What is my cost basis on crypto if the only info given on 1099-B is 1d Proceeds?

[jacriswell]

Three sales total, all bitcoin. Proceeds less than $1K

[TomK2023 · Accepted solution]

If you use $0 as the cost basis in the program, the IRS will tax you on the full $1,000.

Since the 1099-B is missing the info, you must look at your own records.  

• Check the exchange where you bought the BTC (Coinbase, Robinhood, etc.), and download your "Transaction Report" or "Trade History" for the year you purchased it.
• Check your email(s) for "Order Executed" or "Purchase Confirmation" (the amount you paid for the BTC plus any transaction fees... this total is your cost basis),

If you cannot prove what you paid, you have three options:

• Look up the historical price of Bitcoin on the approximate day that you made these purchase(s).  (e.g., using CoinMarketCap or Yahoo Finance). Use that price multiplied by the amount of BTC sold. The IRS usually accepts "reasonable" estimates (but they are not required to).
• If you bought BTC at many different prices, you can choose which "lots" you sold. Most people use FIFO (First-In, First-Out)... the cost basis of the first BTC you bought is used for the first BTC you sold.
• If you have no idea when or how you got it (e.g., it was a gift with no records), you must enter $0. 

Enter Crypto Info from Form 1099-B:

1. Open or continue your return.
2. Enter the Proceeds from Box 1d.
3. Enter the Cost Basis you found in your records into the Box 1e field.
4. Select "Long-term non-covered" (if held >1 year) or "Short-term non-covered" (if held <1 year) for Sale Category. (Box E or Box B)
5. Enter Bitcoin (or BTC) for Description.

Since your 1099-B did not report the basis to the IRS, your return will generate Form 8949 (that you provided the basis yourself).

Be sure to keep your purchase records (spreadsheets or PDF statements) with your tax records for at least 3 years in case the IRS asks for proof of that basis.