Coinbase, a popular cryptocurrency wallet and exchange service, recently lost a court case against the IRS and had to notify approximately 13,000 customers that Coinbase was going to release their information to the IRS. [Coinbase: IRS Notification] [US vs. Coinbase Inc. court document] As alarming as this is, it’s actually understandable. The IRS has already integrated with other electronic payment systems like credit card companies, Zelle (bank’s pay a person option), and PayPal so that the IRS doesn’t require businesses to issue 1099-MISC for contractors that were paid electronically and my guess is, Coinbase is now brought onboard.
Tax is inevitable but the IRS wants the cash value [gains/lost] on every transaction so if a person made a lot of microtransactions, it’s going to be a nightmare to track them. Coinbase does offer an API integration to your Mint (subsidiary of Intuit) account but at the same time Coinbase also cautions, “Any integration that involves API keys creates potential risks for account take-overs.”
Other than good’ol excel spreadsheet, does anybody have a viable option that I should look into?
If the transactions are off-chain (not recorded to the blockchain), only the exchange where the transactions took place can possibly offer records of what frequent trader did.
Nevertheless, it is individual account holder’s responsibility to report capital gains.
However, it is just not practical (yet) for a Bitcoin frequent trader to keep good track of every transaction happened at the exchange by himself/herself without the exchange offers reports in details. But as long as you don’t trade too often, keeping track of transactions by individual is still possible.
Thanks, Charles, your reference link was a good read. I followed it to cointracking.info which had a column converting all altcoins to bitcoins values. I’m guessing so it can easily be compared to something like NYSE Bitcoin Index (NYXBT) to establish the fair market value for that transaction. It gave me an idea on fields I’ll need in my SQLite database.
I didn’t know cointracking.info exists that can track profit and loss from so many listed exchanges via API or export-import-csv files.
Although I’m not sure how accurate the cointracking.info report(s) can be or how easy (or difficult) it is to use for tax purposes, I think it’s worth the try with a good intention to file tax in mind. I’m sure the service can only improve from here and would be better (support more exchanges) over time.
I heard before that IRS has started to coming after cryptocurrency stock markets, but this is very close now. A friend of mine said that she reported her incomes from cryptocurrency back to 2018, in a basic MISC template: 1099-misc-form.pdffiller.com Have no clue how trustworthy is it irl