchased. I am sure i am down alittle overall as far as deposits and fees, and i always sold immediately but am worried the IRS will want me to pay taxes on $35K of bitcoin sales or potentially have to go into all of the gambling stuff (which coincidentally Bovada only lets you go back 31 days...for records). Anyone experiencing anything similar or have any input i would greatly appreciate it. Thanks in advance.

**Barrakuda** · 12-29-20, 03:06 AM

The OP's situation has two independent components to it, BTC gains and gambling income:

1) When you got paid by the book in BTC, you effectively bought BTC for the amount the book charged you. Your BTC trading gains, if any, would whatever you sold the same amt of BTC for on the exchange minus what the book charged you. If no gains, then no need to report.

2) Completely separate from that is the question of reporting the gambling income. There's a lot out there saying that technically, you can only deduct the losses incurred during the same gambling "session" as when the gains occurred. This is not reasonable for a sports bettor, and most who do report at all, report their net winnings as income -- in this case, $2200. Will this survive an audit? I have no idea. But worst case scenario for this type of small amount would be that you have to pay extra tax down the road.

**Barrakuda** · 12-29-20, 03:14 AM

Originally posted by kufan11

Hey i also am curious about this, i see it has been awhile and wanted to know if there was any clarity on the issue. In my situation i deposited via CC and then withdraw via bitcoin, goes to wallet and then sent to cashapp, cashapp automatically sends i believe its called a 1099-B to IRS for sales over 20K so lets say i have 35K bitcoin sold, and cashapp probably (havent seen form yet) doesnt show any purchased. I am sure i am down alittle overall as far as deposits and fees, and i always sold immediately but am worried the IRS will want me to pay taxes on $35K of bitcoin sales or potentially have to go into all of the gambling stuff (which coincidentally Bovada only lets you go back 31 days...for records). Anyone experiencing anything similar or have any input i would greatly appreciate it. Thanks in advance.

Not a CPA, but I would think your records of purchasing the BTC from the sportsbook will be sufficient to prove your basis. After all, you don't need to buy and sell on the same exchange to match up trades. So I would expect buying from a sportsbook would not present a problem as long as you have full documentation.

Again the tricky part is reporting BTC trading gains separately from gambling income.

No affiliation, but there is some good general tax info here:

Taxable Talk | From Russ Fox, EA, of Clayton Financial and Tax of Las Vegas, NV. All of the items below are for information only and are not meant as tax advice. Please consult your own tax advisor to see how each item impacts your own situation.

http://www.taxabletalk.com/

**wildemu** · 01-02-21, 02:59 PM

I remember when I posted this I was shitting my pants, and unfortunately it was warranted. For the 2019 tax year where I was an active crypto sportsbook player, I had to report my gains/losses on the crypto market because my exchanges (coinbase/kraken) sent the forms on Jan 2020 to the IRS for my activity. On my tax return, I provided all the buys and sells that I generated from bitcoin.tax which ended up being minimal gains ($11) since I quickly cashed out after the sportsbook.

In the summer of 2020, I received letter 6174 from the IRS stating that I may have incorrectly reported my crypto activity, it looked like the letter in this link : https://www.cointracker.io/blog/cryp...RS%20resources.

Even though I thought I submitted my activity correctly the first time, I submitted my forms again in paper format. The accountant friend that I worked with stated the following are taxable:

1. When you bought bitcoin and deposited into the sportsbook, you sold the coin at that time and need to make note of any gains.

2. When you withdraw any winnings from the sportsbook, you are buying bitcoin and then when you cash out at an exchange, you are selling and need to note of any gains.

3. You need to keep track of all gambling winnings and losses throughout the year if the IRS decides to probe further on the crypto transactions. You can win 20k and lose 25k, and only 20k losses can be deducted. The painful part is when you may end up paying taxes because you were elevated to a higher income bracket due to your 20k winnings.

I am posting this because I want to make other players aware of the taxing headache you may incur from the IRS as that bureau starts to sharpen up their tracking. You could end up in a situation where IRS will try to get taxes out of your potential crypto gains (where the net total could have been negative anyways), and out of the gambling activity you incurred if they decide to probe further into your crypto activity. They already have a question dedicated to crypto ownership on tax forms the past few years to weed out if you are lying or not.

I came back to this forum to see if there is improvement for 2021. I will create a separate thread to see if there are other ways now to not leave a paper trace in the crypto sportsbook world. In 2020, I played legally with the U.S. state but I am sure the sportsbook will send my activity to the IRS as well. I would like to minimize this exposure like the way it was before crypto. I do not want to have the stress that I may owe significant taxes on the gambling activity where winnings are not major or even worse, it is a losing year.

**filis1** · 01-05-21, 12:13 PM

Can please assist? For example I deposit 1,000$ using a CC and lost it all. Next day deposited another 1,000$ using CC and withdraw 2000$ and send to my BTC account GEMINI and sold it right way, so transferred 2000$ to my bank account. When i received the 1099 MISC INCOME from Gemini provider says i made 2000$. But this is not true, technically i am even. Am i going to report 2,000$ as misc income to IRS or just have it as zero. The reason i am asking is because GEMINI sent only to IRS the 2,000$ i sold and IRS has not idea that i reported 2,000 using my CC. Plus the deposits in the CC shows all these weird names and not the actual name of the booking site. Please advise. thank you!!!

**DwightShrute** · 01-05-21, 12:17 PM

Originally posted by filis1

Can please assist? For example I deposit 1,000$ using a CC and lost it all. Next day deposited another 1,000$ using CC and withdraw 2000$ and send to my BTC account GEMINI and sold it right way, so transferred 2000$ to my bank account. When i received the 1099 MISC INCOME from Gemini provider says i made 2000$. But this is not true, technically i am even. Am i going to report 2,000$ as misc income to IRS or just have it as zero. The reason i am asking is because GEMINI sent only to IRS the 2,000$ i sold and IRS has not idea that i reported 2,000 using my CC. Plus the deposits in the CC shows all these weird names and not the actual name of the booking site. Please advise. thank you!!!

your bank won't care unless its over 10,000. Over 10,000 raises flags.

that 2,000 is none of their business and no one should or will ask. If they do, just tell them someone who owed you money send it to you.

**filis1** · 01-05-21, 12:29 PM

thank you for the quick response...i used the 2K as example..in total the GEMINI report 40,000$ but i am even..I deposited 40K and got back 40K..what do i in that case? thank you!

**DwightShrute** · 01-05-21, 12:46 PM

Originally posted by filis1

thank you for the quick response...i used the 2K as example..in total the GEMINI report 40,000$ but i am even..I deposited 40K and got back 40K..what do i in that case? thank you!

I had a player win over 200,000 a couple years back. He took it out bits at a time and never over 10,000 per shot.

I have had winners take out 50,000 in a wire transfer as well. He probably has a bank manager that knows him and/or he does several large transactions before.

The point being, if you aren't a big businessman, why draw attention to yourself? You are nothing to the IRS or Revenue Canada most likely. Don't give them a reason to look at you. There are a hundred stories you can say how you got 2000 or whatever the number is. Just don't flaunt it in their face. Be smart. you have 40,000 in your wallet, take it out slowly. If you have to take out a lot for some reason, think of other ways. Go to a BTC atm for some. Have a family member or someone you trust open a wallet and have them give you the cash. Open another wallet or 2 and send some Btc there.

Gemini can do what they want. Report what they want. Who cares? Live your life. Win more bets. That other shit is a good problem to have.

**illyTheKid** · 01-05-21, 01:15 PM

Originally posted by DwightShrute

I had a player win over 200,000 a couple years back. He took it out bits at a time and never over 10,000 per shot.

I have had winners take out 50,000 in a wire transfer as well. He probably has a bank manager that knows him and/or he does several large transactions before.

The point being, if you aren't a big businessman, why draw attention to yourself? You are nothing to the IRS or Revenue Canada most likely. Don't give them a reason to look at you. There are a hundred stories you can say how you got 2000 or whatever the number is. Just don't flaunt it in their face. Be smart. you have 40,000 in your wallet, take it out slowly. If you have to take out a lot for some reason, think of other ways. Go to a BTC atm for some. Have a family member or someone you trust open a wallet and have them give you the cash. Open another wallet or 2 and send some Btc there.

Gemini can do what they want. Report what they want. Who cares? Live your life. Win more bets. That other shit is a good problem to have.

Actually like this advice most haha. I too am worried about this.

**wildemu** · 01-06-21, 07:26 PM

Originally posted by filis1

thank you for the quick response...i used the 2K as example..in total the GEMINI report 40,000$ but i am even..I deposited 40K and got back 40K..what do i in that case? thank you!

You are receiving some misleading advice here. Since it was reported to the IRS by Gemini, if you don't report the gains/losses on your crypto activity, you are at risk of being audited and being investigated further. I recommend using crypto tax software like bitcoin.tax to help you calculate your buys and sells throughout 2020. It's not about reporting the gambling income at this point, it's about reporting your crypto buys and sells which should be close to even anyways.

**illyTheKid** · 01-07-21, 03:32 AM

Why cant we say the bitcoin was gifted to us? Say we've only had a few bitcoin withdraws, wouldnt saying it was a gift be good enough? Dead uncle, old friend who owed you money...How would they know?

**filis1** · 01-07-21, 02:19 PM

Wildemu, thats what i did. I reported all the buys/sells and sent to IRS. There was no way to capture the actual BTC price in each trading activity so i just reported in actual USD (bought lets say 100$ and sales 100$). My gains were matching the amount that was reported by GEMINI to IRS. I had to complete a 8949 form, same way you do for stocks. So i will advise if you did more than 200 transactions and received more than 40K you need to report that to IRS under gain/losses. Thank you all..great forum...