Pacun

39 minutes ago, TexTaxToo said:

And the IRS has delayed the implementation of the reporting requirement for cryptocurrency transactions:

https://www.irs.gov/newsroom/treasury-irs-provide-transitional-guidance-for-broker-reporting-on-digital-assets

Still taxable. Papers means nothing... you must report your gains and pay taxes on them if any.

Remember that I don't know where my bank has the database of my transactions by block chain is open to anyone who wants to see my transactions and any profits I made.  So the fact that the IRS has said to the crypto exchanges that they don't have to report to the IRS, it doesn't mean that we don't have to report gains and it doesn't mean that the records are not available to everyone.

China has banned crypto because they are creating their own digital yuan and don't want any competition.

On other posts we have said that our industry is shrinking because Turbo tax has gained popularity and each client they have taken, has been taken from our pools. Other free efiling platforms have also sliced our pool.  We should embrace crypto because it will save our jobs, at least for some of us.  The sooner we embrace it, the better. The genius is out of the bottle and unstoppable. In 5 years, every other person (at least) will have crypto transactions. 

I work for a company and I get paid... with something... let's call it money. I don't see it and don't touch and I don't know where it is registered... but it is registered somewhere... not the block chain.  Every other week, a transaction is registered debiting my employer's account and crediting mine. The next day, my creditors are credited and those amounts are registered somewhere. NONE of us see the money and we only know that an entry has been kept somewhere. We have been using a crypto similar "thing" for a while, correct? At least I have.

With Covid-19, I was happy I never had to touch money and preferred those registered transactions where ever they existed. 

Sch C income $88,000

Sch D 141,800. For simplicity:
1a $4,800 $14,000 = -$9,200
1b $2,000 $1000 = $1,000
8a $250,000 $100,000 = $150,000

If short term loses were larger than long term gains, we would use $3,000 loses and carry the remainder to future years, correct?
 

Let's say someone invested 2 billions in Zec in January 2022 and they sold them in March 2022 for 4 billions.  Zec really doubled in price between January and March 2022.  Then you moved to a more "stable" coin and you purchased 4 billion in bit coin. On March 31, bit coin cost $46,000. Currently it cost about is about $16000. Needless to say that the company has less than its 2billion original investment right now. 

So if the company doesn't sell bit coin before year end, it will have a tax bill for 2 billion dollars of short term capital gains. By selling the bit coin they can have a loss in their return or they can sell just enough to pay 0 taxes. They can sell and purchase immediately after the same amount of bitcoin and be OK. 

Not such an animal in crypto!  Wash sales don't exist.

2 hours ago, Catherine said:

I had a client who mined bitcoin (briefly, for one year) some time ago. He did not track electric usage, and only got a few coins. Basically ran his computer overnight on it. So yes, bitcoin mining can be a hobby.

Excellent, but based on hash difficulty, it will be hard to find someone doing it as a hobby who has mined any bitcoin in 2022.

3 minutes ago, Max W said:

Client has to pay tax on the mined bitcoins as ordinary income at FMV, which would be $16000 * 6.25 = $100,000

Items 2 and 4 STCG.  Item 3,  LTCG

Item 5, Other income.

Item 5 is a freebie. Reduction in purchasing price of the computer. 

I guess we have to understand how bitcoin is mined and I wish I had an example of someone who has mined 6.25 bitcoins as a hobby but I don't.  The definition that you have a choice between schedule C and hobby is for other coins that you can mine with hard drives and a home computer, but if you want to try to answer the problem as a hobby, please go ahead. Some other people might do it on schedule C as suggested. Nothing wrong with either approach.

Mining bitcoin is schedule C income per definition since so far no one has a hobby of mining bitcoin. 

The reason for the exercise is to help at least one of our colleagues. Also, since we are the professionals helping people to report their earnings/loses, we need to practice crypto because later on we won't have time to read about this subject.

The exercise seems to be easy because it doesn't include harder/divided subjects such as NFTs, staking, hard forks, liquid pools, wrapped coins/tokens, validators rewards, P2E, and many other ways of making money from Crypto. 

Since hobby expenses are not currently allowed, it makes sense that the taxpayer insists on Schedule C. As his preparer, I would be inclined to report it as a hobby. 

How will this single tax payer report these transactions that happened in 2022:

1.- Client had his computer mining bitcoin and sold one bit coin for $16,000 at the very moment he had dominion and control of his 6.25 coins he mined in 2022. He is not going to get more coins this year for our example. For his mining operation he has utilities cost of $10k and depreciation expenses for $2k. 

2.- at the beginning of 2022, he purchased 4 ETH coins at $3,500 each for a grand total of $14,000. In November 2022 he sold his 4 coins at $1,200 each for a grand total of $4,800.

3.- in 2020, he purchased 10 Yfi coins at $10,000 each for a grand total of $100,000 and sold them in 2022 at $25,000 each for a grand total of $250,000. 

4.- In January 2022, he opened a crypto debit card and funded it with 100 Solana coins he purchased at $10 each for a total of $1,000. In March 2022, he used his crypto debit card to purchase a computer for his in-laws and paid $2,000 using all his Solana coins which had doubled in price.

5.- For using his crypto debit card to purchase the computer he was rewarded $200 in fiat which he pocketed. 

Could you please let me know the net income on Sch C, amount Short term gain/loses and any carry over and Long Term Gains?

 Thank you. 

On 12/21/2022 at 12:50 PM, Terry D EA said:

<<<<<Is he getting earned income credit by using his winnings on schedule C?>>>>> I'm a bit confused. He has a regular job and earns 20-40K gambling. No mention of dependent children in the original OP or filing status. Enlighten me, how does the EITC come into play here? The main question is whether he meets the requirements to be a professional gambler. I agree with the other replies

I wish I could enlighten you but I am asking questions, hence my ? (question mark) at the end of each sentence.

On 12/19/2022 at 11:43 AM, ETax847 said:

It's definitely interesting given that he devotes 2-4 hours a day in research for his sports bets.  He is trying to make the argument it is no different than a part time job.  He keeps records detailing his bets, has a separate bank account for this activity and has a profit motive.

If he insists that he is in business, it is because his schedule C has a bunch of deductions, correct? Wil an audit read "no changes" if audited? Is he getting earned income credit by using his winnings on schedule C?

Let's say you have .5 million in bank accounts and a house and you want a to set up a living trust, how much does it cost? Will you use a local lawyer or someone on line?

You don't need to send anything to the IRS, just the forms needed for a regular case. 

If she has a final divorce dated in November 2022, you will need to know if she maintained the home, which was the main home of her child for at least 6 months in 2022. It will be nice if age of the child was provided and if he was full time student. Assuming he is 18, no need for full time student status. So you need to concentrate on who maintained the home from Jan to Sept and is she maintained it for 4 months (plus nov and dec), and it was the main home for child, she can claim Head of Household even if the other parent claims the child. 

3 hours ago, Margaret CPA in OH said:

Curious - what does it mean, 'on a domain?' I thought there were only desktop or server choices.  I have a 'domain name' for my site but, since ATX is not cloud-based, I'm having trouble understanding this situation.  Would you explain for this simpleton?

Let's say that you have 3 computers but each one is a stand alone computer. Your password is checked by each computer independently. In most cases, you only need to have the computer you are using on and everything will work. On a domain, there is a server, and the other computers are workstations. When you log on to the workstation, the server verifies your user name and password.  In the case of ATX, you install the server software for ATX on the server and most likely that server holds the clients' data. If the server is down, you don't have access to your clients data. The advantage is that everybody in the office uses the same data repository and everybody has access to all the clients (if needed). 

You don't need a domain to run ATX server but the computers need to be connected to each other and be using the same IP subnet, but having a domain is better when you a few computers. 

Technically, you can install the server portion on laptop running windows 10/11 and that becomes, NOT the server for the domain, but the server for ATX. Then you can connect other desktops, laptops or servers to that laptop and they are the subordinates of the laptop running the ATX server software. Keep in mind that the laptop still reports to the domain server (controller).  Please ignore this last paragraph if needed.

yes, there were two distributions.... one for 45K and another for 99K. Client paid taxes and penalty on the 45K. the 99K was divided in 3 years and for 2020, 33K were re-invested (rolled over). IRS is wrong and I have seen the signed 8915-E form and sent a copy to the "auditor". 

client withdraw 99K due to covid in 2020. Wife (filing jointly) had her workplace shutdown in 2020. 

On March 26, 2021, client deposited back 33K to his plan as a rollover for year 2020. IRS letter states that $144K were distributed and only $45K were reported as income.  As you know, those $99K could be divided 3 ways and reported 1/3 in 2020, 1/3 in 2021, 1/3 in 2022 AND the whole or portion amount could have been rolled over before April 15, 2023. (1040Xs might be needed if taxes paid and monies were rolled over)

I have seen people on this forum citing the sessions of the code when replying to posts. If you have a letter or cites please share them since I am preparing a letter for the IRS.

Client efiled and form 8915-E was added as pdf.

I would efile as soon as possible and pay from my pocket any penalty.  It happened to me once and by paying the penalty from my pocket, I never forget to efile anymore. 

After that event, every April fools day, I click on each return on return manager to see if efile was accepted.  If I don't see the efile transmission, I check my paperwork. I also make a note on return manager if client picked up her/his papers and didn't file with us. I also make a note such as "2021 by mail" if forms were sent by mail. As you know, checking 1000 returns on return manager might take you an hour but it is a good investment.

I think I use the field named "client #" to make my notes. Since this field is rolled over each year, I make sure I use the year that was paper filed so that I don't get confused in subsequent years. "Paper filed" will not cut it for me. 

Transportation is ordinary and necessary for that job. So, I would ask him how many miles he ran his car last year and then ask him to calculate what percentage was business vs personal and enter that information against schedule C.  Most of the time, I prepare returns, I don't audit my clients.

Since he is under EIC, he didn't make a lot of money. He might know how many houses he painted and how many days he works on each house (on average), he might know the distance to the house and then you can help him to recreate. Again, ordinary and necessary is key. 

On 9/19/2022 at 4:58 PM, Dave T said:

  I need to add two supporting schedules EIC and form 8867. How do I do that?  

Thank you

The same way you do it when you prepare a regular return... by clicking on the form that needs to be added.

If you are paper filing, you need to attach new forms that were not originally filed AND forms that have changed.  If the customer efiled, you should be able to efile the amended return and as long as you fill out the new forms, they will be included in the efile file. 

So, if I want to partner with the owner of ABC, LLC and I invest $10K from my 21 month interest free credit card, ABC, LLC will get a 1099-K?

On 9/9/2022 at 5:16 PM, schirallicpa said:

You know this is somehow going to end up in the tax return and in our hands.............

Debt forgives from that law will not be taxable nor reportable.

Follow the dependent rules and file accordingly.  Don't worry about the $1,400 because that's based on years and/or issues that don't have anything to do with the parents' return. 

Identity theft will not change the facts on 2021 parents' return either. 

Maybe spouse got it the previous year and was renewed semi automatically.  Was her marital status changed in the last couple of years?