PFT #68 - Personal Finance Tip of the Week: Tracking Crypto Gains and Losses for IRS Tax Filing

This week’s topic is about tracking your crypto currency transactions for tax purposes. There are more than 10,000 coins on the market making crypto a household word. Hence, the IRS has taken note and expects filers to report results of their trading activity. We covered this in our personal finance tip #55 where each year you calculate what you have in gains versus losses, and determine what that number is.  For example, if you sell Bitcoin for $10,000 in profit and sell Solana for an $8,000 loss, you have a realized capital gain of $2,000. On the inverse you’d have a $2,000 loss.  Keep in mind that realized gains for assets held under one year are taxed as ordinary income meaning it will add to your overall earnings for the year.  Now in the event that you incur a loss, the IRS allows for a maximum amount of $3,000 each calendar year inclusive with carry forward losses. So this is simple math right? Correct! However, with the numerous coin exchanges available and their lack of infrastructure, tracking your activity is proving to be difficult.  For example, if you bought Shiba Inu on Coinbase, transferred it to your wallet and then moved it to Gemini, the second exchange doesn't know the original purchase price. It is not as simple as going online to the exchanges and they’ll have a detailed history.  Therefore, it is incumbent upon you to track this information that will be reported on IRS form 8949. The bottom line is that it may be a painstaking process depending on how much you trade.  More than likely if you fail to do this or miss transactions you may get away with it, seeing that some exchanges have not caught up with the regulation.  With that being said, we suggest that you create a spreadsheet and log your transactions throughout the year. In time, the IRS will catch up and you don’t want to be caught.  Website   https://www.somethingonmymind.net/ Merchandise https://www.somethingonmymind.net/shop Social Media  https://www.instagram.com/somm.podcast/ https://www.youtube.com/channel/UChec5qcZBcGkIhUU3belNDw https://www.tiktok.com/@somm.podcast?lang=en https://www.facebook.com/somm.podcast https://twitter.com/Somm_podcast