I received a letter from the IRS today specifying that they are aware that I have or had one or more accounts containing virtual currency (BTC). They directed me to accurately report my transactions. Has anyone else received this letter? The media reported that approx 10,000 people received this letter last summer. This was my first experience receiving such a notification.
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I received it and it would be impossible for me figure that out. If you're buying and immediately putting into sportsbook that converts to cash you wouldn't owe anything. They are trying to tax you on gains of change in market value. If you bet at a book IN bitcoin like I do there's really no reasonable way I could calculate that. I highly I doubt I would have profited enough that IRS would even bother with me. But if they do I'm all ears on how they plan to calculate it. I wouldn't worry too much about it unless you've made tens of thousands of dollars (in profit due to change in bitcoin price) by holding bitcoin and reselling later.Comment -
Bitcoin
State of NJ taxed me and hit me with penalties on my withdrawals from Bitcoin, 9%. It was reported to them by coinbase. Beware if you use bitcoin some states are taxing you.Comment -
The issue is when you file they straight up ask you if you bought/sold/transacted in Crypto. People either don't check it off and try to get away with it or they don't see it and it's an honest mistake. They know who has what crypto accounts with sites like Coinbase or Cashapp so you need to properly report your gains. Both sites even send you your gains for the year so there is nothing that you need to compute.Comment -
But if you are purchasing say $4K of BTC and cashing out say $10K of BTC, regardless of the market fluctuation, this can be identified as income that wasn't reported. This would come out if they are auditing your BTC history, which would lead to subsequent questioning.Comment -
Going to be interesting to see how it works for players who deposit into their book with plastic, and withdraw all winnings via btc. Does that look like one large amount of bitcoin gained? Even if it's sold right away at no profit?Comment -
Hire an accountant.
Bitcoin withdrawals from coinbase are reported to the IRS if they are in excess of $600. Coinbase pro withdrawals are reported if in excess of $20k, but in AR, DC, MA, MS, NJ, and VT that threshold is dropped to $600. Speaking as a person who has survived an audit, I can tell you that the IRS does not penetrate around. If you ignore their request they will tack on penalties and fees that are in wild excess of what they think you owe, regardless of whether you actually owe it or not. You are guilty until proven innocent with them, so address this ASAP.
Bitcoin is taxed as a capital gain, and bets are taxed as gambling wins/losses. A CPA who has experience with bitcoin should be able to help you determine what income gets taxed where at what rate. Your sportsbook accounts will have transaction logs of your deposits and withdrawals, as will kredit kards, coinbase, and other bitcoin wallets. This info is necessary for avoiding IRS penalties and fees.
Good luck.Comment -
Very well said. Report what coinbase and cash app give you as the numbers and you won't have an issue. If you make money whether its from actual gains or if its from gambling winnings there are ways to get creative.
However, you MUST check the box that you bought/sold/transacted or you'll get ****** and like Ian said they will make you pay penalties and fees that are way above what you would have paid doing things the right way.Comment -
You should report your crypto transactions even if you don't report gambling income. Every transaction is a capital gain or loss even if just a few dollars when you transfer to/from sportsbooks. You probably should file an amended return with Schedule D. See what your accountant says.Comment -
I don't recall ever giving them my ssn, but they have my banking info so there you go.Comment -
Been telling people for years... don't use Coinbase. They are the scum of all crypto brokers.
They'd rat their own mother out if she turned in Bitcoin.Comment -
Me too.Comment -
I wouldn't know. Haven't filed taxes in several years now. If anyone is close to leaving the matrix (EDIT: Ponzi scheme), it is me.Comment -
very interesting about coinbase, thank you for sharing.Comment -
Anyone know how BitPay reports to IRS? Coinbase banned me years ago before I realized you couldn’t send straight from the bookComment -
From BitPayBitPay complies with the requirements of Section 6050W of the Internal Revenue Code. This Section requires payment processors to provide information to the IRS through Form 1099-K reporting.This requirement only applies in the case of merchants that receive payments from BitPay of more than $20,000 in gross volume and more than 200 separate payments in a single calendar year.
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this is what is called a fishing expedition by the IRS
they have no clue, and cant have any clue, what you might have gained or lost. they just know you are in coinbase's database and transacted over a certain thresholdComment -
At the risk of being told to learn how to use search, what exchanges do you recommend?Comment -
Following the rules for reporting is almost impossible. Several years ago I made the decision to start reporting my transactions. I use Coinbase to acquire coins, move them to exchanges, trade actively, send some to bookmakers, receive some from bookmakers (a lot less than I send), and occasionally withdraw cash from Coinbase or Bitpay. Each and every one of these moves should be reported and requires the price of the coin at the time of the move. I found it impossible to track all of my previous moves. I spent hundreds of hours in this attempt. I finally came up with a simple approach and have used variations of this ever since. If I ever get audited, at least I can show an honest and consistent approach.
If Coinbase does send the reports to the IRS, they won't even be close to reality in my case. So now I'm tracking every move as I make them and should be in a good position to file my reports next year without more hundreds of hours programming and using spreadsheets.Comment -
What happens if you buy then send right away? Would you have to report that?Comment -
Unfortunately, there is no immediate when dealing with bitcoins. Maybe really short time frame, but not immediate. There are two situations here.
First, I buy bitcoins then rapidly send them to a sportsbook that converts them to USD. I compute the difference between my total cash outlay and what I was given credit for by the sportsbook. That I would report to the IRS. Generally, that would be a small loss because of fees associated with these transactions.
Second, I send the bitcoins to a sportsbook that keeps the balances in bitcoin. Again I would report that as a sale. The problem here is what was the value received at the sale. Technically, that would be the price at the moment the sale occurred. But again a small amount of time is involved, so there isn't a specific coin price. For historic transactions, I use the average of a coins open, high, low, and close price as the price at sale. Again I include the fees in the net P/L for the trade.
I'm not sure the IRS knows how they are going to deal with this complexity. But I decided on what I feel is a reasonable approach and use it every year. Hopefully, the IRS would view that as a good faith effort to follow the law.Comment -
It is pretty close to impossible to keep track of every single transactions if you do hundreds of them over time.
How about when you convert it to USD on the Bit.P. Card? Do you also report that?Comment -
So the bottom line is simple. No matter how smart you think you are, you are still going to get screwed by someone if you use bitcoin. If you do anything with bitcoin, the odds are 98% that you are some list that the Feds have. Now what they decide to do about those lists are rather well kept secrets. Unfortunately, you get no warning that they are about to make your life miserable. Many examples in here of people wasting money on accountants, wasting time trying to recover records, and all kinds of other hidden charges that cut into your bottom lie which actually makes many of you guys overall LOSERS, when you account for all the time and money you waste using bitcoin to begin with.Comment -
If you buy then send right after, that is not considered "hold" correct?
If you receive and then convert to fiat right after, that is not considered "hold" as well.
So in those two events, there is not much gain or loss since the bitcoin changes wallets within a minute.Comment -
From BP site:
But when you load the BPay Card with dollars using Bitcoin or Bitcoin Cash, you are making a transaction which the "Ruler of your soul" considers to be taxable under its guidance
So does that mean each time converts to dollars, that is taxed? How would that be calculated?Comment
