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Cryptocurrency FAQs

Cryptocurrency FAQs

2017 was a year where we had a lot of crypto questions! Then valuations came down & we did not hear about coins much until 2020 when they exploded again. Since we have hundreds of clients with crypto, many of them asking some of the same questions, I will go through some common ones below: 

Question: I forgot to report crypto on my prior year returns – what should I do? 

Answer: The IRS is cracking down on people that have not reported crypto – this is not professional advice until you contact us, however, you must amend your returns to include this right away. 

Question: If I traded one crypto from another but did not convert back to fiat, do I have to report that? 

Answer: Yes, you must report that as a transaction on form 8949

Question: How do I generate this form? 

Answer: There are countless platforms that will generate this for you by linking to your exchanges. Examples are cointracker.io and cointracking.info, however, there are dozens that function similarly 

Question: What if my exchange was shut down or the data is no longer available? 

Answer: You are entirely allowed to use estimates – if you are not sure how the rules around estimates work, please book a consultation with us & we will guide you. 

Question: I have more than one type of income from my crypto – should I report interest separately from trading, for example? 

Answer: Yes, each activity may have its own reporting requirements, so reach out to us and we will parse through your activity to determine which forms & schedules you are required to file

Question: I was the victim of crypto fraud – is this a deduction? 

Answer: Yes, financial fraud is still deductible. We can help you with this deduction

Question: I have millions in potential crypto gains – are there any strategies for me to write off this income? Can I also move to a state with less (or no) income tax?

Answer: Great question – there are quite a few strategies to be implemented here depending on your individual circumstances – happy to go through those with you. 

Question: I have already generated my 8949 but my cost basis does not look right – what do I do? 

Answer: Contract us & we will show you exactly how to handle this [very common] situation 

Question: I barely had any trading activity – should I report? The activity was less than the 1099 requirement

Answer: The IRS requires that you report this activity, even if only $100 worth of transactions. This is because although there is a threshold for Coinbase (for example) to generate a 1099, you are still required to report it. 

Question: If I trade crypto frequently for example buy and sell within 30 days, will the wash sale rules apply to my loss?

Answer: The great news is that wash sales rules don’t apply to crypto. If you sell crypto for a loss, you an use the loss to offset the capital gains.  

Need help with Cryptocurrency FAQs?

Call us today at (866) 656-8036, email us at hello@dimovtax.com, or fill out the form and we’ll get in touch immediately.

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