Dear IRiS
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A Dear IRIS shared by Bill H. in NC: (regarding crypto)
Dear Iris,
All my friends were telling me how much money they were making in Bit Coin. So I decided to give it a try and plunked down ten grand on Bit Coins. Six months later, they were worth half that and I cashed out! Now my friend who works at one of those free tax sites and has done my return for years tells me he can’t do my tax return because I was trading digital currencies. Is that a fact? Besides losing all that money am I now going to have to pay someone to do my tax return?
Lost It in Trinity
Dear Lost It:
Sorry to hear your foray into digital currency went so badly. But doing tax returns for investors in digital currency can be complicated and the IRS does not allow their free tax preparation sites to do returns that involve the purchase and sale of so-called crypto currencies. Like I said, this can be pretty complicated, for example, buying digital currencies and then using those currencies to purchase goods is also a disqualifying event for free tax preparation. It’s really important that both the taxpayer and the preparer understand all the details of the transaction and the rules before proceeding.
If you had just bought Bit Coins and not sold them, your friend could still do your return. But once you sold those coins, your return became “Out of Scope” for the IRS’s free tax sites. Keep in mind there are lots of nuances in the definition of the words “bought” and “sold” when deciding how to answer the Digital Asset question on the Form 1040. But in your case, it’s pretty clear, you’ll have to answer the question “Yes” and have to bite the bullet and pay to have your return done this year.
Dear Iris,
All my friends were telling me how much money they were making in Bit Coin. So I decided to give it a try and plunked down ten grand on Bit Coins. Six months later, they were worth half that and I cashed out! Now my friend who works at one of those free tax sites and has done my return for years tells me he can’t do my tax return because I was trading digital currencies. Is that a fact? Besides losing all that money am I now going to have to pay someone to do my tax return?
Lost It in Trinity
Dear Lost It:
Sorry to hear your foray into digital currency went so badly. But doing tax returns for investors in digital currency can be complicated and the IRS does not allow their free tax preparation sites to do returns that involve the purchase and sale of so-called crypto currencies. Like I said, this can be pretty complicated, for example, buying digital currencies and then using those currencies to purchase goods is also a disqualifying event for free tax preparation. It’s really important that both the taxpayer and the preparer understand all the details of the transaction and the rules before proceeding.
If you had just bought Bit Coins and not sold them, your friend could still do your return. But once you sold those coins, your return became “Out of Scope” for the IRS’s free tax sites. Keep in mind there are lots of nuances in the definition of the words “bought” and “sold” when deciding how to answer the Digital Asset question on the Form 1040. But in your case, it’s pretty clear, you’ll have to answer the question “Yes” and have to bite the bullet and pay to have your return done this year.
The Newspaper Image came from: https://www.presentationmagazine.com/editable-old-newspaper-template-4520.htm 12/3/2023