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bubbabee698
Level 2

First in First out and Last in first out

I use first in first out for my stocks.  Can I use Last in first out for my crypto transactions in the same year as my stocks first in first out?

6 Replies
Mike9241
Level 15

First in First out and Last in first out

have you used FIFO in the past for crypto sales? 

 

The IRS Notice 2014-21 provides no guidance on which valuation method is acceptable. IRS has had ample time since then to release more specific guidance on crypto taxation. Even the new tax law signed into effect in December 2017 does not clarify acceptable accounting methods for cryptocurrencies. However, the use of LIFO, at least for stock sales, requires that adequate identification can be made. This is difficult, if not impossible, for most crypto trades. You could argue that requirements for stock sales don’t apply to crypto- currencies. If the IRS agrees with that or not is still unknown. The use of LIFO instead of FIFO seems possible at this time, in the absence of specific guidance from the IRS. But as you can see, there is risk involved.

If the IRS disagrees with the use of LIFO for crypto trades, you may face additional taxes plus penalties.

 

if you used FIFO in the past for crypto sales changing to LIFO could be regarded as a change in accounting methods requiring IRS approval by filing form 3115.

 

if not to protect yourself from a possible charge of tax evasion, you may want to see a tax pro about filing a request for a Private Letter Ruling. this can be expensive and the IRS does have the right to say no you can't use LIFO.

 

fanfare
Level 15

First in First out and Last in first out

Is your crypto outfit sending you (and the IRS) a 1099-B.?

Many do not.

 

If not, your sales category is C or F and you can match up buys and sells any way you want to.

Keep good records in case the IRS audits you.

bubbabee698
Level 2

First in First out and Last in first out

According the to the IRS website Q&A on the topic you can use FIFO or specific identification method.  Specific identification can be used as LILO if that's how you want to use it (I would think).  My question may not have been presented correctly.  Since I already get a 1099B from a broker using FIFO for stocks my question was can I use a different method for my crypto sales and keep the stocks at FIFO.  I'm thinking you need to use the same method for everything but wasn't sure.

bubbabee698
Level 2

First in First out and Last in first out

No, I wont be getting a 1099B for the crypto.  The reason I want to use LILO is I have more confidence in the cost basis being correct vs. going all the way back to 2017.  Being able to substantiate cost basis in the Crytpo Defi area is very limited.  I only know of using software that can track the blockchain transactions however if you are missing even one public address/platform the cost basis will likely be wrong if the missing address/platform touches the calculation.

fanfare
Level 15

First in First out and Last in first out

Sooner your later your SELL will have to match some 2017 BUY unless you hold it forever (unlikely).

You should collect and retain cost basis info as soon as possible rather than let it recede into the dust of history.

fanfare
Level 15

First in First out and Last in first out

You don't have to use the same method for everything.

You can use FIFO for most stock trades but inform your broker that you want LIFO for a particular stock transaction.

You have to change your default temporarily, or inform the broker before the SELL settles (two business days).

Confirm with your broker for the correct process to follow to avoid mishaps.

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