• Firms

    Cryptocurrency Traders Learning That Taxes Are a Thing

    By | January 31, 2018

    Here’s an amusing MarketWatch story by Shawn Langlois on how cryptocurrency traders, presumably having no concept of income, are all bent out of shape about the taxes they owe on their trading gains.

    The lead kvetcher, latex_man, posted a thread entitled “I just did my taxes and it turns out I lost almost everything” and let’s all have a good laugh together:

    I bought 2 BTC in early 2017. I did a few trades between BTC and dollars but in the end effectively I sold it late in the year for about $40k and changed my mind and bought them back a few hours later. I got weak hands, what can I say.

    Anyway, I still got that 2 BTC (and no cash). My accountant said because of my trades, I have to pay like 35% income taxes (short term gains) on it with state and federal, so like $15000. If I sell it now for $10k each I’m only gonna end up with $5k left over. He says I owe $15k by April no matter what happens this year to my bitcoins even though it crashed by 50%.

    WTF?

    Fuck taxes man. This is so fucked it’s like I didn’t earn anything.

    Langlois combed through the comments which are filled with comically bad advice for this forlorn trader, and I have got to imagine there’s a lot of this going on right now. I hope you tax accountants with naive crypto traders as clients are letting them down gently.

    [MW]

    • Nathan

      Shouldn’t these be “wash sales” if the repurchase happens within a week? If so, the taxes should be zero, if he is still holding the bitcoin

      • Adam Hill

        Via Marketwatch

        The skinny on wash sales

        Your anticipated tax loss is disallowed if, within the period beginning 30 days before the date of the loss sale and ending 30 days after that date, you acquire “substantially identical” stocks or securities. For purposes of this article, let’s call them replacement securities.

        According to the tax law, your loss transaction and the purchase of the replacement securities are a “wash,” so you shouldn’t be allowed any tax benefits. Please understand, however, that this righteous concept applies only to losses. If you sell for a gain and buy back identical stocks or securities within the above time frame, Uncle Sam is happy to collect his due with no qualms. (Among us tax professionals, this is known as a “heads I win; tails you lose” rule.)