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Ask HN: How do I pay taxes on crypto/token trading

48 points by beedrillzzzzz ↗ HN
From what I have read and can assume, in the USA trades between tokens should be treated as tax events to apply short/long term capital gains and not like-kind exchanges - tax should be paid immediately (current tax cycle), rather than when exchanged back to fiat.

Does anyone have any useful resources or authoritative info & suggestions on how to go about calculating and reporting taxes on crypto and ethereum tokens?

Thank you in advance.

35 comments

[ 2.7 ms ] story [ 82.7 ms ] thread
kruhft
Capitol Gains when converted to cash, in Canada.

Keep your records.

coralreef
What about crypto to crypto conversion? Taxable event?
surds
From what I have read on the matter, yes. If you made gains on one crypto and converted that into another, you own tax on the gains of the first one.

How does loss account in this situation? Suppose some crypto has fallen and I am in loss - does this 'loss' (at current valuation) help reduce the tax liability?

kruhft
Yes, I've heard that as well.
jackgolding
Anyone know if this is the same in Australia?
Mandatum
Unfortunately no. In AU, you pay capital gains on every single transaction you make - AUD to BTC, BTC to LTC, LTC to anything else. This makes trading regularly on places like Binance incredibly unattractive. There are discounts for holding over a year, and capital losses cannot be used to offset your tax. As an individual you are given a 50% discount however on your CGT, and 20% of your CGT can count towards your personal income tax.

If you're trading more than $10K AUD and you get audited, you're in for a world of pain if you haven't engaged a crypto knowledgeable accountant.

If you have substantial investments in crypto in AU - once you talk to an accountant who is knowledgeable of crypto (and you'll need to hunt one down, not many are) they'll tell you immediately to incorporate in NZ and transfer ownership to the company. NZ doesn't have capital gains tax for crypto and you can pay yourself dividends.

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philipodonnell
The tax accounting isn't that complicated. I don't have anything specific to point you to, but for the most part, cryptocurrency assets will be treated like any other asset like a stock or bond. If you sell it for more than you bought it for then you owe taxes on the difference in the tax year you made the sale.

The only reason it seemed complicated is people were trying to gimmick their way out of it by making complicated arguments for preferential tax treatment. This is always the way it was headed IMHO.

throwaway011114
I don't think it has to be such a headache as long as you keep records. What I plan on doing is calculating my gains and losses using https://bitcoin.tax/ and bringing the report to a CPA to check over.

Not sure about the "paid immediately" part. That's news to me actually. Can anybody else weigh in on this?

Edit: https://www.irs.gov/faqs/estimated-tax suggests you do if you expect to owe more than $1,000 in taxes.

beedrillzzzzz
To clarify: paid immediately as in the current tax cycle, and not when liquidated to fiat as another reply suggests is law in Canada.
goodoldboys
I use bitcoin.tax and it's made things so much easier. You can import trading history from the major exchanges and for any non-major exchange trading you can import manually or with a CSV.

It's free for up to 100 "events" (trades, mining, gifts, income, etc) and a reasonable $20 per year for anything above that.

I'll be taking the output from that software to give to my accountant and go from there.

bitthrow
I don't think it's quite as straightforward as people are making it out to be here, especially when considering forks. If you bought BTC a year ago and sell BCH (or BTC) today, what was your purchase price?

There are currently a couple of dozen Bitcoin forks, each with arguably equal claim to be the true successor. So it's difficult enough if you bought before all the forks and are selling all of your BTC in one go now, but lord help you and your accountant if you've bought or sold any inbetween some of the forks.

beedrillzzzzz
It seems like forks, smart contracts and related complexities (most recently noticed ETH -> WETH on radarrelay.com), coins/tokens that function in different ways (minting), all seem like they can affect record keeping for taxes in interesting ways... at the very least making it difficult to point to transactions and call them simple trades.
dahdum
At least for USA exchanges, only Bitcoin Cash has a marketplace so it's the only one I tracked. I put a cost basis of $0 at the time of fork, and paid short term capital gains on the sale.
crazypyro
Could you argue that the cost basis of your bitcoin was changed because BCH is similar to a stock dividend that is reinvested?
dahdum
Maybe, but I've read CPA advice on just declaring as income. Seems to be the most conservative approach and didn't change the tax substantially for me.
kumarski
http://zenledger.io

My friends and I have been building out tech in this space. (no we're not doing an ICO= we've been asked if we are by so many people, jesus)

The 1031 laws change things for people, feel free to ping me if you have deeper questions.

beedrillzzzzz
I will be sure to check out ZenLedger!

Do the previously vague 1031 laws mean one should file 2017 and 2018 taxes differently? Is it legally valid to treat tokens as like-kind assets in 2017?

kumarski
I deal more on the marketing/branding front. (it's being redone, don't panic lols)

We have a hardcore CPA/IRS founder on team, I will ask them and get back to you.

nodesocket
Zenledger is a nice startup idea. I thought that Coinbase is sending out 1099 (K's or MISC) to users and the IRS though already?

I wonder how many US citizens will just ignore their tax obligations thinking crypto trades, profits are untraceable.

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rizwank
Do you support optional 1031-like kind for 2017? What about optional currency-to-currency for those looking to be aggressive?

Thanks!

anon_man
Will this work if I use Bittrex, Binance, and Gemini?
kumarski
Yes, our plan is to support those exchanges. All US exchanges.
throwaway481516
Do you know what is the tax situation for non-residents using an US exchange to convert to fiat? Should non-citizens, non-residents also pay capital gain tax?