Basis for Stocks and Crypto
Stock and Crypto Cost Basis, what you need to know when you complete your Federal Returns. You need to know how to figure the stock and crypto cost basis. When you sell stocks, your brokerage will issue you a 1099 form in late January or even as late as march in some cases. This 1099 form will have all your stock sales on it and should have what you bought the stock for (the cost basis) and the dates when you sold it and when you bought it.
Usually, this form will have ALL your necessary data that we need to complete your taxes. Sometimes, when you have owned the stock for many years or if you transferred from one brokerage to another, this important data is missing.
Your Broker can Assist
Have your broker track down the basis on any stock that is missing this data. The easiest way is to contact your broker and tell him/her that you need his/her assistance to figure out the basis. This is something that usually happens automatically in their system but sometimes you have to ask.
The brokers do not want to talk to us… main reason is that there are privacy issues. Secondly, the broker works for you, and you can get them to follow through (because you pay them) a lot better than we can.
What if they can’t help
If you need us to find the basis, please realize that it will take additional billable hours to investigate the basis. We will need the date or dates that you bought your stock to track down the cost. It is a lot cheaper for you to get the broker to do it for free. For every stock that you sold that is missing basis you will need to provide us with the stock name, symbol and date of purchase.
Don’t forget that Crypto counts
If you are dabbling in the Cryptocurrency world, I hate to tell you that crypto transactions are treated like stock sales. The Federal government is really focused on tracking your Crypto transactions for Taxes. This means EVERY time you buy something with crypto… or sell your crypto it is a transaction reportable sale for the IRS. Stock and crypto cost basis are important, so you don’t end up in trouble with the IRS. If anyone hasn’t explained this to you, you are in for a rude awakening. The Federal IRS is working hard to Identify everyone who acquires and trades any type of cryptocurrency. There is a question right on your tax return, that asks you point blank:
“At any time during the year did you receive, sell, send exchange or otherwise acquire any financial interest in any virtual currency?”
When you sign the Federal Returns, let’s not forget that you attest to the truthfulness of the Tax Return and could be subject to perjury penalties.
IRS sent letters out
The simple truth is if you are playing in the crypto world, you must report it to the IRS. The more transactions you have the greater probability that the IRS will be able to identify your failure to report it on your Tax Returns. Just think, on every transaction there are at least 2 people involved. The IRS reported that it sent letters to more than 10,000 people who potentially failed to report crypto transactions on their taxes. The IRS didn’t randomly pick people out of the air, they KNEW that those people failed to file their crypto on their Returns. If you are one of those people who may have overlooked your crypto reporting in the past, we would recommend that you amend any past Returns.
Crypto Software for Tax Reporting
There are quite a few companies who offer software for assisting you in getting ready for the Federal IRS. Best referral site for different software choices is coinsutra.com/crypto-tax. We recommend Cryptotrader.