I have many cryptocurrency transactions on CashApp & Venmo throughout the year. The transactions were the individual purchases of bitcoin, sending bitcoin to a third party gambling site, and selling bitcoin that was derivative from gambling winnings.
I lost a lot more money than I won…. I’m aware that I can write off my gambling losses up to the amount of my winnings. I don’t know how to input that into the turbo tax program.
All the transaction options available were not an accurate representation of how the cryptocurrency was being used. The options were things like capital gain, transfer, etc.
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All gambling winnings trigger a TAXABLE EVENT regardless if you received a form W-2G or not.
For example, if you receive a $100 worth digital currency as a gambling winnings, you will pay taxes on that amount as ordinary income.
As stated by the IRS, "you may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and kept a record of your winnings and losses. The amount of losses you deduct can't be more than the amount of gambling income you reported on your return. Claim your gambling losses up to the amount of winnings, as "Other Itemized Deductions."
For example , if you have gambling losses for $80, you can deduct $80 on your Schedule A, Itemized Deduction. Now if you have gambling losses of $125, you can only deduct $100 as you are limited to only deduct as much as you have won.
For example, if you disposed of the above-mentioned digital asset you obtained from your gambling winnings ($100) WITHIN A YEAR OR LESS, let us say for $110, then you will have SHORT-TERM GAIN of $10. Should you sell this digital asset WITHIN A YEAR OR LESS, let us say for $85, then you will have a SHORT-TERM LOSS of $15.
If you disposed of this digital asset ($100) in a time frame that is GREATER THAN A YEAR, let us say for $110, then you will have a LONG-TERM GAIN of $10. Should you sell this digital asset in a time frame that is GREATER THAN A YEAR, let us say for $85, then you will have a LONG-TERM LOSS of $15.
MORE ON CAPITAL GAINS AND LOSSES FOR CRYPTOCURRENCY TRANSACTIONS
Firstly, cryptocurrency activity MUST be reported as income whether or not you received a Tax Form from the service that you are using.
Secondly, in the case you did NOT receive a Tax Form, and you cannot secure one from your service provider, then you must use the transactions history (usually a csv file) to establish the basis and the proceeds of each selling transaction to determine if it is either a gain or a loss. In addition you will need to record the dates to determine if the transaction is either short-term or long-term.
Lastly, there are some crypto aggregator services or other services in general, that will actually construct/generate for you a Tax Form Proxy. Just verify that the data being entered is accurate so that you may have an accurate Tax Form.
There are a couple ways you could actually do this on your taxes. You can use a crypto tax service such as CoinTracker or CryptoTaxCalculator and connect all of your accounts, including their BTC address. You can then use the software to adjust their data to reflect your activities. Then you can download the tax forms from those providers and upload the CSV into TurboTax. Or, you could create an Intuit Format Crypto CSV of all of your transactions and manually build the form to reflect an accurate depiction of your activities.
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