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I have made 300+ crypto currency transactions in 2018. Do I need to report all these 300+ transactions to IRS? If yes, what is the procedure?

My tax consultant is saying we need to report only aggregate total short term loss only (no gain for me). Is it correct? I haven't received any 1099 form from any of my crypto online exchanges.

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    Were all trades made with either USD or purchased crypto, or did you mine some too? – Hart CO Mar 18 at 21:48
  • @HartCO, I did trading using both USD as well as purchased crypto. I used GDAX, binance, gemini exchanges for trading. No mining. – dodo Mar 19 at 14:15
  • For the crypto to crypto trades does your trade history show value in USD of each traded currency at the time of each transaction? – Hart CO Mar 19 at 14:26
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    Yes. in transaction document I see all trades(buy/sell) in USD – dodo Mar 19 at 14:43
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Compare to over-the-counter Forex and that is reported either on 1040 Schedule 1 Line 21 or reported on Form 6781. Use of Form 6781 requires that the Forex currency pair be also available as futures contracts. Form 6781 requires an attached statement while 1040 Line 21 allows an attached statement. In either case there are no wash-sales and no unrealized gains carried. Futures get a 60/40 long-term/short-term capital gain/loss accounting while Other Income can be an unlimited loss deduction.

But reporting cryptocurrency transactions as capital gain/loss would require itemizing on a Form 8949:

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

Compare to day traders making hundreds of trades per day that use a Form 4797. They are not subject wash sales but also don't carry unrealized gains across the year.

I would itemize on Form 8949 for cryptocurrencies. Of course manual wash-sale accounting might be required depending on the trading style.

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  • its impossible to report all 300+ trades in form 8949. Do I need to attach any other form? – dodo Mar 19 at 14:16
  • Luckily, wash-sale rules do not apply to crypto trading. – Hart CO Mar 19 at 14:59
  • Use as many Form 8949 as needed and total them together on a Schedule D. Of course a Schedule D result goes on a 1040 Schedule 1. I have software that makes a Form 4797 based on each trade input as it is opened and closed. Then the Form 4797 might be adapted to a Form 8949. I don't know why wash-sale accounting is not required with the capital gain/loss accounting. I gave a link to IRS guidance. – S Spring Mar 19 at 20:23
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The details do need to be reported, typically this would be done on Form 8949 which then feeds aggregated results to Schedule D.

In cases where you have too many trades to fit, you'll submit attached statements that provide the same information, per the Instructions for Form 8949:

Exception 2. Instead of reporting each of your transactions on a separate row of Part I or II, you can report them on an attached statement containing all the same information as Parts I and II and in a similar format (i.e., description of property, dates of acquisition and disposition, proceeds, basis, adjustment and code(s), and gain or (loss)). Use as many attached statements as you need. Enter the combined totals from all your attached statements on Parts I and II with the appropriate box checked.

For example, report on Part I with box B checked all short-term gains and losses from transactions your broker reported to you on a statement showing basis wasn't reported to the IRS. Enter the name of the broker followed by the words “see attached statement” in column (a). Leave columns (b) and (c) blank. Enter “M” in column (f). If other codes also apply, enter all of them in column (f). Enter the totals that apply in columns (d), (e), (g), and (h). If you have statements from more than one broker, report the totals from each broker on a separate row.

So your Form 8949 would have one row per exchange for each part (Part I - Short-Term, Part II - Long Term).

There also appear to be crypto-specific products that offer to do this for you, but hopefully the exchange output is friendly enough that you can easily standardize it in a spreadsheet program to match.

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  • Many thanks. So I need to attach 8949 statement for each exchanges and mention total trade of each exchange's cost/gain in Form 8949. Can I send these 8949 statement online or do I need to mail it to IRS? – dodo Mar 19 at 15:42
  • @dodo That's a good question, probably best to ask your software/service provider, but likely you'd be able to e-file the return and mail Form 8949 and the supporting statements. – Hart CO Mar 19 at 16:13
  • Got it. Appreciate your help. – dodo Mar 19 at 16:55

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