I also often reinvest the crypto, which makes it even more complicated. I’m paid in eth, and it seems impossible to directly tie that to when fiat goes out on a tax report. Is income I make just added to cost basis if I reinvest, and if not how does it work? Thinking of getting a tax accountant, but don’t know how much it costs and if I can afford it. Answers to these questions would be much appreciated! Thanks
You need to keep detailed records of all crypto coming into your possession.
That value on that date is your basis.
if you exchange from one form to another, that is a capital transaction that is reportable to IRS on your tax return.
Oh yes I do. I’m asking something in specific about income made from self employment. I provide free lance services for projects and get paid in ether. So that counts as income and income tax. Let’s take an example. I get $400 in eth (let’s say it’s .2 eth worth $400) for making a website for a project. Now when I go to sell it, say on coinbase, for fiat, there should be a cost basis of $400. Let’s say I immediately transfer that to coinbase and cash out for fiat. Is that now capital gains tax? If so, why and how?
If your cost basis is $400 and you cash out for $400 your capital gain is zero.
You still have to report the SELL transaction of crypto.
meanwhile your self-employed income is $400 (from crypto).
Since crypto is not stable, having a gain/loss of exactly zero is unlikely.