https://tokentax.co has real crypto accountants checking your uploads, working with you on missing cost basis, answering any questions you might have on intercom. US, UK, Canada and other countries supported automatically. And a TokenTax Crypto-specialist CPA can file your returns in the US as well
For Robinhood crypto, there's form8949.com which is generally fantastic. It can import from a number of crypto exchanges in addition to the traditional brokers.
Is there any rule of thumb to calculate taxes over crypto? Like "10% of your profits". I'm sure if you make more than 500k a year you might have to pay more taxes but I'm sure there is an average that covers 90% of traders.
If you didn't keep proper records, then use the cost basis of your crypto as 0 and report the sale price as pure profit. You will never under pay your taxes that way, and if your numbers are low enough, it's probably worth it to overpay on taxes than to spend the time recovering detailed records of what happened in between.
If it's too big of a number for you, then better remake / recover those records. Luckily you have a permanent record called the blockchain.
If you need a rule of thumb, for example you want to have a rough idea what your taxes would be like to see if you're comfortable doing some liquidation or something, then sure. I'd back-of-the-napkin long-term gains at 20%, and short-term at 35% (covers both federal and state; assumes U.S.).*
Again, very rough. You need concrete numbers once you do actual trading, because in the U.S. you are required to make estimated tax payments. The actual numbers can, for example, vary wildly from nearly 0% to upwards of 50%.
* These are based on a typical 15% federal tax on long-term gains and 5% for state taxes; or 35% being a comfortable average for most people's effective tax rate in the U.S. for short term gains. The 50% tax rate is approached when you have largish gains, toward $1 mil or so, and live in expensive states like New York or California.
Calculating your profits (and loses) is what these sites generally do -- that is usually the hard part, especially if you have a lot of transactions. Not to mention, the way that you calculate that differs by jurisdiction. Loses are just as important since they can have a significant benefit to the taxes you owe. I use bitcoin.tax and then export the data for my accountant to fit into the rest of my tax return.
In the US, profit on crypto is straight up capital gains. Held for less than a year = short term capital gains, taxed as regular income. Long term depends state-to-state, but overall taxed less than income (federal has 3 brackets - 0, 15, 20% depending on your income. 500k+ puts you in the 20% bracket)
Tax compliance can be high because the people with the most to lose just buy themselves loopholes - eg there's no requirement to file an FBAR for fine art! Enforcement resources can then be focused on keeping the middle class in line.
Pay unto Caesar and all that. But avoiding taxes through financial privacy is not equivalent to stealing. And certainly don't imply that an empire's aggressive wars are in any way akin to local community services!
> I don't think stealing books from library at any kind of scale approaching the value of tax evasion is so easy to get away with.
Sort of offtopic but ontopic to your comment: When bored and reading state statutes I've discovered librarians in NJ are the only group of people aside from law enforcement officers that are relieved of most liability when arresting someone. (anyone else that does a wrongful arrest can be hit with all sorts of charges and civil lawsuits)
Since then I've been raising awareness among the librarians of their ability to beat the shit out of people stealing books.
So yes, you are correct. I would expect that it would be more difficult to get away with at scale in the same sense it wouldn't be wise to steal office supplies from the local police station.
Yes, it is quite easy to pay taxes on crypto and quite difficult to explain during audit how cash ended up in your bank account without associated tax payments.
I only ever played with small amounts for fun, and in the long term, I took losses. But it's very difficult for me to compile all my trades for tax reasons. I set up automated trading on half a dozen different exchanges (some of which no longer exist) using half-baked python scripts with no logs. How on earth do I compile a Form 8453 showing all of those thousands of trades? I could spend months tracking down all the public keys I used and use blockchain explorers to compile a list of transactions... but I would not describe this as easy
I agree with this. Normal trading on exchanges might be relatively easy since you can just export transactions and dump them into a tool like this, but it can get a lot more complicated than that.
Some examples of things that are complicated:
- Trading ERC721 tokens (there are no tools to track down these transactions, track cost basis, etc - I ended up spending days hand crafting scripts to retrieve this data)
- Opening a cdp on something like Makerdao (which parts of this are taxable events / how do I file it?)
- What counts as a wash sale? [0]
- What are allowable methods of tracking cost basis?
- How do I handle hard forks?
Some of these are partially answered, but none of it is clear at all.
Yes, hindsight is 20/20. In my case, I doubt they'll care, given the small amount and the fact that there were no taxable profits. But I have to imagine that I'm not the only one who did this.
I'm sorry you decided to conduct algorithmic trading of digital assets on multiple exchanges without ever considering taxes. But services such as those linked by the OP (and others like bitcoin.tax) automatically import trades from all major exchanges and calculate the most advantageous method to minimize taxes.
I was doing various cryptocurrency mining in 2011 and trading in 2012, long before bitcoin.tax existed. Many of the exchanges I used have since shut down.
Yes. I've used bitcoin.tax the past few years. This one looks nice although it's missing a couple exchanges that I would need to use it next year (maybe they'll have them by then).
yes, the IRS concluded that "less than 800 people pay taxes on crypto" using a flawed and simplistic search string. I looked at how I reported various gains filed in 2014 and 2015 and it would not have included me in those 800 people.
the best thing about bubbles getting larger is that more people with more personalities and expertise are aware of what these things are. A judge wouldn't rubber stamp a subpoena on such basic and flawed logic, a treasury secretary wouldn't trust their employee with as shoddy an analysis, influential senators wouldn't believe it as their own altcoin trades wouldn't be counted. speculation drives innovation.
I don't do crypto, if I do I wouldn't. Just like I would not for cash transaction. I know legally I should and there is some risk but the risk is low enough.
From a tax perspective, sure. If you bought any time before the fall of 2017, and sold any time in 2018, it's pretty easy to have realized a gain in 2018.
Many people sold BTC at $14k+ and then bought back in at 10k, 5k, etc. If they didn't sell again for all of 2018 they'd only have "realized gains" and no realized loses. So on paper they'd have only have gains, as the IRS doesn't recognize the market value of your current holdings.
Not an expert, but afaik you'd have to separate the buyback by 1 month from the wash sale for it to be valid/legal. You'd be kicking yourself if the price skyrocketed during that window.
> There is some debate as to whether wash sales apply to cryptocurrency sales, however the IRS specifically states that wash sales only apply to stocks and securities. Since the IRS has also issued guidance that cryptocurrencies are property, CoinTracker does not calculate/apply wash sales.
There are also so called "flip seasons" where you throw money at random small cap altcoins and flip them 30-200% higher over the course of a month. These happen whenever BTC settles down and consolidates before plunging to news lows.
https://cryptotaxcalculator.io