Sale of Bitcoin

[Yardley CPA]

Has anyone dealt with  clients who have purchased and sold Bitcoin?  I recognize the sale resulting in a gain would warrant classification as a capital gain, just wondering if anyone has clients who have provided transaction history or any other type of statements?  I was unable to find any clear-cut indication as to whether this information is reported to the IRS officially?

Indeed, it appears barely anyone is paying taxes on their crypto-gains. For example, in 2015, only 802 Coinbase users told the IRS about bitcoin gains, despite the exchange having 2.9 million users in December of that year, according to Milne’s data.

Any thoughts on this?

[jasdlm]

I have reported Bitcoin Sales for a client.  He has been in bitcoin from the beginning.  He keeps a spreadsheet of buys/sells (at my request) with dates purchased/sold in the format acceptable by the IRS.  I enter summary totals, and I attach his spreadsheet as a .pdf.  He has short-term and long-term gain, and he is meticulous about tracking buys/sells (which I think is important).

Some of the Bitcoin companies also pay dividends, which I report on Schedule B.

I have not had any problems/questions/rejects with this approach, and one year he made over $2mil, so it would have been noticeable.

Eager to hear whether I've been handling it the way others would.

[Catherine]

I have bitcoin trading clients.  I used to use a spreadsheet for tracking, and had the client provide me a list of all his buys (very few) and sells (more, but not tons until last year).  A year or three ago, he signed up for one of the basis-tracking services.  Since then, he provides that spreadsheet for me.  I rework a copy of the spreadsheet for a bit (getting the columns in the right order, and the date in US style rather than Euro style), then import (into Drake).  

[ZoomnFinancial]

On 3/19/2019 at 7:07 PM, jasdlm said:

I have reported Bitcoin Sales for a client.  He has been in bitcoin from the beginning.  He keeps a spreadsheet of buys/sells (at my request) with dates purchased/sold in the format acceptable by the IRS.  I enter summary totals, and I attach his spreadsheet as a .pdf.  He has short-term and long-term gain, and he is meticulous about tracking buys/sells (which I think is important).

Some of the Bitcoin companies also pay dividends, which I report on Schedule B.

I have not had any problems/questions/rejects with this approach, and one year he made over $2mil, so it would have been noticeable.

Eager to hear whether I've been handling it the way others would.

Exactly how I have handled my 2 bitcoin clients (no dividends). They aren't making $2M...  

[Roberts]

On 3/19/2019 at 6:38 PM, Yardley CPA said:

Indeed, it appears barely anyone is paying taxes on their crypto-gains. For example, in 2015, only 802 Coinbase users told the IRS about bitcoin gains, despite the exchange having 2.9 million users in December of that year, according to Milne’s data.

 

That's weird because from what I've read on Reddit - everyone is making tons of money in Bitcoin.   

I don't think most of the exchanges ever give tax info on the trades to the IRS because they are actually foreign based.

[Lion EA]

Does FATCA and FBAR come into play?

[Catherine]

5 hours ago, Lion EA said:

Does FATCA and FBAR come into play?

I don't think so, because the exchanges don't actually exchange anything but computer bits.  It's not like having cash in a savings account in Denmark.  But it's a good question, and perhaps that may come in to play as these exchanges mature.