All Things Tax

All Things Tax

Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.

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Pioneer
Posts: 1
Registered: ‎11-20-2017

Bitcoin trading and taxes?

This year I jumped on the bitcoin bandwagon and started trading in crypto currencies. This is my first time buying and trading cryptos. I have several questions based on specific scenarios and am hoping I can get some answers. 

 

If I end the tax year with a capital LOSE, do you still have to file a 1099-B and 8949?

 

If I end the tax year with a capital LOSE, I assume you do not pay any taxes? You only pay taxes on capital gains?

 

If I deposit 1,000 USD (from my bank account) into a trading account and over multiple trades, now have $1500 USD in my trading account, but I do NOT withdraw those USD funds back into my bank account, is this still considered a capital gain? Or do I have to withdraw the USD from my trading account back into my bank account for it to be considered a capital gain?

 

I usually have H&R block do my taxes as I don't feel like dealing with them myself. Does H&R have tax specialists that specifically deal with trading taxes, or better yet crypto currencies? 

 

Any help is appreciated!

Tax Pro
Posts: 5,780
Registered: ‎02-23-2016

Re: Bitcoin trading and taxes?

Hi Cobra321,

 

 

Yes, you still have to include Form 8949 with your tax return to show all of your transactions even if you have a loss for the year.  Yes, the information from Form 1099-B must be reported on Form 8949 even if you have a loss.

 

Correct.  You will not owe any taxes on a capital loss.  You can actually deduct the first $3,000 of an overall loss on your Form 1040 which reduces your AGI and thus your taxable income.  Any loss that is left over after that is carried forward to the next year and then deducted first against gains and then if anything is still unused you can again deduct up to $3,000 for that year.  The process continues for five years or until the loss is used up.

 

If you start the year with $1,000 and you end the year with $1,500 then you have a gain, whether or not it remains in your trading account.  The gain will be reported to you on Form 1099-B.

 

Yes, there are more experienced tax professionals at most H&R Block locations who have a great deal of knowledge in this area.  Ask for an enrolled agent or a master or senior advisor.

 

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)