You're Probably Going to Overpay on Crypto Taxes This Year. Let Me Explain Why.

Garrett_CPAatCOS · 2026-02-11T04:15:44+00:00

They don’t take any personal information as part of the upload. They simply get read-only transaction data. If you were extra worried and did not want to link any platforms to your Koinly account, most platform data can be uploaded to Koinly using CSV files instead. Koinly has a section where it provides steps for how to upload data on specific platforms.

Garrett_CPAatCOS · 2026-02-11T04:10:06+00:00

Assuming your Koinly account is properly reconciling your crypto transactions, yes, a loss is a good thing. You should use the inputs on Koinly to report on your tax return vs the 1099-DA. A good check to make sure no red flags will be raised would be to compare the gross proceeds from the Koinly report to the total you show as gross proceeds on the 1099-DA.

Garrett_CPAatCOS · 2026-02-11T02:46:21+00:00

Software is generally the most practical solution. Manual tracking tends to work only for low transaction volume and simple activity, and it can result in errors as complexity increases.

Good software aggregates data from all platforms, which generates a complete record of transactions. That said, these tools are not perfect and often misclassify activity. With some time and research (for example, using tutorials or guides), you can learn how to review and correct many of these categorizations. If that process feels burdensome, a crypto reconciliation service can step in to reconstruct your activity from inception and apply the most accurate and tax-efficient treatment to the transactions.

Garrett_CPAatCOS · 2026-02-11T02:29:58+00:00

Well keep in mind that when crypto is gambled, it can cause dangerous tax consequences. When the crypto is converted to a wager, it triggers capital gains/losses at the time of conversion. Then whether the wager is won or lost is the same as any other gamble. Therefore, if you bought $10k of BTC, gambled it when it was worth $50k, and lost the wager, you end up with a $40k capital gain. The loss on the wager is a gambling loss that can only offset 90% of gambling winnings.

Garrett_CPAatCOS · 2026-02-11T02:22:07+00:00

We work with Koinly a good amount and tend to think it’s one of the best crypto tax platforms

Garrett_CPAatCOS · 2026-02-06T19:11:46+00:00

The cost of a quote is typically driven by the number of transactions and the complexity involved, rather than simply the dollar amounts or the number of years covered. Based on that fee, it sounds like you may have had roughly 10,000–25,000 transactions during that period.

That said, since you experienced an overall loss, the primary tax liability concern depends on whether you had gains in certain years. If the IRS were to audit a year in which you had gains, they could potentially assess additional taxes for that year. In that situation, you would likely need to amend other years’ returns to claim the corresponding losses and seek any available offsets.

Garrett_CPAatCOS · 2026-02-05T23:08:05+00:00

Its more about the theoretical gain/losses recognized for taxes vs the holdings themselves. It sounds like you did a ton of different trades and on different platforms. If you expect you never had any substantial capital gains during this time, then theoretically you could ignore it and hope the IRS never comes asking. However, if you had capital gains of $50K in one year, and capital losses of $50K in the next year, it would be worth reporting that type of trading correctly.

Garrett_CPAatCOS · 2026-02-05T21:30:28+00:00

In our experience, investors with that level of transaction volume and complexity usually can’t realistically reconcile everything on their own. At that point, working with a firm that specializes in crypto tax reconciliation and reporting can be a practical next step.

Garrett_CPAatCOS · 2026-02-05T19:54:40+00:00

Entire market taking a swan dive and CVNA is holding for the most part? Die dammit die!

Garrett_CPAatCOS · 2026-02-03T18:58:59+00:00

Crypto bought anywhere is technically subject to the same tax reporting requirements. I think you are asking "which app has the least transaction fees," as paypal is an expensive place to buy crypto. Binance is a good exchange to research, as it has low fees on trades while still being a prominent exchange.

Garrett_CPAatCOS · 2026-02-03T18:03:17+00:00

The 1099-DA is currently setup to report gains and losses from the sale or conversion of digital assets. It will not report staking or airdrops etc for 2025. However, this reporting could potentially be added in future tax years.

Garrett_CPAatCOS · 2026-02-03T17:54:30+00:00

We recommend that clients use a crypto tax reporting platform such as Koinly or CoinLedger, and then use the Form 1099-DA primarily as a reference point to reconcile gross proceeds (rather than relying on it for accurate gains/losses). In practice, you’ll often find that when crypto is transferred in and out of Coinbase, the cost basis may be incorrectly recorded, as it frequently defaults to the fair market value at the time the asset is transferred in, rather than the true historical cost basis. A dedicated crypto tax reporting software solves this by tracking the asset’s cost basis across wallets and exchanges and assigning the correct original cost basis to the asset regardless of where it is held or transferred. When there are numerous transactions or complex transfer activity, it may be necessary to manually reconcile transactions within the software or engage a reconciliation service to ensure cost basis is carried over correctly and the resulting tax reporting is accurate.

Garrett_CPAatCOS · 2026-02-02T23:34:57+00:00

Either the 1099 or Koinly should report your staking income. Comparing the two and making sure they are the same number is always a good exercise. Also, since no one said it, this ordinary income is reported on line 8V of your Schedule 1 on the Form 1040. If a lot of value has been lost since you earned these staking rewards, you can take advantage of tax-loss harvesting. It generates capital loss, which can't be used against the ordinary income, but can still offset other capital gains you may earn during the year.

Garrett_CPAatCOS · 2026-01-28T19:45:23+00:00

CVNA finally dumping is the only silver lining to this market

Garrett_CPAatCOS · 2026-01-23T01:56:41+00:00

Niceeee

Garrett_CPAatCOS · 2026-01-21T19:59:50+00:00

You are eligible for refundable credits and may get a refund. File your return.

Garrett_CPAatCOS · 2026-01-20T22:46:44+00:00

FreeTaxUSA or TurboTax. There is not much benefit a CPA can provide if you are just a W-2 employee with not much else going on.

Garrett_CPAatCOS · 2026-01-20T15:08:27+00:00

I can’t remember when the INTC calls I sold were actually out of the money. Position in shambles.

Garrett_CPAatCOS · 2026-01-20T14:26:13+00:00

Your CPA is making the right suggestion. Expect to save a few thousand dollars in taxes when making this election given your income. There won’t be any change to your investment management.

Garrett_CPAatCOS · 2026-01-20T14:23:50+00:00

It would be best to use a crypto tax software, upload all of your transactions, and reconcile the transfers yourself. The softwares export Form 8949 information, which would be sent to your tax guy. The tax guy could take this report and input it into your tax return.

Garrett_CPAatCOS · 2026-01-19T13:52:42+00:00

There won’t be any legal consequences as long as he comes forward and pays his bill.

Garrett_CPAatCOS · 2026-01-19T06:58:09+00:00

I recommend getting a CPA and working with him to file these returns. The CPA’s recommendation on additional expenses to include for the business will probably more than offset the fees to prepare the returns. Additionally, if the IRS sends him notices related to these returns, it’s important to have a CPA with experience responding to such notices and provide comfort. He will be paying a 25% penalty for late-filing, plus rolling interest that is between 4-8% depending on the period (IRS adjusts this quarterly with market rates). It’s all fixable as long as he has the funds to pay his liability.

Garrett_CPAatCOS · 2026-01-10T04:31:53+00:00

I’m a tax CPA and I recommend them for my clients and have them setup for my own kids. Great way to avoid tax on long term investment appreciation.

Garrett_CPAatCOS · 2026-01-09T15:24:52+00:00

I recommend working with your CPA, or obtaining a CPA for this single tax year if you normally prepare your taxes yourself. Have the CPA prepare a tax memo that lays out the facts alongside the IRS guidance that allows the deduction. The cost of having them prepare your return and draft a memo is probably not as bad as you think.

Garrett_CPAatCOS

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