FBAR Cryptocurrency & IRS: Is it Required to be Reported?

IRS Says No Bitcoin FBAR Reporting This Tax Season Required

IRS Says No Bitcoin FBAR Reporting This Tax Season Required submitted by IamAlso_u_grahvity to Bitcoin [link] [comments]

IRS Says No Bitcoin FBAR Reporting This Tax Season Required

IRS Says No Bitcoin FBAR Reporting This Tax Season Required submitted by BTCNews to BTCNews [link] [comments]

UNITED STATES tax residents dealing with BITCOIN (and Alts) miss FBAR and FATCA reporting - here is a easy to understand guide that helps US tax residents with FBAR and FATCA rules in simple English (no purchase required)

UNITED STATES tax residents dealing with BITCOIN (and Alts) miss FBAR and FATCA reporting - here is a easy to understand guide that helps US tax residents with FBAR and FATCA rules in simple English (no purchase required) submitted by whatisfomo to Bitcoin [link] [comments]

UNITED STATES tax residents dealing with BITCOIN (and Alts) miss FBAR and FATCA reporting - here is a easy to understand guide that helps US tax residents with FBAR and FATCA rules in simple English (no purchase required)

UNITED STATES tax residents dealing with BITCOIN (and Alts) miss FBAR and FATCA reporting - here is a easy to understand guide that helps US tax residents with FBAR and FATCA rules in simple English (no purchase required) submitted by ABitcoinAllBot to BitcoinAll [link] [comments]

IRS: No Bitcoin Reporting on FBARs for This Filing Season

IRS: No Bitcoin Reporting on FBARs for This Filing Season submitted by optimator999 to Bitcoin [link] [comments]

x-post from /Bitcoin re FBAR reporting -- fellow Americans take note

FBAR reporting is a real bear, and there is an interesting post from a purported tax attorney over in /Bitcoin that I suggest is worth reading. I've been aware of this for a few years now, and it is truly staggering what Congress requires us now to disclose to our government regarding our Finances. And because MtGox files are all over the place we can only assume that our government has access to user lists to cross reference.
I'm FBAR reporting. Suggest fellow Americans look closely at this.
http://www.reddit.com/Bitcoin/comments/278s56/i_am_a_tax_attorney_here_is_why_you_should/
submitted by raywal to BitcoinMarkets [link] [comments]

Do US bitcoin holders of more than $10K need to file a Report of Foreign Bank and Financial Accounts (FBAR) ?

According to these instructions(see page 6), it looks like Bitcoiners might need to file this form. Any opinions out there?
Who Must File an FBAR.
A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. See General Definitions, to determine who is a United States person.
General Definitions
Financial Account. A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).
Foreign Financial Account. A foreign financial account is a financial account located outside of the United States. For example, an account maintained with a branch of a United States bank that is physically located outside of the United States is a foreign financial account. An account maintained with a branch of a foreign bank that is physically located in the United States is not a foreign financial account.
submitted by 17chk4u to Bitcoin [link] [comments]

IRS Says Bitcoin Not Reportable On FBAR (For Now)

IRS Says Bitcoin Not Reportable On FBAR (For Now) submitted by VivaLaPandaReddit to Bitcoin [link] [comments]

IRS Says Bitcoin Not Reportable On FBAR (For Now)

IRS Says Bitcoin Not Reportable On FBAR (For Now) submitted by cryptocurrencylive to CryptoCurrencyLive [link] [comments]

Bitcoin Exchange Accounts Should Be Reported on FBARs, Analysts Say

Bitcoin Exchange Accounts Should Be Reported on FBARs, Analysts Say submitted by cryptocurrencylive to CryptoCurrencyLive [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]

Economic Stimulus and Cryptocurrency (Podcast Episode and Summary)

Hey All!
I’m Isa, producer of The Bitcoin Taxes Podcast and I want to share some valuable information with you. Our newest episode is out today and this time we discuss economic stimulus and cryptocurrency, a topic I think might be of your interest.
Our guest this time is Andrew. Andrew Gordon is a cryptocurrency tax lawyer and the managing attorney of Gordon Law Group. Andrew concentrates on tax controversy and compliance, crypto, and business law – which makes him uniquely suited to discuss how cryptocurrency users may be affected by the economic stimulus options made available in response to COVID-19.
Andrew joins our show to discuss these economic relief measures, and how cryptocurrency traders and businesses can benefit from them. We also discuss what role cryptocurrency has played in this relief response. In addition, Andrew updates us on any changes regarding the FBAR and FATCA filings since his last time on the show.
Episode Page
Audio Only
Episode highlights

FBAR and FATCA Filings: A Reminder (01:35)

Andrew: The FBAR and FATCA are different forms, but both of them are concerned with disclosing the maximum value that you had in the account at any time during the year. They’re not asking for gains or losses – it’s just a disclosure, meaning that there’s no tax calculation. The IRS simply wants to know what is the maximum amount that you had in that account. As long as you disclose and disclose timely, there aren’t any penalties, there isn’t any tax.

Economic Stimulus Programs (05:58)

Andrew: There’s been a lot of different stimulus programs that are available for small businesses, sole proprietors, and so a lot of different people in crypto and even those with businesses outside crypto have been reaching out to us asking: are there different programs that we can take advantage of? How do we take advantage of this? What makes sense for us?
The payroll protection program loans, PPP, is one of the best options out there for small businesses. It really is almost like getting free money or a grant from the government and it allows up to eight weeks of payroll, rent, and utilities to be paid to you in a forgivable loan. So it’s originally a loan, but as long as you use it for those purposes, you don’t just stick the money in your pocket, it is forgiven by the government.
There was originally $349 billion that was approved for this program and within days the money was gone. The SBA ran out of money and news reports suggest that probably about 5 to 10% of the people that wanted funds got it in that initial amount. Unfortunately there seems to be suggestions, as you said, that people that have connections or perhaps even larger companies are getting these loans, but there are things that small businesses, that people listening to this can do and should do, to take advantage of these loans.

Stimulus Options for Crypto Traders (09:37)

Andrew: Some of these other programs do apply to crypto traders. Some of the people out there listening are crypto traders, which is different than [being an] investor.
If you are trading daily, regularly, and it’s really a business, you may be filing your tax return as a trader – which a lot of people may think of themselves as a trader, but in the eyes of the IRS, they’re really investors. This is different because as a trader, you’re essentially a small business and so you’ll be eligible for these same forgivable loans or other loans that any other small business would be eligible for – and you don’t need payroll. That was a big misconception with the payroll protection program loans, [because] it’s got “payroll” in the name.
For people listening out there either as a crypto business, or you just have another business – you’re a schedule C filer on your tax return, and that could be for crypto, or it could be for something else. You can be eligible for a forgivable loan under the payroll protection program. And I’ll fast forward the math for you. If you’re a schedule C business, you can be eligible for a little over $20,000 of forgivable loans. And again, this can be if you’re a crypto trader, it could be if you have a business that’s related to crypto, providing crypto consulting or anything like that, or even something that’s not related to crypto at all.
submitted by IsaN-BitcoinTax to CoronavirusRecession [link] [comments]

Economic Stimulus and Cryptocurrency (Podcast Episode and Summary)

Hey All!
I’m Isa, producer of The Bitcoin Taxes Podcast and I want to share some valuable information with you. Our newest episode is out today and this time we discuss economic stimulus and cryptocurrency, a topic I think might be of your interest.
Our guest this time is Andrew. Andrew Gordon is a cryptocurrency tax lawyer and the managing attorney of Gordon Law Group. Andrew concentrates on tax controversy and compliance, crypto, and business law – which makes him uniquely suited to discuss how cryptocurrency users may be affected by the economic stimulus options made available in response to COVID-19.
Andrew joins our show to discuss these economic relief measures, and how cryptocurrency traders and businesses can benefit from them. We also discuss what role cryptocurrency has played in this relief response. In addition, Andrew updates us on any changes regarding the FBAR and FATCA filings since his last time on the show.
Episode Page
Audio Only

Episode highlights

FBAR and FATCA Filings: A Reminder (01:35)

Andrew: The FBAR and FATCA are different forms, but both of them are concerned with disclosing the maximum value that you had in the account at any time during the year. They’re not asking for gains or losses – it’s just a disclosure, meaning that there’s no tax calculation. The IRS simply wants to know what is the maximum amount that you had in that account. As long as you disclose and disclose timely, there aren’t any penalties, there isn’t any tax.

Economic Stimulus Programs (05:58)

Andrew: There’s been a lot of different stimulus programs that are available for small businesses, sole proprietors, and so a lot of different people in crypto and even those with businesses outside crypto have been reaching out to us asking: are there different programs that we can take advantage of? How do we take advantage of this? What makes sense for us?
The payroll protection program loans, PPP, is one of the best options out there for small businesses. It really is almost like getting free money or a grant from the government and it allows up to eight weeks of payroll, rent, and utilities to be paid to you in a forgivable loan. So it’s originally a loan, but as long as you use it for those purposes, you don’t just stick the money in your pocket, it is forgiven by the government.
There was originally $349 billion that was approved for this program and within days the money was gone. The SBA ran out of money and news reports suggest that probably about 5 to 10% of the people that wanted funds got it in that initial amount. Unfortunately there seems to be suggestions, as you said, that people that have connections or perhaps even larger companies are getting these loans, but there are things that small businesses, that people listening to this can do and should do, to take advantage of these loans.

Stimulus Options for Crypto Traders (09:37)

Andrew: Some of these other programs do apply to crypto traders. Some of the people out there listening are crypto traders, which is different than [being an] investor.
If you are trading daily, regularly, and it’s really a business, you may be filing your tax return as a trader – which a lot of people may think of themselves as a trader, but in the eyes of the IRS, they’re really investors. This is different because as a trader, you’re essentially a small business and so you’ll be eligible for these same forgivable loans or other loans that any other small business would be eligible for – and you don’t need payroll. That was a big misconception with the payroll protection program loans, [because] it’s got “payroll” in the name.
For people listening out there either as a crypto business, or you just have another business – you’re a schedule C filer on your tax return, and that could be for crypto, or it could be for something else. You can be eligible for a forgivable loan under the payroll protection program. And I’ll fast forward the math for you. If you’re a schedule C business, you can be eligible for a little over $20,000 of forgivable loans. And again, this can be if you’re a crypto trader, it could be if you have a business that’s related to crypto, providing crypto consulting or anything like that, or even something that’s not related to crypto at all.
submitted by IsaN-BitcoinTax to stimuluscheck [link] [comments]

Analyzing the new 2019 Crypto Tax Guidelines (Podcast & Summary)

Hey all - I typically post my podcast episodes on our personal subreddit, and on this subreddit. Here's my interview with Tyson Cross. Disclaimer, I work for BitcoinTaxes. The summary is a bit longer than usual, but there were a lot of parts that I thought were important to highlight from this episode.
---
The IRS has recently released new tax guidance for cryptocurrency trading – the first official guidance released in over 5 years, since March 2014. Tyson Cross, a tax attorney who specializes in cryptocurrency taxation, joins me on The BitcoinTaxes Podcast to analyze this new guidance.
In addition to analyzing the new guidelines (and Tyson providing his expertise) we answered some questions from Reddit users as well (starting @ 44:50).
Link to the podcast episode page
Link to the podcast audio
Summary/Highlights:
Two Components – Revenue Ruling & FAQ (1:08):
The revenue ruling creates some problems. The FAQ, for the most part, is not too problematic. But – I’d say on the net whole, both maybe create more questions than they answer, unfortunately.

The Revenue Ruling – Airdrops & Forks (2:28):
Revenue Ruling 2019-24 is what the IRS released and specifically it addresses this issue of hard forks and airdrops, which until now has really gone unanswered. There’s been a lot of debate in the tax community about whether hard forks and airdrops are taxable events…whether they satisfy these kinds of requirements that we have from existing law for treating something as a taxable event. The big two are: do you have an ascension to wealth – meaning is the thing you received valuable? Number two, do you have dominion and control over it – meaning are you free to treat it as your own? If those two things are met, then generally speaking, you have taxable income.
The problem is applying those two standards to hard forks or airdrops is actually pretty difficult. The revenue ruling here attempts to make that application – but the problem is that the facts they use are problematic…and don’t seem to really adequately describe a hard fork or an airdrop. This revenue ruling is broken down into two situations where the IRS lays out the facts and then applies the law and reaches a conclusion about whether or not these events are taxable.
They say situation one is not a taxable event because the taxpayer did not receive additional units of virtual currency. But in situation two, the IRS says that it was a taxable event because the taxpayer not only received units of virtual currency from the followup airdrop, but also had dominion and control, because the taxpayer could immediately sell them if he or she wanted to. Situation one is not taxable. Situation two is taxable. So where do most hard forks like the BTC/BCH hard fork fit in? Strictly speaking, if you really took those revenue ruling at face value using the plain language, it doesn’t fit into either one because the BTC/BCH hard fork wasn’t followed by an airdrop.
This revenue ruling, like many issues that have come up with cryptocurrency, puts taxpayers in a really hard spot where they are left yet again guessing what the IRS wants them to do. If you don’t want to have any problems with the IRS in the future, I would tell you to go ahead and report every hard fork and every airdrop as a taxable event.

The IRS FAQ on Virtual Currency Transactions – Specific Identification Methods (22:30):
One of the big questions that’s been floating around the virtual currency space now for years is what methods do you use to calculate your cost basis? FIFO (First In First Out) is the default approach for shares of stock – so, kind of unsurprisingly, the IRS said in the FAQ Question #38 that FIFO is the default method also for virtual currency.
What was maybe a little bit surprising is that the IRS also says in Question #37 that you can use specific identification for virtual currency. This was actually a little surprising to me because the requirements for using specific identification for shares of stock is actually a little burdensome. In Question #37, the IRS sets what I would consider a pretty low bar to use specific identification for cryptocurrency transactions.
Specific identification would mean that instead of just assuming you’re selling your first Bitcoin, the oldest Bitcoin in your wallet, you can actually look at all of your holdings and pick which one you’re selling when you do a sale. So you could pick the one with the highest cost basis if you wanted (HCFO), or you could pick the newest one in your wallet (LIFO). So this opens up a lot of possibilities for taxpayers to be a little more strategic about how their gains are reported. Using specific identification, taxpayers can maybe choose the cost basis method that causes them to have the lowest amount of capital gains.
Most people listening should be relatively happy to hear that specific identification is possible. The question is what do you have to do to be allowed to use it? Question #37 says that you have to have records showing the transaction information for all units of the specific virtual currency held in a single account wallet or address. The question goes on to say that the information must show four things: the date and time each unit was acquired, your cost basis and the fair market value of each unit at the time it was acquired, the time and date each unit was sold or otherwise disposed of, and the fair market value of each unit when it was sold or disposed of. Well those are four things that we pretty much have already, every time we do a transaction with virtual currency – if you trade on coin on a Poloniex, when you download your transaction report, it’s going to show all four of those things every time.

Unchanged Guidelines & Unanswered Questions (29:43):
I would say most things weren’t changed by this guidance. And that’s one of the things that’s maybe a little disappointing about the updated FAQ and the Revenue Ruling. A lot of it we already knew, especially in the FAQ – it kind of just flushes out some of the smaller points. But generally, the basic principles that we’ve been operating under for the last five years are all still in place.
We know that basically any transaction conducted with virtual currency is a taxable event and it’s generally capital gains and reported on Schedule D of your tax return. That part of it is still the same – nothing changed. The FAQ also addresses things like mining. We’ve known for a while that you have ordinary income based on the value of that coin at the time that it is mined. That logic would apply to staking rewards and other similar receipts of virtual currency. Also if you get paid in virtual currency, you know that’s taxable. Whether you’re an employee, or you’re a business selling goods or services, those are all taxable events.
There are still some big unanswered questions that we have and hopefully we get some guidance on that soon. I think the big thing they missed, and it’s really disappointing, was the issue about foreign account reporting.We’ve been asking this question now for five years or longer, about whether accounts held at foreign cryptocurrency exchanges are subject to reporting on FBAR or under FATCA on Form 8938. The question is, does an account at a foreign cryptocurrency exchange fall within the definitions used for the FBAR and Form 8938? And the answer is that we don’t know.

Retroactive Guidelines (34:20):
Most IRS rulings are retroactive unless otherwise stated. The Revenue Ruling and FAQ do not identify an exception to that. So I would say that these are retroactive.
Should you go back and amend past years? That’s a tough question to answer. I’d say talk to your tax preparer or advisor and see what they think. A lot of that depends on how much income it was, how much the rest of your income was on your tax return, how much time is left on the statute of limitations. It’s not an easy question to apply generally. But certainly you should look into it because the IRS will be following this revenue ruling retroactively.

Questions from the Community @ 44:50:
Tyson answers questions from social media, Reddit, and from BitcoinTaxes users.

Important Links:
IRS FAQ
Rev. Rul. 2019-24 (PDF)
BitcoinTaxes Summary
submitted by Sal-BitcoinTax to BitcoinMarkets [link] [comments]

US Tax Guide for ETH and other cryptocurrencies

Introduction:  
Greetings, fellow ethtraders! Happy New Year! In the next few months, taxpayers across the US will be filing their 2017 tax returns. As an Enrolled Agent and a ETH/cryptocurrency investor and enthusiast, I wanted to write up a brief guide on how your investments in ETH and other cryptocurrencies are taxed in the US.
 
 
1. Are ETH/cryptocurrency realized gains taxable?
Yes. The IRS treats virtual currency (such as cryptocurrency) as property. That means if you sell ETH, BTC, or any other cryptocurrency that has appreciated in value, you have realized a capital gain and must pay taxes on this income. If you held the position for one year or less, it is a short-term capital gain which is taxed at your ordinary income tax rate. If you held the position for more than one year, it is a long-term capital gain which is taxed at your long-term capital gains tax rate. In most cases, this is 15%, but could also be 0% or 20% depending on your specific ordinary income tax bracket.
 
2. If I sell my ETH for USD on Coinbase but do not transfer the USD from Coinbase to my bank account, am I still taxed?
Yes. The only thing that matters is that you sold the ETH, which creates a taxable transaction. Whether you transfer the USD to your bank account or not does not matter.
 
3. If I use my ETH to buy OMG or another cryptocurrency, is this a taxable transaction?
Most likely yes. See #4 below for a more detailed explanation. If assuming crypto to crypto trades are not able to be like-kind exchanged, then continue on to the next paragraph here.
This is actually two different transactions. The first transaction is selling your ETH for USD. The second transaction is buying the OMG with your USD. You must manually calculate these amounts. For example, I buy 1 ETH for $600 on Coinbase. Later on, the price of 1 ETH rises to $700. I transfer that 1 ETH to Bittrex and use it to buy 37 OMG. I have to report a capital gain of $100 because of this transaction. My total cost basis for the 37 OMG I purchased is $700.
 
4. If I use my ETH to buy OMG or other cryptocurrency, could that be considered a tax-free like-kind exchange?
Probably not. The new tax law says that like-kind exchanges only pertain to real estate transactions. This was done with Section 13303, which replaced “property” with “real property” for all of Section 1031 (page 72 near the bottom). My personal interpretation:
In 2018 and going forward, cryptocurrencies can definitely not be like-kind exchanged.
In 2017 and before, it is a very gray area. I personally am not taking the position that they can be like-kind exchanged, because if the IRS went after a taxpayer who did this, the IRS would probably win and the taxpayer would owe taxes, interest, and probably penalties on every single little gain made from trading one cryptocurrency for another.
Here is a great interpretation of why trading cryptocurrency for cryptocurrency is probably not a like-kind transaction.
In my opinion, the biggest factor is that like-kind exchanges must be reported on Form 8824 and not just ignored. Therefore, if a taxpayer is claiming like-kind exchanges on crypto to crypto exchanges, he or she would have to fill out a Form 8824 for each individual transaction of crypto to crypto, which would be absolutely cumbersome if there are hundreds or thousands of such trades.
Here is another article about like-kind exchanges.
Here is the American Institute of CPAs' letter to the IRS, dated June 10, 2016, asking them to release guidance on whether crypto to crypto can be like-kind exchanged or not. The IRS has not responded to the letter.
 
5. How do I calculate the realized capital gain or loss on the sale of my cryptocurrency?
The realized gain or loss is your total proceeds from the sale minus what you purchased those positions for (your cost basis). For example, you bought 1 ETH for $300 in June of 2017. In December of 2017, you sold that 1 ETH for $800. Your realized gain would be $800 - $300 = $500. Since you held it for one year or less, the $500 would be a short-term capital gain taxed at your ordinary income tax rate.
 
6. Which ETH's cost basis do I use if I have multiple purchases?
The cost basis reporting method is up to you. For example, I buy my first ETH at $300, a second ETH at $530, and a third ETH at $400. Later on, I sell one ETH for $800. I can use:
FIFO (first in first out) - cost basis would the first ETH, $300, which would result in a gain of $500.
LIFO (last in first out) - cost basis would be the third ETH, $400, which would result in a gain of $400.
Average cost - cost basis would be the average of the three ETH, $410, which would result in a gain of $390.
Specific identification - I can just choose which coin's cost basis to use. For example, I can choose the second ETH's cost basis, $530, which would result in the lowest capital gains possible of $270.
 
7. If I end up with a net capital loss, can I claim this on my tax return?
Capital gains and capital losses are netted on your tax return. If the net result of this is a capital loss, you may offset it against ordinary income on your tax return, but only at a maximum of $3,000 per year. The remaining losses are carried forward until you use them up.
 
8. What is the tax rate on my capital gains?
If long-term, the tax rate is 0%, 15%, or 20%, depending on your ordinary income tax bracket. If short-term, the tax bracket you’ll be in will depend on your total income and deductions. The ordinary income tax brackets are 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% in 2017 and 10%, 12%, 22%, 24%, 32%, 35%, and 37% in 2018 and going forward.
Here are the 2017 and 2018 ordinary income tax brackets.
Here are the 2017 and 2018 long-term capital gains tax brackets.
Here is a detailed article on how the calculation of long-term capital gains tax work and how you can take advantage of the 0% long-term capital gains rate, if applicable.
 
9. If I mine ETH or any other cryptocurrency, is this taxable?
Yes. IRS Notice 2014-21 states that mining cryptocurrency is taxable. For example, if you mined $7,000 worth of ETH in 2017, you must report $7,000 of income on your 2017 tax return. For many taxpayers, this will be reported on your Schedule C, and you will most likely owe self-employment taxes on this income as well. The $7,000 becomes the cost basis in your ETH position.
 
10. How do I calculate income for the cryptocurrency I mined?
This is the approach I would take. Say I mined 1 ETH on December 31, 2017. I would look up the daily historical prices for ETH and average the high and low prices for ETH on December 31, 2017, which is ($760.35 + $710.12) / 2 = $735.24. I would report $735.24 of income on my tax return. This would also be the cost basis of the 1 ETH I mined.
 
11. Can I deduct mining expenses on my tax return?
If you are reporting the income from mining on Schedule C, then you can deduct expenses on Schedule C as well. You can deduct the portion of your electricity costs allocated to mining, and then you depreciate the cost of your mining rig over time (probably over five years). Section 179 also allows for the full deduction of the cost of certain equipment in year 1, so you could choose to do that if you wanted to instead.
 
12. If I receive ETH or other cryptocurrency as a payment for my business, is this taxable?
Yes. Similar to mining, your income would be what the value of the coins you received was. This would also be your cost basis in the coins.
 
13. If I received Bitcoin Cash as a result of the hard fork on August 1, 2017, is this taxable?
Most likely yes. For example, if you owned 1 Bitcoin and received 1 Bitcoin Cash on August 1, 2017 as a result of the hard fork, your income would be the value of 1 Bitcoin Cash on that date. Bitcoin.tax uses a value of $277. This value would also be your cost basis in the position. Any other hard forks would probably be treated similarly. Airdrops may be treated similarly as well, in the IRS' view.
Here are a couple more good articles about reporting the Bitcoin Cash fork as taxable ordinary income. The second one goes into depth and cites a US Supreme Court decision as precedent: one, two
 
14. If I use ETH, BTC, or other cryptocurrency to purchase goods or services, is this a taxable transaction?
Yes. It would be treated as selling your cryptocurrency for USD, and then using that USD to purchase those goods or services. This is because the IRS treats cryptocurrency as property and not currency.
 
15. Are cryptocurrencies subject to the wash sale rule?
Probably not. Section 1091 only applies to stock or securities. Cryptocurrencies are not classified as stocks or securities. Therefore, you could sell your ETH at a loss, repurchase it immediately, and still realize this loss on your tax return, whereas you cannot do the same with a stock. Please see this link for more information.
 
16. What if I hold cryptocurrency on an exchange based outside of the US?
There are two separate foreign account reporting requirements: FBAR and FATCA.
A FBAR must be filed if you held more than $10,000 on an exchange based outside of the US at any point during the tax year.
A Form 8938 (FATCA) must be filed if you held more than $75,000 on an exchange based outside of the US at any point during the tax year, or more than $50,000 on the last day of the tax year.
The penalties are severe for not filing these two forms if you are required to. Please see the second half of this post for more information on foreign account reporting.
 
17. What are the tax implications of gifting cryptocurrency?
Small gifts of cryptocurrency do not have a tax implication for the gift giver or for the recipient. The recipient would retain the gift giver's old cost basis, so it could be a good idea for the gift giver to provide records of the original cost basis to the recipient as well (or else the recipient would have to assume a cost basis of $0 if the recipient ever sells the cryptocurrency).
Large gifts of cryptocurrency could start having gift and estate tax implications on the giver if the value exceeds more than $14,000 (in 2017) or $15,000 (in 2018) per year per recipient.
Here's a good article on Investopedia on this issue.
An important exception applies if the gift giver gives cryptocurrency that has a cost basis that is higher than the market value at the time of the gift. Please see the middle of this post for more information on that.
 
18. Where can I learn even more about cryptocurrency taxation?
Unchained Podcast: The Tax Rules That Have Crypto Users Aghast
IRS Notice 2014-21
Great reddit post from tax attorney Tyson Cross from 2014
 
19. Are there any websites that you recommend in helping me with all of this?
Yes - I have used bitcoin.tax and highly recommend it. You can import directly from an exchange to the website using API, and/or export a .csv/excel file from the exchange and import it into the website. The exchanges I successfully imported from were Coinbase, GDAX, Bittrex, and Binance. The result is a .csv or other file that you can import into your tax software.
I have also heard good things about cointracking.info but have not personally used it myself.
 
20. Taxation is theft!
I can't help you there.
 
 
That is the summary I have for now. There have been a lot of excellent cryptocurrency tax guides on reddit, such as this one, this one, and this one, but I wanted to post my short summary guide on ethtrader which hopefully answers some of the questions you all may have about US taxation of ETH and other cryptocurrencies. Please let me know if you have any more questions, and I’d be happy to answer them to the best of my ability. Thank you!
Regarding edits: I have made many edits to my post since I originally posted it. Please refresh to see the latest edits to my guide. Thank you.
 
Disclaimer:
The information contained within this post is provided for informational purposes only and is not intended to substitute for obtaining tax, accounting, or financial advice from a professional.
Any U.S. federal tax advice contained in this post is not intended to be used for the purpose of avoiding penalties under U.S. federal tax law.
Presentation of the information via the Internet is not intended to create, and receipt does not constitute, an advisor-client relationship. Internet users are advised not to act upon this information without seeking the service of a tax professional.
submitted by Nubboi to ethtrader [link] [comments]

Analyzing the new 2019 Crypto Tax Guidelines (Podcast & Summary)

The IRS has recently released new tax guidance for cryptocurrency trading – the first official guidance released in over 5 years, since March 2014. Tyson Cross, a tax attorney who specializes in cryptocurrency taxation, joins me on The BitcoinTaxes Podcast to analyze this new guidance.
In addition to analyzing the new guidelines (and Tyson providing his expertise) we answered some questions from Reddit users as well (starting @ 44:50).
Link to the podcast episode page
Link to the podcast audio
Summary/Highlights:
Two Components – Revenue Ruling & FAQ (1:08):
The revenue ruling creates some problems. The FAQ, for the most part, is not too problematic. But – I’d say on the net whole, both maybe create more questions than they answer, unfortunately.

The Revenue Ruling – Airdrops & Forks (2:28):
Revenue Ruling 2019-24 is what the IRS released and specifically it addresses this issue of hard forks and airdrops, which until now has really gone unanswered. There’s been a lot of debate in the tax community about whether hard forks and airdrops are taxable events…whether they satisfy these kinds of requirements that we have from existing law for treating something as a taxable event. The big two are: do you have an ascension to wealth – meaning is the thing you received valuable? Number two, do you have dominion and control over it – meaning are you free to treat it as your own? If those two things are met, then generally speaking, you have taxable income.
The problem is applying those two standards to hard forks or airdrops is actually pretty difficult. The revenue ruling here attempts to make that application – but the problem is that the facts they use are problematic…and don’t seem to really adequately describe a hard fork or an airdrop. This revenue ruling is broken down into two situations where the IRS lays out the facts and then applies the law and reaches a conclusion about whether or not these events are taxable.
They say situation one is not a taxable event because the taxpayer did not receive additional units of virtual currency. But in situation two, the IRS says that it was a taxable event because the taxpayer not only received units of virtual currency from the followup airdrop, but also had dominion and control, because the taxpayer could immediately sell them if he or she wanted to. Situation one is not taxable. Situation two is taxable. So where do most hard forks like the BTC/BCH hard fork fit in? Strictly speaking, if you really took those revenue ruling at face value using the plain language, it doesn’t fit into either one because the BTC/BCH hard fork wasn’t followed by an airdrop.
This revenue ruling, like many issues that have come up with cryptocurrency, puts taxpayers in a really hard spot where they are left yet again guessing what the IRS wants them to do. If you don’t want to have any problems with the IRS in the future, I would tell you to go ahead and report every hard fork and every airdrop as a taxable event.

The IRS FAQ on Virtual Currency Transactions – Specific Identification Methods (22:30):
One of the big questions that’s been floating around the virtual currency space now for years is what methods do you use to calculate your cost basis? FIFO (First In First Out) is the default approach for shares of stock – so, kind of unsurprisingly, the IRS said in the FAQ Question #38 that FIFO is the default method also for virtual currency.
What was maybe a little bit surprising is that the IRS also says in Question #37 that you can use specific identification for virtual currency. This was actually a little surprising to me because the requirements for using specific identification for shares of stock is actually a little burdensome. In Question #37, the IRS sets what I would consider a pretty low bar to use specific identification for cryptocurrency transactions.
Specific identification would mean that instead of just assuming you’re selling your first Bitcoin, the oldest Bitcoin in your wallet, you can actually look at all of your holdings and pick which one you’re selling when you do a sale. So you could pick the one with the highest cost basis if you wanted (HCFO), or you could pick the newest one in your wallet (LIFO). So this opens up a lot of possibilities for taxpayers to be a little more strategic about how their gains are reported. Using specific identification, taxpayers can maybe choose the cost basis method that causes them to have the lowest amount of capital gains.
Most people listening should be relatively happy to hear that specific identification is possible. The question is what do you have to do to be allowed to use it? Question #37 says that you have to have records showing the transaction information for all units of the specific virtual currency held in a single account wallet or address. The question goes on to say that the information must show four things: the date and time each unit was acquired, your cost basis and the fair market value of each unit at the time it was acquired, the time and date each unit was sold or otherwise disposed of, and the fair market value of each unit when it was sold or disposed of. Well those are four things that we pretty much have already, every time we do a transaction with virtual currency – if you trade on coin on a Poloniex, when you download your transaction report, it’s going to show all four of those things every time.

Unchanged Guidelines & Unanswered Questions (29:43):
I would say most things weren’t changed by this guidance. And that’s one of the things that’s maybe a little disappointing about the updated FAQ and the Revenue Ruling. A lot of it we already knew, especially in the FAQ – it kind of just flushes out some of the smaller points. But generally, the basic principles that we’ve been operating under for the last five years are all still in place.
We know that basically any transaction conducted with virtual currency is a taxable event and it’s generally capital gains and reported on Schedule D of your tax return. That part of it is still the same – nothing changed. The FAQ also addresses things like mining. We’ve known for a while that you have ordinary income based on the value of that coin at the time that it is mined. That logic would apply to staking rewards and other similar receipts of virtual currency. Also if you get paid in virtual currency, you know that’s taxable. Whether you’re an employee, or you’re a business selling goods or services, those are all taxable events.
There are still some big unanswered questions that we have and hopefully we get some guidance on that soon. I think the big thing they missed, and it’s really disappointing, was the issue about foreign account reporting.We’ve been asking this question now for five years or longer, about whether accounts held at foreign cryptocurrency exchanges are subject to reporting on FBAR or under FATCA on Form 8938. The question is, does an account at a foreign cryptocurrency exchange fall within the definitions used for the FBAR and Form 8938? And the answer is that we don’t know.

Retroactive Guidelines (34:20):
Most IRS rulings are retroactive unless otherwise stated. The Revenue Ruling and FAQ do not identify an exception to that. So I would say that these are retroactive.
Should you go back and amend past years? That’s a tough question to answer. I’d say talk to your tax preparer or advisor and see what they think. A lot of that depends on how much income it was, how much the rest of your income was on your tax return, how much time is left on the statute of limitations. It’s not an easy question to apply generally. But certainly you should look into it because the IRS will be following this revenue ruling retroactively.

Questions from the Community @ 44:50:
Tyson answers questions from social media, Reddit, and from BitcoinTaxes users.

Important Links:
IRS FAQ
Rev. Rul. 2019-24 (PDF)
BitcoinTaxes Summary
submitted by Sal-BitcoinTax to bitcointaxes [link] [comments]

BitcoinTaxes FAQ Podcast - We answer your questions about using Bitcoin.Tax!

Disclosure: I work for BitcoinTaxes, and I host this podcast! This is the last entry in our crypto taxation podcast series, and I interviewed the founder of BitcoinTaxes. We answered questions from Reddit, Facebook, & Twitter about using our service to calculate crypto capital gains. I've posted our podcasts to this community in the past, and they seem fairly well-received. I've added timestamps to each question, in case you are rushing on your taxes and don't have time to listen to the whole thing. Any other questions, feel free to PM me. Going to be working overtime today and tomorrow helping people finish their crypto calculations!
TLDR; Q&A about using Bitcoin.Tax, a cryptocurrency capital gains calculation service.
Link to Podcast
---
The end of the tax season is quickly approaching, and this will be the last entry in our current podcast series (don't worry, we've got a new cryptocurrency series coming soon!). This podcast was created to answer and explore some of the complex questions surrounding cryptocurrency taxation. For the final entry in our Cryptocurrency Taxation Podcast series, we are answering questions, from customers, about using Bitcoin.Tax. Colin Mackie, CEO & Founder of Bitcoin.Tax, is with us today to help answer these questions, and to talk about some of the upcoming features of our software.
Colin created Bitcoin.Tax in 2013 to solve a problem for himself, and for the cryptocurrency community. Since then, Bitcoin.Tax has expanded rapidly, continues to grow, and improving to suit the needs of our customers.
Questions & Answers
[For the full answer, navigate to the portion of the podcast as indicated by the timestamp next to the question]
Q: What information goes in the Spending Tab? If I didn't make any purchases using crypto, do I still need to import my exchange data into the Spending Tab? [02:12]
A: Any non-trade where you are spending crypto to purchases goods (e.g., a gift card) or paying for services (e.g., paying for food delivery). Tips and donations are also entered in the Spending Tab, and can be categorized as such.
Q: How do I report lost or stolen crypto? Will this count as a loss? [04:25]
A: Lost and stolen crypto can be added to the Spending Tab. This will remove the cost basis of that lost/stolen crypto, but the fiat worth of the crypto will not be deducted from your capital gains.
Q: How do I report coins that are at zero (worth zero now)? [07:25]
A: Some zero-worth coins can be added to the Trading Tab as a zero-sale. However, this is a highly situational situation - always consult with a tax professional to assess what should be done about zero-worth coins.
Q: When do I use your Standard CSV? [08:42]
A: When you are trying to add data from an exchange or wallet that is not inherently supported by the system.
Q: If I transfer a coin from a wallet (whether it be purchased with fiat on Coinbase or mined) to another exchange and then sell it on this exchange, I will end up with an unmatched transaction. How do I reconcile it? Where do I enter this data in your software? [10:49]
A: This will not result in an unmatched trade, as long as you enter the source information showing the coin's acquisition as well as the data showing where/when/how it was disposed of. If the coin was purchased on Coinbase, transferred to a wallet, transferred to another exchange, and then sold on that exchange, you would only need to import your Coinbase data and import the data from the exchange that the coin was sold on. If the coin was mined, the mining income would need to be added to the Income Tab.
Q: What is the most common reason for an unmatched trade? [13:05]
A: The most common reason is a lack of data. Other common reasons include incorrectly entered data, incorrect times and dates, timezone errors, missing fork/income data, and one coin using multiple symbols.
Q: When is the appropriate time to use the "address" function? [24:05]
A: The address function is meant to pick up data that you aren't able to import any other way.
Q: Where do you get the price for crypto from? [25:20]
A: Prices typically come from the exchanges itself, when data is imported. If the software needs to do a price check for an asset, we use our own pricing data (going back to 2010) from various exchanges and sources. We use a weighted daily average from these sources.
Q: Why does Turbotax Online have a 250 line limit? [27:24]
A: We can't speak for TurboTax Online, but this is likely a limit set in place to ensure that their users can upload their data without an issue. TurboTax suggests aggregating the data, and so we offer aggregation options in response to this limit.
Q: I only ever invested 5,000 dollars, why does my report show a cost basis and proceeds in the hundreds of thousands?[31:35]
A: 1099-K forms, from exchanges, typically only show proceeds. Any time you sell or trade a coin, your proceeds go up by the fair market value of that coin, even if you traded the coin at a loss. It's important to remember that proceeds are not an indication of how much money you've profited trading cryptocurrency. The important figure, and the one that is taxed, is the capital gains (proceeds - cost basis).
Q: If I need a larger plan than I originally paid for, do I have to pay the whole price of the new plan? [34:30]
A: No. You only have to pay the difference between the plan you currently have and the plan you want to upgrade to. This can be done by going to Account -> Plan.
Q: I bought and held some crypto back in 2016 and 2017, but didn't sell them until 2018. Do I need to buy plans for all those years? [35:27]
A: It depends on if you need to report your taxes for 2016 and 2017. If yes, then you will need to purchase the plans for 2016 and 2017 in order to export the reports. If not, and you only bought crypto with fiat in those years, you can enter the data into 2016 and 2017 for free. You would also have to purchase 2016 and 2017 (as well as any year) if you did trade crypto for other crypto. All trading data from every year needs to be imported to properly calculate your gains.
Q: How do I account for forks? [37:45]
A: Forks can be added to the Income Tab. If the forked coin has a fair market value at the time of the acquisition, you can enter that value as income. If it does not, you can enter it as a zero-cost acquisition. Entering a fork as zero-cost is essentially deferring the tax on it until it is traded, in which case, you will incur the full amount of the proceeds as a capital gain.
Q: I bought some crypto back in 2017 but never withdrew any money, just traded some other alt-coins. Do I need to report anything? [39:53]
A: Buying crypto for fiat is not a taxable transaction, in itself. Once that crypto is disposed of for fiat, for another crypto, or for goods or services, then a taxable event occurs. If you only bought crypto for fiat, you do not need to report this, but you will need to keep the records of these purchases so that you have a cost basis when you do dispose of the crypto.
Q: Bittrex recently announced that they are closing down in New York state? Do I need to do anything? [42:20]
A: Download and export your data from them ASAP. In addition, it's always a good idea to consistently back up your trading records from all exchanges, in case they close down or you lose access.
Q: What are some of the new features coming to Bitcoin.Tax? [44:28]
A: Enhanced accuracy on coin pricing (from daily average to hourly average), new exchanges being supported, new CPA version (white-labeling), and calculations of maximum values on foreign exchanges for FATCA/FBAR reporting.
---
We hope that we've been able to answer some of the frequently asked questions from our customers. As always, if you need a hand, or have any questions, you can reach out to our excellent support team by visiting https://bitcoin.tax/support. Be sure to check out our regularly-updated Knowledge Base for even more answers to your questions.
Stay tuned for our next podcast series, where we will be interviewing key experts and businesses in the cryptocurrency space! If interested, shoot me a PM!
submitted by Sal-BitcoinTax to BitcoinMarkets [link] [comments]

An extensive guide for cashing out bitcoin and cryptocurrencies into private banks

Hey guys.
Merry Xmas !
I am coming back to you with a follow up post, as I have helped many people cash out this year and I have streamlined the process. After my original post, I received many requests to be more specific and provide more details. I thought that after the amazing rally we have been attending over the last few months, and the volatility of the last few days, it would be interesting to revisit more extensively.
The attitude of banks around crypto is changing slowly, but it is still a tough stance. For the first partial cash out I operated around a year ago for a client, it took me months to find a bank. They wouldn’t want to even consider the case and we had to knock at each and every door. Despite all my contacts it was very difficult back in the days. This has changed now, and banks have started to open their doors, but there is a process, a set of best practices and codes one has to follow.
I often get requests from crypto guys who are very privacy-oriented, and it takes me months to have them understand that I am bound by Swiss law on banking secrecy, and I am their ally in this onboarding process. It’s funny how I have to convince people that banks are legit, while on the other side, banks ask me to show that crypto millionaires are legit. I have a solid background in both banking and in crypto so I manage to make the bridge, but yeah sometimes it is tough to reconcile the two worlds. I am a crypto enthusiast myself and I can say that after years of work in the banking industry I have grown disillusioned towards banks as well, like many of you. Still an account in a Private bank is convenient and powerful. So let’s get started.
There are two different aspects to your onboarding in a Swiss Private bank, compliance-wise.
*The origin of your crypto wealth
*Your background (residence, citizenship and probity)
These two aspects must be documented in-depth.
How to document your crypto wealth. Each new crypto millionaire has a different story. I may detail a few fun stories later in this post, but at the end of the day, most of crypto rich I have met can be categorized within the following profiles: the miner, the early adopter, the trader, the corporate entity, the black market, the libertarian/OTC buyer. The real question is how you prove your wealth is legit.
1. Context around the original amount/investment Generally speaking, your first crypto purchase may not be documented. But the context around this acquisition can be. I have had many cases where the original amount was bought through Mtgox, and no proof of purchase could be provided, nor could be documented any Mtgox claim. That’s perfectly fine. At some point Mtgox amounted 70% of the bitcoin transactions globally, and people who bought there and managed to withdraw and keep hold of their bitcoins do not have any Mtgox claim. This is absolutely fine. However, if you can show me the record of a wire from your bank to Tisbane (Mtgox's parent company) it's a great way to start.
Otherwise, what I am trying to document here is the following: I need context. If you made your first purchase by saving from summer jobs, show me a payroll. Even if it was USD 2k. If you acquired your first bitcoins from mining, show me the bills of your mining equipment from 2012 or if it was through a pool mine, give me your slushpool account ref for instance. If you were given bitcoin against a service you charged, show me an invoice.
2. Tracking your wealth until today and making sense of it. What I have been doing over the last few months was basically educating compliance officers. Thanks God, the blockchain is a global digital ledger! I have been telling my auditors and compliance officers they have the best tool at their disposal to lead a proper investigation. Whether you like it or not, your wealth can be tracked, from address to address. You may have thought all along this was a bad feature, but I am telling you, if you want to cash out, in the context of Private Banking onboarding, tracking your wealth through the block explorer is a boon. We can see the inflows, outflows. We can see the age behind an address. An early adopter who bought 1000 BTC in 2010, and let his bitcoin behind one address and held thus far is legit, whether or not he has a proof of purchase to show. That’s just common sense. My job is to explain that to the banks in a language they understand.
Let’s have a look at a few examples and how to document the few profiles I mentioned earlier.
The trader. I love traders. These are easy cases. I have a ton of respect for them. Being a trader myself in investment banks for a decade earlier in my career has taught me that controlling one’s emotions and having the discipline to impose oneself some proper risk management system is really really hard. Further, being able to avoid the exchange bankruptcy and hacks throughout crypto history is outstanding. It shows real survival instinct, or just plain blissed ignorance. In any cases traders at exchange are easy cases to corroborate since their whole track record is potentially available. Some traders I have met have automated their trading and have shown me more than 500k trades done over the span of 4 years. Obviously in this kind of scenario I don’t show everything to the bank to avoid information overload, and prefer to do some snacking here and there. My strategy is to show the early trades, the most profitable ones, explain the trading strategy and (partially expose) the situation as of now with id pages of the exchanges and current balance. Many traders have become insensitive to the risk of parking their crypto at exchange as they want to be able to trade or to grasp an occasion any minute, so they generally do not secure a substantial portion on the blockchain which tends to make me very nervous.
The early adopter. Provided that he has not mixed his coin, the early adopter or “hodler” is not a difficult case either. Who cares how you bought your first 10k btc if you bought them below 3$ ? Even if you do not have a purchase proof, I would generally manage to find ways. We just have to corroborate the original 30’000 USD investment in this case. I mainly focus on three things here:
*proof of early adoption I have managed to educate some banks on a few evidences specifically related to crypto markets. For instance with me, an old bitcointalk account can serve as a proof of early adoption. Even an old reddit post from a few years ago where you say how much you despise this Ripple premined scam can prove to be a treasure readily available to show you were early.
*story telling Compliance officers like to know when, why and how. They are human being looking for simple answers to simple questions and they don’t want like to be played fool. Telling the truth, even without a proof can do wonders, and even though bluffing might still work because banks don’t fully understand bitcoin yet, it is a risky strategy that is less and less likely to pay off as they are getting more sophisticated by the day.
*micro transaction from an old address you control This is the killer feature. Send a $20 worth transaction from an old address to my company wallet and to one of my partner bank’s wallet and you are all set ! This is gold and considered a very solid piece of evidence. You can also do a microtransaction to your own wallet, but banks generally prefer transfer to their own wallet. Patience with them please. they are still learning.
*signature message Why do a micro transaction when you can sign a message and avoid potentially tainting your coins ?
*ICO millionaire Some clients made their wealth participating in ETH crowdsale or IOTA ICO. They were very easy to deal with obviously and the account opening was very smooth since we could evidence the GENESIS TxHash flow.
The miner Not so easy to proof the wealth is legit in that case. Most early miners never took screenshot of the blocks on bitcoin core, nor did they note down the block number of each block they mined. Until the the Slashdot article from August 2010 anyone could mine on his laptop, let his computer run overnight and wake up to a freshly minted block containing 50 bitcoins back in the days. Not many people were structured enough to store and secure these coins, avoid malwares while syncing the blockchain continuously, let alone document the mined blocks in the process. What was 50 BTC worth really for the early miners ? dust of dollars, games and magic cards… Even miners post 2010 are generally difficult to deal with in terms of compliance onboarding. Many pool mining are long dead. Deepbit is down for instance and the founders are MIA. So my strategy to proof mining activity is as follow:
*Focusing on IT background whenever possible. An IT background does help a lot to bring some substance to the fact you had the technical ability to operate a mining rig.
*Showing mining equipment receipts. If you mined on your own you must have bought the hardware to do so. For instance mining equipment receipts from butterfly lab from 2012-2013 could help document your case. Similarly, high electricity bill from your household on a consistent basis back in the day could help. I have already unlocked a tricky case in the past with such documents when the bank was doubtful.
*Wallet.dat files with block mining transactions from 2011 thereafter This obviously is a fantastic piece of evidence for both you and me if you have an old wallet and if you control an address that received original mined blocks, (even if the wallet is now empty). I will make sure compliance officers understand what it means, and as for the early adopter, you can prove your control over these wallet through a microtransaction. With these kind of addresses, I can show on the block explorer the mined block rewards hitting at regular time interval, and I can even spot when difficulty level increased or when halvening process happened.
*Poolmining account. Here again I have educated my partner bank to understand that a slush account opened in 2013 or an OnionTip presence was enough to corroborate mining activity. The block explorer then helps me to do the bridge with your current wallet.
*Describing your set up and putting it in context In the history of mining we had CPU, GPU, FPG and ASICs mining. I will describe your technical set up and explain why and how your set up was competitive at that time.
The corporate entity Remember 2012 when we were all convinced bitcoin would take over the world, and soon everyone would pay his coffee in bitcoin? How naïve we were to think transaction fees would remain low forever. I don’t blame bitcoin cash supporters; I once shared this dream as well. Remember when we thought global adoption was right around the corner and some brick and mortar would soon accept bitcoin transaction as a common mean of payment? Well, some shop actually did accept payment and held. I had a few cases as such of shops holders, who made it to the multi million mark holding and had invoices or receipts to proof the transactions. If you are organized enough to keep a record for these trades and are willing to cooperate for the documentation, you are making your life easy. The digital advertising business is also a big market for the bitcoin industry, and affiliates partner compensated in btc are common. It is good to show an invoice, it is better to show a contract. If you do not have a contract (which is common since all advertising deals are about ticking a check box on the website to accept terms and conditions), there are ways around that. If you are in that case, pm me.
The black market Sorry guys, I can’t do much for you officially. Not that I am judging you. I am a libertarian myself. It’s just already very difficult to onboard legit btc adopters, so the black market is a market I cannot afford to consider. My company is regulated so KYC and compliance are key for me if I want to stay in business. Behind each case I push forward I am risking the credibility and reputation I have built over the years. So I am sorry guys I am not risking it to make an extra buck. Your best hope is that crypto will eventually take over the world and you won’t need to cash out anyway. Or go find a Lithuanian bank that is light on compliance and cooperative.
The OTC buyer and the libertarian. Generally a very difficult case. If you bought your stack during your journey in Japan 5 years ago to a guy you never met again; or if you accumulated on https://localbitcoins.com/ and kept no record or lost your account, it is going to be difficult. Not impossible but difficult. We will try to build a case with everything else we have, and I may be able to onboard you. However I am risking a lot here so I need to be 100% confident you are legit, before I defend you. Come & see me in Geneva, and we will talk. I will run forensic services like elliptic, chainalysis, or scorechain on an extract of your wallet. If this scan does not raise too many red flags, then maybe we can work together ! If you mixed your coins all along your crypto history, and shredded your seeds because you were paranoid, or if you made your wealth mining professionally monero over the last 3 years but never opened an account at an exchange. ¯_(ツ)_/¯ I am not a magician and don’t get me wrong, I love monero, it’s not the point.
Cashing out ICOs Private companies or foundations who have ran an ICO generally have a very hard time opening a bank account. The few banks that accept such projects would generally look at 4 criteria:
*Seriousness of the project Extensive study of the whitepaper to limit the reputation risk
*AML of the onboarding process ICOs 1.0 have no chance basically if a background check of the investors has not been conducted
*Structure of the moral entity List of signatories, certificate of incumbency, work contract, premises...
*Fiscal conformity Did the company informed the authorities and seek a fiscal ruling.
For the record, I am not into the tax avoidance business, so people come to me with a set up and I see if I can make it work within the legal framework imposed to me.
First, stop thinking Switzerland is a “offshore heaven” Swiss banks have made deals with many governments for the exchange of fiscal information. If you are a French citizen, resident in France and want to open an account in a Private Bank in Switzerland to cash out your bitcoins, you will get slaughtered (>60%). There are ways around that, and I could refer you to good tax specialists for fiscal optimization, but I cannot organize it myself. It would be illegal for me. Swiss private banks makes it easy for you to keep a good your relation with your retail bank and continue paying your bills without headaches. They are integrated to SEPA, provide ebanking and credit cards.
For information, these are the kind of set up some of my clients came up with. It’s all legal; obviously I do not onboard clients that are not tax compliant. Further disclaimer: I did not contribute myself to these set up. Do not ask me to organize it for you. I won’t.
EU tricks
Swiss lump sum taxation Foreign nationals resident in Switzerland can be taxed on a lump-sum basis if they are not gainfully employed in our country. Under the lump-sum tax regime, foreign nationals taking residence in Switzerland may choose to pay an expense-based tax instead of ordinary income and wealth tax. Attractive cantons for the lump sum taxation are Zug, Vaud, Valais, Grisons, Lucerne and Berne. To make it short, you will be paying somewhere between 200 and 400k a year and all expenses will be deductible.
Switzerland has adopted a very friendly attitude towards crypto currency in general. There is a whole crypto valley in Zug now. 30% of ICOs are operated in Switzerland. The reason is that Switzerland has thrived for centuries on banking secrecy, and today with FATCA and exchange of fiscal info with EU, banking secrecy is dead. Regulators in Switzerland have understood that digital ledger technologies were a way to roll over this competitive advantage for the generations to come. Switzerland does not tax capital gains on crypto profits. The Finma has a very pragmatic approach. They have issued guidance- updated guidelines here. They let the business get organized and operate their analysis on a case per case basis. Only after getting a deep understanding of the market will they issue a global fintech license in 2019. This approach is much more realistic than legislations which try to regulate everything beforehand.
Italy new tax exemption. It’s a brand new fiscal exemption. Go to Aoste, get residency and you could be taxed a 100k/year for 10years. Yes, really.
Portugal What’s crazy in Europe is the lack of fiscal harmonization. Even if no one in Brussels dares admit it, every other country is doing fiscal dumping. Portugal is such a country and has proved very friendly fiscally speaking. I personally have a hard time trusting Europe. I have witnessed what happened in Greece over the last few years. Some of our ultra high net worth clients got stuck with capital controls. I mean no way you got out of crypto to have your funds confiscated at the next financial crisis! Anyway. FYI
Malta Generally speaking, if you get a residence somewhere you have to live there for a certain period of time. Being stuck in Italy is no big deal with Schengen Agreement, but in Malta it is a different story. In Malta, the ordinary residence scheme is more attractive than the HNWI residence scheme. Being an individual, you can hold a residence permit under this scheme and pay zero income tax in Malta in a completely legal way.
Monaco Not suitable for French citizens, but for other Ultra High Net worth individual, Monaco is worth considering. You need an account at a local bank as a proof of fortune, and this account generally has to be seeded with at least EUR500k. You also need a proof of residence. I do mean UHNI because if you don’t cash out minimum 30m it’s not interesting. Everything is expensive in Monaco. Real Estate is EUR 50k per square meter. A breakfast at Monte Carlo Bay hotel is 70 EUR. Monaco is sunny but sometimes it feels like a golden jail. Do you really want that for your kids?
Dubaï
  1. Set up a company in Dubaï, get your resident card.
  2. Spend one day every 6 month there
  3. ???
  4. Be tax free
US tricks Some Private banks in Geneva do have the license to manage the assets of US persons and U.S citizens. However, do not think it is a way to avoid paying taxes in the US. Opening an account at an authorized Swiss Private banks is literally the same tax-wise as opening an account at Fidelity or at Bank of America in the US. The only difference is that you will avoid all the horror stories. Horror stories are all real by the way. In Switzerland, if you build a decent case and answer all the questions and corroborate your case in depth, you will manage to convince compliance officers beforehand. When the money eventually hits your account, it is actually available and not frozen.
The IRS and FATCA require to file FBAR if an offshore account is open. However FBAR is a reporting requirement and does not have taxes related to holding an account outside the US. The taxes would be the same if the account was in the US. However penalties for non compliance with FBAR are very large. The tax liability management is actually performed through the management of the assets ( for exemple by maximizing long term capital gains and minimizing short term gains).
The case for Porto Rico. Full disclaimer here. I am not encouraging this. Have not collaborated on such tax avoidance schemes. if you are interested I strongly encourage you to seek a tax advisor and get a legal opinion. I am not responsible for anything written below. I am not going to say much because I am so afraid of uncle Sam that I prefer to humbly pass the hot potato to pwc From here all it takes is a good advisor and some creativity to be tax free on your crypto wealth if you are a US person apparently. Please, please please don’t ask me more. And read the disclaimer again.
Trust tricks Generally speaking I do not accept fringe fiscal situation because it puts me in a difficult situation to the banks I work with, and it is already difficult enough to defend a legit crypto case. Trust might be a way to optimize your fiscal situation. Belize. Bahamas. Seychelles. Panama, You name it. At the end of the day, what matters for Swiss Banks are the beneficial owner and the settlor. Get a legal opinion, get it done, and when you eventually knock at a private bank’s door, don’t say it was for fiscal avoidance you stupid ! You will get the door smashed upon you. Be smarter. It will work. My advice is just to have it done by a great tax specialist lawyer, even if it costs you some money, as the entity itself needs to be structured in a professional way. Remember that with trust you are dispossessing yourself off your wealth. Not something to be taken lightly.
“Anonymous” cash out. Right. I think I am not going into this topic, neither expose the ways to get it done. Pm me for details. I already feel a bit uncomfortable with all the info I have provided. I am just going to mention many people fear that crypto exchange might become reporting entities soon, and rightly so. This might happen anyday. You have been warned. FYI, this only works for non-US and large cash out.
The difference between traders an investors. Danmark, Holland and Germany all make a huge difference if you are a passive investor or if you are a trader. ICO is considered investing for instance and is not taxed, while trading might be considered as income and charged aggressively. I would try my best to protect you and put a focus on your investor profile whenever possible, so you don't have to pay 52% tax if you do not have to :D
Full cash out or partial cash out? People who have been sitting on crypto for long have grown an emotional and irrational link with their coins. They come to me and say, look, I have 50m in crypto but I would like to cash out 500k only. So first let me tell you that as a wealth manager my advice to you is to take some off the table. Doing a partial cash out is absolutely fine. The market is bullish. We are witnessing a redistribution of wealth at a global scale. Bitcoin is the real #occupywallstreet, and every one will discuss crypto at Xmas eve which will make the market even more supportive beginning 2018, especially with all hedge funds entering the scene. If you want to stay exposed to bitcoin and altcoins, and believe these techs will change the world, it’s just natural you want to keep some coins. In the meantime, if you have lived off pizzas over the last years, and have the means to now buy yourself an nice house and have an account at a private bank, then f***ing do it mate ! Buy physical gold with this account, buy real estate, have some cash at hands. Even though US dollar is worthless to your eyes, it’s good and convenient to have some. Also remember your wife deserves it ! And if you have no wife yet and you are socially awkward like the rest of us, then maybe cashing out partially will help your situation ;)
What the Private Banks expect. Joke aside, it is important you understand something. If you come around in Zurich to open a bank account and partially cash out, just don’t expect Private Banks will make an exception for you if you are small. You can’t ask them to facilitate your cash out, buy a 1m apartment with the proceeds of the sale, and not leave anything on your current account. It won’t work. Sadly, under 5m you are considered small in private banking. The bank is ok to let you open an account, provided that your kyc and compliance file are validated, but they will also want you to become a client and leave some money there to invest. This might me despicable, but I am just explaining you their rules. If you want to cash out, you should sell enough to be comfortable and have some left. Also expect the account opening to last at least 3-4 week if everything goes well. You can't just open an account overnight.
The cash out logistics. Cashing out 1m USD a day in bitcoin or more is not so hard.
Let me just tell you this: Even if you get a Tier 4 account with Kraken and ask Alejandro there to raise your limit over $100k per day, Even if you have a bitfinex account and you are willing to expose your wealth there, Even if you have managed to pass all the crazy due diligence at Bitstamp,
The amount should be fractioned to avoid risking your full wealth on exchange and getting slaughtered on the price by trading big quantities. Cashing out involves significant risks at all time. There is a security risk of compromising your keys, a counterparty risk, a fat finger risk. Let it be done by professionals. It is worth every single penny.
Most importantly, there is a major difference between trading on an exchange and trading OTC. Even though it’s not publicly disclosed some exchange like Kraken do have OTC desks. Trading on an exchange for a large amount will weight on the prices. Bitcoin is a thin market. In my opinion over 30% of the coins are lost in translation forever. Selling $10m on an exchange in a day can weight on the prices more than you’d think. And if you trade on a exchange, everything is shown on record, and you might wipe out the prices because on exchanges like bitstamp or kraken ultimately your counterparties are retail investors and the market depth is not huge. It is a bit better on Bitfinex. It is way better to trade OTC. Accessing the institutional OTC market is not easy, and that is also the reason why you should ask a regulated financial intermediary if we are talking about huge amounts.
Last point, always chose EUR as opposed to USD. EU correspondent banks won’t generally block institutional amounts. However we had the cases of USD funds frozen or delayed by weeks.
Most well-known OTC desks are Cumberlandmining (ask for Lucas), Genesis (ask for Martin), Bitcoin Suisse AG (ask for Niklas), circletrade, B2C2, or Altcoinomy (ask for Olivier)
Very very large whales can also set up escrow accounts for massive block trades. This world, where blocks over 30k BTC are exchanged between 2 parties would deserve a reddit thread of its own. Crazyness all around.
Your options: DIY or going through a regulated financial intermediary.
Execution trading is a job in itself. You have to be patient, be careful not to wipe out the order book and place limit orders, monitor the market intraday for spikes or opportunities. At big levels, for a large cash out that may take weeks, these kind of details will save you hundred thousands of dollars. I understand crypto holders are suspicious and may prefer to do it by themselves, but there are regulated entities who now offer the services. Besides, being a crypto millionaire is not a guarantee you will get institutional daily withdrawal limits at exchange. You might, but it will take you another round of KYC with them, and surprisingly this round might be even more aggressive that the ones at Private banks since exchange have gone under intense scrutiny by regulators lately.
The fees for cashing out through a regulated financial intermediary to help you with your cash out should be around 1-2% flat on the nominal, not more. And for this price you should get the full package: execution/monitoring of the trades AND onboarding in a private bank. If you are asked more, you are being abused.
Of course, you also have the option to do it yourself. It is a way more tedious and risky process. Compliance with the exchange, compliance with the private bank, trading BTC/fiat, monitoring the transfers…You will save some money but it will take you some time and stress. Further, if you approach a private bank directly, it will trigger a series of red flag to the banks. As I said in my previous post, they call a direct approach a “walk-in”. They will be more suspicious than if you were introduced by someone and won’t hesitate to show you high fees and load your portfolio with in-house products that earn more money to the banks than to you. Remember also most banks still do not understand crypto so you will have a lot of explanations to provide and you will have to start form scratch with them!
The paradox of crypto millionaires Most of my clients who made their wealth through crypto all took massive amount of risks to end up where they are. However, most of them want their bank account to be managed with a low volatility fixed income capital preservation risk profile. This is a paradox I have a hard time to explain and I think it is mainly due to the fact that most are distrustful towards banks and financial markets in general. Many clients who have sold their crypto also have a cash-out blues in the first few months. This is a classic situation. The emotions involved in hodling for so long, the relief that everything has eventually gone well, the life-changing dynamics, the difficulties to find a new motivation in life…All these elements may trigger a post cash-out depression. It is another paradox of the crypto rich who has every card in his hand to be happy, but often feel a bit sad and lonely. Sometimes, even though it’s not my job, I had to do some psychological support. A lot of clients have also become my friends, because we have the same age and went through the same “ordeal”. First world problem I know… Remember, cashing out is not the end. It’s actually the beginning. Don’t look back, don’t regret. Cash out partially, because it does not make sense to cash out in full, regret it and want back in. relax.
The race to cash out crypto billionaire and the concept of late exiter. The Winklevoss brothers are obviously the first of a series. There will be crypto billionaires. Many of them. At a certain level you can have a whole family office working for you to manage your assets and take care of your needs . However, let me tell you it’s is not because you made it so big that you should think you are a genius and know everything better than anyone. You should hire professionals to help you. Managing assets require some education around the investment vehicles and risk management strategies. Sorry guys but with all the respect I have for wallstreebet, AMD and YOLO stock picking, some discipline is necessary. The investors who have made money through crypto are generally early adopters. However I have started to see another profile popping up. They are not early adopters. They are late exiters. It is another way but just as efficient. Last week I met the first crypto millionaire I know who first bough bitcoin over 1000$. 55k invested at the beginning of this year. Late adopter & late exiter is a route that can lead to the million.
Last remarks. I know banks, bankers, and FIAT currencies are so last century. I know some of you despise them and would like to have them burn to the ground. With compliance officers taking over the business, I would like to start the fire myself sometimes. I hope this extensive guide has helped some of you. I am around if you need more details. I love my job despite all my frustration towards the banking industry because it makes me meet interesting people on a daily basis. I am a crypto enthusiast myself, and I do think this tech is here to stay and will change the world. Banks will have to adapt big time. Things have started to change already; they understand the threat is real. I can feel the generational gap in Geneva, with all these old bankers who don’t get what’s going on. They glaze at the bitcoin chart on CNBC in disbelief and they start to get it. This bitcoin thing is not a joke. Deep inside, as an early adopter who also intends to be a late exiter, as a libertarian myself, it makes me smile with satisfaction.
Cheers. @swisspb on telegram
submitted by Swissprivatebanker to Bitcoin [link] [comments]

BitcoinTaxes Podcast: Crypto Audits w/ Alex Kugelman

BitcoinTaxes Podcast Link
TLDR; Alex Kugelman, a tax controversy lawer, discusses crypto audits and how to avoid them.
Highlights:
IRS audits are a real possibility for anyone who has traded cryptocurrencies. Our guest today is Alex Kugelman, a tax controversy lawyer with an abundance of knowledge concerning cryptocurrency audits. He's here to share his expertise on IRS cryptocurrency audits, including risk reduction strategies as well as enforcement predictions and misconceptions.
Alex Kugelman specializes in IRS audits. His experience includes four years of Federal government court experience at the U.S. Tax Court and a U.S. District Court. [00:40]
Alex: I'm an attorney out in California. I clerked for a US District Court judge and as well as the United States Tax Court. I've been in private practice exclusively doing tax controversy work for the past five years or so. I kind of got involved with crypto towards the end of 2016. I tended to represent clients mainly with compliance & disclosure issues with respect to cryptocurrency. I just really like it. Really interesting area.
The Coinbase summons in 2018 played a major role in Alex's interest in crypto audits. [01:19]
Alex: What started me into the crypto space was when the IRS first issued summons for Coinbase. We started getting some interesting calls regarding that. And at that time I thought to myself, this might be an interesting area. So I started following the actual summons enforcement proceeding at the District Court here in San Francisco - from there kind of worked with people under different types of compliance, including international disclosures. Now we're starting to see some of the first cryptocurrency audits come through.
First, let's get a brief rundown of how IRS audits work. [02:00]
Alex: It is important to understand the IRS as an administrative agency and all different layers of it. So when it comes to an audit the term that the IRS uses is an examination and there's three basic levels.
The first is a correspondence exam. That's where you get a letter that says, dear taxpayer, so-and-so reported that you had $100 of interest income that wasn't on your tax return - we're going to increase your tax. If you want to challenge that, you can. And that's basically termed an under reporter notice. That's probably not going to be a cryptocurrency audit if you get that notice.
The next one is an office exam. That is someone in the local IRS office sending you a letter that says, we have selected a certain tax return for audit and we're going to look at these issues. We'd like you to call us to schedule an appointment. That's going to be usually a tax compliance officer that is doing that.
The third and probably the most serious level of exam is a field examination. That's also going to be a local IRS representative, typically a revenue agent. There, the revenue agent may come to your work or ask come to your work or business to kind of conduct the audit.
All three of those are going to start the same: a letter that's sent to you at your most recent address provided to the IRS.
Cryptocurrency audits follow a similar protocol. [05:40]
Alex: I think it's likely that most crypto audits are going to start with one of two things happening. One is that there is information from the Coinbase summons that is inconsistent with what was on a taxpayer's tax return. I think for someone who's involved with that issue, they're going to have a good sense of that one because they should've gotten an email notice from Coinbase.
Or two, the audit notice is going to identify older tax years - 2013, 2014 or 2015 because those are the years that the information related to.
Another reason I think people will get audited is going to be because information on the return is incomplete, in the sense that the taxpayer or the cryptocurrency owner reports some transactions, without enough detail to figure out the actual cost basis.
Does reporting your data in an aggregated fashion increase your chances of being audited? [06:45]
Alex: I mean one - to the extent that there's going to be a lot of taxpayers - a lot of people use TurboTax, right? If that's the way TurboTax is preparing all of those returns, it would seem to me you're kind of in a herd of people like that. And at least it's consistent with what a lot of people are doing. The second part of that is going to be at least those people who have prepare the returns in that manner, they're going to, or should have, the underlying data. So even if it's an aggregate reporting of each asset class as opposed to each individual trade, if there ever were questions then you're going to have your CSV files, you're going to have your Bitcoin.tax exports, you're going to have all the information that you need to back that up.
Alex is an advocate of over-reporting your information to the IRS. [09:30]
Alex: I'm a big proponent of over-reporting - and I don't mean paying too much tax. I just mean including too much information. Because at some point there's kind of two ways that your returned can be flagged: a computer flags the return for some reason or there's a special unit or a person who actually flags it. At the end of the day, a human being will be looking at that return and deciding whether it actually is going to go all the way through to an audit. I want them to completely understand what's being reported, why it's been reported, and if there's too much information, that's fine - it's less likely that someone's going to have more questions.
A crypto audit is very likely to be a field exam - and it's important to hire a good rep. [11:00]
Alex: It's very likely going to be a field exam, which means you're going to have a revenue agent - and those are kind of the best of the best auditors for an IRS audit. And remember - an IRS audit is a civil matter. It is not criminal at this point. Again, it's unlikely that it will become criminal. It is, however, the highest level of audit you're going to get.
If you're going to hire a representative, which you have every right to do, you should contact that person, let them know what's going on and probably have them interface with the auditor. You should receive, as part of the opening notice or letter, the information document request - which is identifying what things to bring for the auditor. Also, it'll tip to what topics might be important. For example the typical things you're going to see will be bank statements, financial or asset account statements, which I view as requesting exchange statements or exchange CSV files. Any documents that show the cost basis for your cryptocurrency trades.
Audits are more art than science. [13:35]
Alex: The auditor has a fair amount of power. So if you play real hardball - that's not going to prevent the auditor from expanding to other years. So when you get that audit notice ,and let's say that you're going to deal with this yourself, the first thing you want to kind of figure out is what are the areas that I wouldn't want to go into, and what are the areas that I don't have good records? That will help guide the way to respond or what information to pull together.
The reality is, and let's just be honest here - for most people reporting cryptocurrency gains, they have all of the information. The IRS does not have much. They might have some records from Coinbase, but it's not as if they have a treasure trove of third party data.
The burden is really going to be, in every audit, on the taxpayer to prove their tax return is correct.
It's difficult to say how lenient the IRS will be regarding past years. [15:35]
Alex: I think the way that I would look at it is that maybe the standard of of records required to really substantiate older years might be a little bit lower for older years as opposed to now because it's different now. There's a lot better information provided by some of the exchanges. There's a lot more software out there to help you, especially for people who are newer to crypto. You should have access to all your bank records. You should still have a lot of emails, reflecting on-ramping off-ramping, or other purchases. You should be able to kind of pull this all together.
I can understand when we have clients who come in and are early adopters and they're missing chunks of information. So I do think that in those types of circumstances, yes, I think there would be a little bit of leniency. But I don't think if you're asking, hey, I reported my gains in 2017 but I never really did it 14, 15 or 16 - I don't think that's going to be viewed very favorably.
It is possible to substantiate your data without all of your records. [19:00]
Alex: I think the first thing is, I mean, outside of cryptocurrency and just generally in audits, how many people have complete records to support everything on their tax return from three years ago? Right? It's just not the reality.
The best source of information in a lot of these cryptocurrency clients are the clients themselves. They kind of know what they did and they can remember. There's some who take good notes and other people don't, but as you go through and ask people: what exchanges have you've been on, what type of coins, if you bought any ICOs, have you ever sold for actual US cash, and have you ever bought goods or services? As you talk through things people tend to recall what happened. We use that information and we cross check that against bank statements, as well as CSV files, to pick out what those transactions look like.
Most people have some sort of records, at least reflecting the transfer in and the transfer back out of that exchange. So you can use historical data and historical pricing information to essentially estimate what that transaction would have been. And then what we do is we provide a written statement summary of what we're doing and why we're doing it.
The other big one that we see all the time - and anybody listening to this, please hear this, do not trade for your friends on your exchange accounts - because that type of commingling causes such major problems. Essentially you are walking into those taxable gains just because you're allowing someone access to the exchange to make sales.
If you need representation for an audit, get representation. [23:00]
Alex: My general rule is that I think experienced representatives are really important. I probably would not hire the CPA that prepared my return unless they were: one, experienced with being a representative in audits. And two, you felt comfortable that they weren't going to go in there with a conflict of interest. But I do think if you're worried about going into audit - hiring a skilled, and experienced rep is really, really important.
If they're experienced with this, they should understand the appropriate ethical standards and go in there and essentially help resolve portions of the audit and move it to a resolution that you can deal with.
Taxpayers actually have a lot of leverage in an audit. And that sounds crazy to say, but there is a lot of truth to that. And so as you're kind of working through the audit itself, you want to make sure that you're not just agreeing to something to be done with it. You're not agreeing to something just because you think that you'll get in more trouble or get a worse result otherwise.
There are important risk-reduction strategies you can utilize to avoid a crypto audit. [28:15]
Alex: The first thing that you really want to do, is just assess; for those of you that are really worried about an audit - just assess what it is you've actually done over the years. When did you start trading, what exchanges were you on, do you have records that reflect on-ramping and off-ramping? And that's going to be your bank account statements. Do you know where you've been, what exchanges you've been on?
For foreign exchanges, there may not be as much of that AML & KYC compliance, but I really believe that you do have reporting requirements under FATCA for FBAR and something called an 8938, which if you listen to the podcast with Tyson, he kind of explains what that is. But it's basically if you have ownership of a foreign bank account or asset, you have certain reporting requirements, whether you've had income or not.
You want to make sure you at least track when you've actually exchanged crypto for cash or vice versa. That's partly because that's one of those areas where when people can get in trouble with some sort of federal investigators - because those types of transactions can be potentially considered money laundering.
For those who believe that they've used like-kind exchange rules to defer taxable gains -you should look on your tax returns to see if you filed the form 8824, which is where like kind exchanges are actually reported. That kind of goes back to the over reporting issue I was talking about before. I think that if you didn't report the actual trades that you're taking like-kind treatment for in past years, I don't know that you've actually taken like-kind treatment to be frank with you. I think, objectively, that might be viewed as just not reporting certain transactions