As a guy who runs a crypto tax accounting firm, I have to say this is one of the best crypto tax guides I've seen.
We use CTC and just a few tips for the anons who plan to use it to DIY:
1)Sort your transactions chronologically - it's easier to see them in context than haphazardly in the "review" page.
2)If you are overwhelmed by the sheer number of transactions, start by adding "incoming" and "outgoing" as filters. This will show you ONLY the transactions CTC didn't algorithmically categorize. Use the "view in context" feature to find the transactions around it that might be related.
3)There are often "missing purchase history" transactions which contribute to overstated cap gains in CTC. Usually this comes from data import errors or an uncategorized cross chain bridge/swap. You can usually find these by going to "view balance" for the transaction with the missing purchase history, selecting "view ledger" and then finding where the balance first goes negative.
You may need to import data via csv if using exchanges like Kucoin/Binance which have incomplete APIs. You may need to "hard sync" the data source again to call the API again and hopefully pull the data off chain.
This process overall will probably take you about 1hr/100 transactions reviewed so plan accordingly. At this point if that sounds overwhelming just file an extension and keep farming airdrops while chipping away.
Also BTB - would be more than happy to give jungle a discount on accounting services and kick back to treasury.
Thanks for the article, it got me thinking about something that should be in the back of all our minds.
Quick open question to everyone here (this must be on some of your minds). This was just a random idea of mine.
In the US, there is a HUGE difference between taxes on short term capital gains (up to 37%) and on long-term capital gains. (up to 20%).
I've just been buying ETH and accumulating. However, I will likely want to sell some ETH if say it reaches my price target (say +$8k for a random number)
Is there anyway that once ETH reaches our price target of $8k, we could short the same amount of ETH in our portfolio in a trade, and then we're essentially market neutral, not making or losing anything if ETH price goes up or down. If we could do that and we only sell our ETH and close out the short position once our holding period is +1 year (so it counts as a long term capital gains, versus short-term capital gains?)
One of the concerns I have is the rehypothecation of ETH, and what exchanges would be stable enough to put our ETH in and also to hold the trade, as that would be a big risk in itself. I would be open to paying someone to help me through that if it's needed bc the tax implications are big.
Would appreciate any feedback you guys have, and if you have any ideas of your own.
IRS: we'll figure your tax penalty because that is too complicated for you to calculate
Also IRS: swapped these coins for an LP, got 10 more LP tokens, withdraw, swap back to the next meme coin plus leverage and have 400 other transactions with regular derisking to the gas token? Yeah, good luck figuring out the cost when you bought that ETH you sold for gas.
Just want to say thank you. First cycle I’ll actually walk away with more money than I put in because I am listening to you guys. Cashed out half of a double recently, feeling good about it. Already made more on that half reinvesting in zyn thanks to defi ed team. Thank you!
What happens when you ‘lose’ your keys and cannot access your crypto ever again? Does uncle sam still Tax you on it? And do you really think tax institutions are currently capable enough of tracking you onchain? I usually find them to be severely behind the curve
You're free to do as you wish, over the long-term more software will simply click "open" and it'll show every transaction from cex to dex since you're on an immutable ledger.
If you buy and hold there is no tax by definition.
Also note, good luck suddenly sending 10 BTC to an exchange and clicking sell with no source of funds would throw up 100 red flags so be smart about what you are doing. Don't try to break the law and receive federal indictment
Even if they're behind tge curve now, they may not be in 2 or 4 years.
They can audit you retroactively and the blockchain is forever. All they have to do is link your public wallet address to your real world ID and retroactively audit you for degeneracy in years gone by.
Its less about what they're capable of now and more about what they're potenrially capable of within 7 years, especially if they're sufficiently incentivized.
Google/facebook ads are good enough at predicting behavior that people are comvinced their phones are listening to them. If the IRS achieves even half that level of tracking users, then anyone thinking they can just ignore taxes today will be toast in the future.
Sadly agree with you. While our tax authority employees are still at home wearing masks, they will catch up one day. The cex that I've used to onboard fiat has been implementing very similar kyc as the securities industry, even on small esoteric items. Right now their compliance and data reporting is relatively weak. If they want to stay in business they will be forced to improve. The firearms culture has a saying "lost it in a boating accident" perhaps ours in the future is "lost it all in YOLO"
If you lose your keys and can't access you technically owe tax on the transactions prior to losing access. But there is not a tax event when you lose the keys because it looks like you just HODL to valhalla.
In Australia you could likely get the loss written off. In the US, to do this you would likely need to see if a tax lawyer would provide an opinion letter to substantiate the write off. An opinion letter from a tax lawyer will run you $10k so you'd need to have enough size in that wallet to justify it with tax saving.
And yes, the tax institutions have acquired resources to be able to track this: [edit] removed link bc that's dangerous. But google Zenledger IRS.
As a guy who runs a crypto tax accounting firm, I have to say this is one of the best crypto tax guides I've seen.
We use CTC and just a few tips for the anons who plan to use it to DIY:
1)Sort your transactions chronologically - it's easier to see them in context than haphazardly in the "review" page.
2)If you are overwhelmed by the sheer number of transactions, start by adding "incoming" and "outgoing" as filters. This will show you ONLY the transactions CTC didn't algorithmically categorize. Use the "view in context" feature to find the transactions around it that might be related.
3)There are often "missing purchase history" transactions which contribute to overstated cap gains in CTC. Usually this comes from data import errors or an uncategorized cross chain bridge/swap. You can usually find these by going to "view balance" for the transaction with the missing purchase history, selecting "view ledger" and then finding where the balance first goes negative.
You may need to import data via csv if using exchanges like Kucoin/Binance which have incomplete APIs. You may need to "hard sync" the data source again to call the API again and hopefully pull the data off chain.
This process overall will probably take you about 1hr/100 transactions reviewed so plan accordingly. At this point if that sounds overwhelming just file an extension and keep farming airdrops while chipping away.
Also BTB - would be more than happy to give jungle a discount on accounting services and kick back to treasury.
How do we connect?
We’re on the tweeter @cryptotaxsucks (Crypto Tax Made Easy)
Thanks for the article, it got me thinking about something that should be in the back of all our minds.
Quick open question to everyone here (this must be on some of your minds). This was just a random idea of mine.
In the US, there is a HUGE difference between taxes on short term capital gains (up to 37%) and on long-term capital gains. (up to 20%).
I've just been buying ETH and accumulating. However, I will likely want to sell some ETH if say it reaches my price target (say +$8k for a random number)
Is there anyway that once ETH reaches our price target of $8k, we could short the same amount of ETH in our portfolio in a trade, and then we're essentially market neutral, not making or losing anything if ETH price goes up or down. If we could do that and we only sell our ETH and close out the short position once our holding period is +1 year (so it counts as a long term capital gains, versus short-term capital gains?)
One of the concerns I have is the rehypothecation of ETH, and what exchanges would be stable enough to put our ETH in and also to hold the trade, as that would be a big risk in itself. I would be open to paying someone to help me through that if it's needed bc the tax implications are big.
Would appreciate any feedback you guys have, and if you have any ideas of your own.
Thanks in advance and #WAGMI.
Note unrelated to the post.
Whale just bought 32m of ether and borrowed 22m DAI against it to buy more ether. Will probably borrow more I reckon.
It has begun.
Does anyone know if there is the ability within CTC to 'update' your cost base at the date when your tax residency changes?
Not directly but there are workarounds.
Also depends on if when you exited prior tax jurisdiction you paid tax to “exit” and then are setting cost base in new jurisdiction at time of entry.
You can also set up a separate account for each country and only sync the data for the relevant dates.
thanks mate!
Can spot an aussie a mile away with a name like Matty Dubs
Soft doxxing me, hey ;)
And CTC also aussie based. Good group of guys.
btw I thought about this and for CTC you should set up one account for each country. That way you can apply different tax settings to each account.
IRS: we'll figure your tax penalty because that is too complicated for you to calculate
Also IRS: swapped these coins for an LP, got 10 more LP tokens, withdraw, swap back to the next meme coin plus leverage and have 400 other transactions with regular derisking to the gas token? Yeah, good luck figuring out the cost when you bought that ETH you sold for gas.
What if you delay your crypto tax and just file it a year later with the IRS? Is that possible?
Just want to say thank you. First cycle I’ll actually walk away with more money than I put in because I am listening to you guys. Cashed out half of a double recently, feeling good about it. Already made more on that half reinvesting in zyn thanks to defi ed team. Thank you!
wait
so you cashed out half… but then reinvested it into a memecoin?
If that’s true… I have a sneaking suspicion on why you lost more than you put in on other cycles
Oh you’d be right on your suspicion. I didn’t put it all in, some went back to ethereum where the rest is.
bullieve
Could we also have a post about friendly crypto countries and how to set base there and paying taxes on exit?
Thank you so much for a great post!!!
Most people ignore taxes. Eventually will be very painful for them. No brainer to use crypto tax software
What happens when you ‘lose’ your keys and cannot access your crypto ever again? Does uncle sam still Tax you on it? And do you really think tax institutions are currently capable enough of tracking you onchain? I usually find them to be severely behind the curve
You're free to do as you wish, over the long-term more software will simply click "open" and it'll show every transaction from cex to dex since you're on an immutable ledger.
If you buy and hold there is no tax by definition.
Also note, good luck suddenly sending 10 BTC to an exchange and clicking sell with no source of funds would throw up 100 red flags so be smart about what you are doing. Don't try to break the law and receive federal indictment
Yep. They'll just wait till your first post-loss transaction and tax + fine you.
Thats our expectation as well. If you just buy and hold on a Trezor obviously no taxable event there.
Sending all of it suddenly and selling will be instant flags especially in large quantities.
Thx guys, gotta move to no tax / degen island then i guess
Even if they're behind tge curve now, they may not be in 2 or 4 years.
They can audit you retroactively and the blockchain is forever. All they have to do is link your public wallet address to your real world ID and retroactively audit you for degeneracy in years gone by.
Its less about what they're capable of now and more about what they're potenrially capable of within 7 years, especially if they're sufficiently incentivized.
Google/facebook ads are good enough at predicting behavior that people are comvinced their phones are listening to them. If the IRS achieves even half that level of tracking users, then anyone thinking they can just ignore taxes today will be toast in the future.
Sadly agree with you. While our tax authority employees are still at home wearing masks, they will catch up one day. The cex that I've used to onboard fiat has been implementing very similar kyc as the securities industry, even on small esoteric items. Right now their compliance and data reporting is relatively weak. If they want to stay in business they will be forced to improve. The firearms culture has a saying "lost it in a boating accident" perhaps ours in the future is "lost it all in YOLO"
If you lose your keys and can't access you technically owe tax on the transactions prior to losing access. But there is not a tax event when you lose the keys because it looks like you just HODL to valhalla.
In Australia you could likely get the loss written off. In the US, to do this you would likely need to see if a tax lawyer would provide an opinion letter to substantiate the write off. An opinion letter from a tax lawyer will run you $10k so you'd need to have enough size in that wallet to justify it with tax saving.
And yes, the tax institutions have acquired resources to be able to track this: [edit] removed link bc that's dangerous. But google Zenledger IRS.
And I've seen firsthand they're not incompetent.