BitCoin

Bitcoin is down $2K, at $29.5K, since 5 hours ago when I started my previous posting.

An hour later it's up $1K, at $30.5K.

Quote: ChumpChange

Bitcoin is down $2K, at $29.5K, since 5 hours ago when I started my previous posting.

That just means everything is on sale right now.

Buy the dip!
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Did I ruin my life by trading crypto? (2 years ago, reddit) - https://www.reddit.com/r/tax/comments/9tcnu8/did_i_ruin_my_life_by_trading_crypto/

I feel like I ruined my life by dabbling into cryptos as a clueless college kid.

I first caught wind of it when a buddy of mine said he was going all in on ETH in May of last year. I said hell with it, signed up on Coinbase and threw $5000 into crypto. Mind you this is like half of my life savings, but in the grand scheme of things it's not too much to lose.

Well, I went down the rabbit hole and struck gold a few times, hitting 10x's on multiple alt coins... I brought my 5k initial all the way up to a $880k portfolio in December 2017.

Now I should have listened. I should have cashed out, yes. Once I hit $1 million I was going to... I would have been set. And then, JUST like that the market tanks going into the new year.

I didn't know anything about taxes so I never bothered to set aside anything. They really never do teach this stuff. I gambled in more than a few bad ICOs to start 2018, had some money in coins that absolutely plummeted with no chance of recovering, etc. Today my portfolio sits at $125k, a far cry from my $880k . My estimated tax liability for 2017 is about 400k (live in California).

I'm a student and I work part time making $12/hr as a retail associate at Barnes & Noble. I haven't paid any taxes or filed any returns for 2017. I wanted to but I have no idea where to begin.

Here's the 1099-K Coinbase reported this spring: https://imgur.com/a/cpPwR9u

Is my life over?

tl;dr: poor college kid invests 5k in crypto last year, ends up with 875k short term gains for 2017, lost most of it in 2018, hasn't paid taxes or filed any returns yet

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EDIT: Yes, these were crypto-to-crypto trades (i.e. Bitcoin for Ethereum, Ethereum for Litecoin). These are considered taxable events from what I understand. At no point did I ever cash out to fiat and transfer any USD into my bank accounts from these tradings.

EDIT 2 (11/2/2018): Thank you all so much for the support and advice. I realize I can't reply to all of you but I am definitely reading each and every one of your comments. I've scheduled a consultation with a tax attorney that specializes in cryptocurrency and alternative investments. I appreciate it all very much, these last few months have been mentally trying.

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1099K amount is not your profits, it's the sum of sales you made, so it's NOT the amount you need to pay tax on. You need to subtract the sum of buys from it.

There is a site that tons of people used to file their 2017 crypto trading taxes: https://Bitcoin.Tax - you connect it to the exchanges (with read only token) and it calculates everything for you. I've had some friends who got 1099k work over $1m on it - you can imagine their panic. But after calculating sales-buys that $1m would convert into $10k profit or so which you part income tax on.

So don't panic, and either calculate your gains magically or using something like the aforementioned site. Their service is like $30, well worth it.

Disclaimer: obviously, none of the above is a financial advice.

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Crypto Taxes 101: The Complete Step-by-Step Crypto Tax Guide https://www.youtube.com/watch?v=r4pN22laLTI
The Ultimate Crypto Tax Guide (2020) https://cryptotrader.tax/blog/the-traders-guide-to-cryptocurrency-taxes

So if you're going to do trades of $20K or more, just do less than 200 of them in a year, (and hold on to your coins for more than a year).

Mdawg just spouts and sometimes he does his research well enough to not sound ridiculous and then there is this thread where his research sucks and it is clear he doesn’t own any btc or an inconsequential amount if he does. I.e. less than 10k

Quote: PokerGrinder

Mdawg just spouts and sometimes he does his research well enough to not sound ridiculous and then there is this thread where his research sucks and it is clear he doesn’t own any btc or an inconsequential amount if he does. I.e. less than 10k

It would stand to reason, less than 5K.

You guys are funny. Not just because you're so wrong, but because the sum of the two figures you mention is exactly what a client was supposed to send me yesterday. He didn't send it until last night though, and now he's saying that because of price fluctuations he didn't have enough and sent .45 instead of .49. Usually I insist on that the value of the crypto at the instant sent must equal what is owed, but in this instance I might have to just eat the nine hundred dollars or so. I'm not selling it or withdrawing it anytime soon. It's back to being worth closer to 15K now anyway, but at the time he sent it I think it was worth only around 14175. Still light no matter what though.

This wallet used to indicate exactly what the BTC was worth at the time of transfer, but I don't seem to notice that feature any longer.

So if you two jolly characters think I've been accumulating and hodling BTC for a decade and have no more than fifteen grand worth, you're in your own world. Which you two are anyway. Have fun together.

And now the second client needs to send 4K I created the link for him. Yes Bluejay, I agree in this instance, it would have been better to use more than one wallet. But I transferred most everything out of coinbase last year and now it's all in this offshore wallet. As far as cold storage non hosted wallets I have never tried one of those, but I couldn't get any interest that way, right? Part of why I swallowed and accepted the KYC verification is that I had to do it to be eligible for interest.

At end of 2017, this overseas client sent me 10 bitcoin, for a $95,000. payment when it was 9500. Actually I think it was $98,000. when it was 9800., I have to look back.
Then when it got to almost double that, he kept saying that I should do more work for him because it was worth so much more now. I told him - I'm not selling it. He said, Okay. He was flabbergasted that I still had it and hadn't sold. I was feeling silly when it went down to 3000, but, so what, I've been hodling so long and most of my coins date from when it was very low. HODL ALL THE WAY. You can't half a** hodl. Either you hodl or you don't. You're not a hodler PokerGrinder, and AxelWolf, you certainly aren't one.

Quote: MDawg

At end of 2017, this overseas client sent me 10 bitcoin, for a $95,000. payment when it was 9500. Actually I think it was $98,000. when it was 9800., I have to look back.
Then when it got to almost double that, he kept saying that I should do more work for him because it was worth so much more now. I told him - I'm not selling it. He said, Okay. He was flabbergasted that I still had it and hadn't sold. I was feeling silly when it went down to 3000, but, so what, I've been hodling so long and most of my coins date from when it was very low. HODL ALL THE WAY. You can't half a** hodl. Either you hodl or you don't. You're not a hodler PokerGrinder, and AxelWolf, you certainly aren't one.

How ridiculous that a client would pay a bill, then somehow later think that he was entitled to more services because the underlying currency had a change in value related to the dollar? And how would a client know whether you liquidated the BTC immediately or not? I'm guessing most firms do NOT want the variance and just want the money! And allow BTC payments because that is how a customer wants to pay!

I assume for tax purposes you must declare the income of $98k, and if it happens to go up you have a capital gain of the value over $98k, but ONLY when you sell the BTC. So you may have $300k in BTC from that original $98k, but you have a tax liability of $40k or so(I think) if you liquidate. (I need such problems!)

As far as a client's paying me, that's straightforward. Whatever the realized gain will be when that day comes, will have to deal with it then. Probably by then the government will have a way of finding out. Already coinbase from what I understand was notifying the US government of higher dollar crypto sale transactions, as I recall the figure was $20,000. or higher. That didn't apply to me as I have never bought or sold anything within coinbase, all I did was receive in my coinbase for a few years, then transfer the few bitcoin that were in there to my overseas hosted wallet, which I call "my blockchain." The overseas hosted wallet has always been my main man. 😎

I do know that for 2021 there will be a question on the first page I believe it is of the US tax return "At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?" which I shall have to answer yes. From what I understand, there were sections of the regular tax return in prior years where we might've been obligated to make some kind of disclosure too, but I never did, because I assumed it applied only to sales of crypto, which I have not done. I've actually never even talked to my accountant about crypto, other than offhandedly, but will have to, this year. All I ever list for him as far as any of this is what my clients paid me in dollars.

I assume there are two tiers of tax for crypto sales, like with stocks. Short and long term capital gains. Mine will all be long term. HODL.

I suppose I can understand the government's desire to regulate crypto, which is behind the most recent drop in value. I mean, I push a button (and hold my breath), and I transfer some ungodly sum of BTC to my wife or child, and...then what? They must declare it? Does this fall under the $15,000. per year I am allowed to give away to a child each year without either of us having to declare it? I suppose so, but if there are no regulations you'd have to be a pretty honest person to transfer and declare the entire crypto transfer if it is above that 15K threshold, let alone at full value and basis.