Need some genuine advice... I've used so many platforms to buy bitcoin over the years and never kept detailed accounts of my cost basis and amounts purchased etc. In the event that I have to sell some of it for fiat to pay for unforeseen expenses how would I avoid an audit?
Discussion
You pay the taxes
There’s a lot of nuance there. Do you have a list of all the platforms you bought from? How many are we talking?
I honestly don't and my memory is horrible but I've bought from Coinbase, Binance, Robinhood, binance.us, GDAX (Coinbase Pro), Kraken, as well as exchanged shit coins for BTC through companies like CoinLoan...
Always had this feeling of doom if I ever did have to sell, going to be a nightmare to try to figure it all out
contact a crypto CPA
Sell it Last in First Out, presumably you have records of more recent ones
Using Last In, First Out is a good idea to use as a Cost basis. I was told just to be consistent.
Now, if I purchase anything that takes Bitcoin, like at the Conference , or my meat from K&C Cattle on the Oshi App (Sats back), I use Strike, so that the cash on Strike turns into Bitcoin on the other end using the Lightning Rails, so no tax event. All of my Zaps⚡️ are from Strike.
Hope that helps…
This is a good answer. I fiat mine as a tax accountant.
If you feel the need to comply, using LIFO method can help. You'll likely have a higher basis and thus a lower gain this way as well.
You can also use specific identification and choose specific lots to dispose. But you might have a tough time doing this if you cant track the UTXOs or come up with some other way to discern specific "lots". Could be more hassle than it's worth.
But as someone else said, you have to stay consistent. Once you pick a method you cannot switch at whim one year to the next. Again, LIFO is probably the easiest and most tax efficient way.
That said, claiming to have Bitcoin profits might put you at a bigger audit risk than going a non-kyc boat accident route...
Insert obligatory not tax advice consult your CPA statement here.
Just try your best. At worst you pay more with penalties and interest and move on with life.
Followed #plebchain