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I started traded cryptocurrency started this January. Please…

I started traded cryptocurrency started...
I started traded cryptocurrency started this January. Please explain how cryptocurrency trading tax return filing. I lost a lot of money but I hear that I still have to file tax return and need to pay tax but doesn't make sense why I have to pay tax when I lost money. Please advice.
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3/15/2018
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Customer reply replied 1 month ago
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Lev
Lev, Tax Advisor
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Satisfied Customers: 32,695
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If you started trading in January 2018 - nothing will be reported on your 2017 tax return,

but you will need to report on your 2018 tax return - which is due by Apr 15, 2019

You will use form 8949 to report all sale transactions

For US tax purposes - cryptocurrency is classified as property - not as currency.

.

ONLY when the property is sold - you realize either the gain or the loss.

Similarly - crypto is treated as an asset you invested.

When it is exchanged for another crypto - the FMV at the time of exchange is your selling price.

Correspondingly - the same value is deemed purchase price for the replacement crypto.

So - if you realized a loss - that loss is used to offset other gains.

If you have net loss - up to $3000 may be used against other taxable income.

.

Please elaborate if needed.

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Customer reply replied 1 month ago
if I started with 50k and only have 10k left, then I can report 40k loss?

That is correct.

But when you will have $40 in capital loss -

that loss may be fully used to offset other capital gains.

HOWEVER - if you have net capital loss - only up to $3000 may be used against other types of income - and the rest will be carried forward to the following tax year.

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Customer reply replied 1 month ago
how will IRS figure out my capital gain since I day trade, there are hundreds of transactions. I don't even know how to calculate. Can I just report the amount started and amount ended with to make it simple?

The issue is that NOT the IRS - but we will need to calculate your gain or loss and tax liability.

That is responsibility of taxpayers.

The IRS will receive most information from your tax return.

If you are using an US brokerage - they usually provide a list of transactions that are uploaded into your tax preparation software and there will be very little manual work.

You may however create a spreadsheet of all your transactions and attach that to your tax return

in this case you will be able to use totals on teh tax form.

But legally - we may not avoid providing a full list of transactions.

Sorry - that will be some overhead - please verify if you are able to download that list from your online account.

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Customer reply replied 1 month ago
I use binance exchange which is based in Hongkong. They don't require me to provide SS# ***** I register, then they won't transmit my transaction record to IRS right? But I had to provide my SS# ***** I register with Coinbase exchange, then this exchange will provide it to IRS?

That is something I may not know.

You might want to ask that question to your broker whether they provide any information tho the IRS...

As I know - the US is trying to push all over the work to have financial organization to comply with US reporting requirements.

.

I appreciate if you take a moment to rate the answer.

Experts are ONLY credited when answers are rated positively.
Lev
Lev, Tax Advisor
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Customer reply replied 14 days ago
If you started cryptocurrency trading December 2017, do you have to file tax return? When did IRS start collecting tax for cryptocurrency trading?

If you started cryptocurrency trading December 2017, do you have to file tax return?

Yes - for sale transactions between Dec 17 and Dec 31 - report on your 2017 tax return.

When did IRS start collecting tax for cryptocurrency trading?

Taxes are due on the gain - not on trading.

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Customer reply replied 13 days ago
is it required to submit all transaction list to IRS when filing tax return or only if IRS ask for it?

Yes - you will need to submit full list of transactions.

If you are using aggregate value on your tax form -

then you will use form 8453

https://www.irs.gov/pub/irs-pdf/f8453.pdf

and attach a list of all transactions - check last box - Form 8949, Sales and Other Dispositions of Capital Assets (or a statement with the same information), if you elect not to report your transactions electronically on Form 8949

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