Cashing Out/Paying Taxes When You Trade On A Dex

[Anonymous No.57240562]

Burger here. Let's say I do a couple swaps on a shitcoin on Uniswap that has a huge run, and end up with like $200k. How do I cash this out while paying minimal goy tribute to the government? Do I just send it all to Coinbase as eth and cash out, then claim long term capital gains?

[Anonymous No.57240677]

Has nobody made a bunch of money trading shitcoins on dexes and then cashed out? How do you do it?

[Anonymous No.57240717]

>>57240677
You send the shitcoins to an exchange that allows you to do so. But now all US exchanges follow KYC regulations now. So youre gonna have to pay taxes homie. Other option is move to puerto rico.

[Anonymous No.57240731]

>>57240717
>So youre gonna have to pay taxes homie
I figured this much, but how do you go about it? Do you actually have to report your dex trades, or can you just turn it all into eth, send it to the cex, cash out, and claim long term cap gains?

[Anonymous No.57240762]

>>57240562
>>57240677

Sorry, let me be more clear. Yes, send the eth to coinbase, gemini, etc. find one with the lowest fees, and dont fucking market sell like a dumbass. Youre gonna have to pay shortterm capital gains tax. I will tell you at 200k expect 35-40% between fed and state if you live in california and ny. Any other state will reduce the % anywhere between 3-6. $160k sitting in a high yield savings for the time being will get your tax money back in 6 years...compounded. just pay the tax and be smart moving forward. Congrats on your earnings, im jeleous.

[Anonymous No.57240772]

>>57240731
Keep track of ALL transactions. Every transaction you made that made you money is taxed. All of it. Talk to a accountant asap and get it sorted with a professional. Its way too much for me to explain here.

[Anonymous No.57240819]

>>57240772
Damn, so you really have to keep a spread sheet of all your dex trades, or use cointracker or whatever. But you can still legitimately fall under long term cap gains if you just bought and held for a year, even if it's not on a cex, right?

[Anonymous No.57240979]

>>57240562
>>57240819
There is no difference between trades done on a DEX or trades done on a CEX.
The IRS treats any trade, any place, as a taxable event. You are responsible for keeping track of every trade and accurately calculating every dollar of profit.

For example,
Let's say you buy 100 ETH for $1000 each on 1 January 2023. $100,000 is your cost basis.
You swap them for USDC on Uniswap on 1 January 2024 at $3000 each. You have just created a tax liability of $200,000 of profit at longterm capital gains tax rates.

On 1 February 2024 you send the 300,000 USDC to Coinbase and sell for $300,000.
Your cost basis for the USDC was $300,000, so you will not owe any additional taxes on this trade.
However, you will still owe capital gains taxes on the $200,000 profit from the trade on 1 January.

These taxes are technically due each quarter, not April 15th of the next year. It's a common misconception. You'd need to make an "Early Estimated Payment" (assuming your gains were not cancelled out by losses).

Also: DEXes will be sending the IRS records of your DEX trades, and if your tax return does not account for these records, you will get audited.
The DEX, by the way, doesn't know what your cost basis was on the 300,000 USDC in the above situation. As far as they know it was zero. You have to prove to the IRS that it was, in fact, $300,000.

PS: Get out of any state with a state income tax. Leave if you can.

[Anonymous No.57241026]

>>57240979
>>57240562
Also: Your tax return needs to include any 1099 or similar document that a DEX generates for you. Same with 1099-INT (interest) from banks, etc. etc. The number one cause of audits in the US is taxpayers not submitting the brokerage/exchange/bank IRS forms that the IRS was already given a copy of but which the taxpayer neglected to include with their tax returns. Your broker and banks will give this to you, if they have any to give, usually by the end of February. March at the latest, generally.

For any serious crypto trader or investor, hire a tax professional who specializes in cryptocurrency.
Hint: They aren't easy to find, and they aren't cheap. Most CPAs have no idea what they are doing, and won't defend your return in an audit.

[Anonymous No.57241058]

just don't pay it, cash it out, never report anything. seriously you're a chump if you do their job for them

[Anonymous No.57241061]

>>57241026
Most dex's have a provision to generate a csv file which lists all tx activity for your address. If you're using metamask the gov already knows everything you did.

[Anonymous No.57241082]

>>57240979
>>57240562
Also, if I wasn't clear, since at least 2018, there is no distinction in the IRS' view between crypto-to-crypto trades and crypto-to-USD trades.
Any time you swap one asset for another, it is considered a SELL. So if you swap BTC for ETH, the IRS sees it no differently than if you sold BTC for USD. You owe taxes just the same. So you can't just do a million crypto-to-crypto trades, then only pay taxes when you sell for USD. It doesn't work like that.
Keep in mind though, your losses within a calendar year can be used to offset gains.
Seriously, find a tax professional if you are not just a hobbyist memer on 4chan.

[Anonymous No.57241130]

>>57241061
Unless you're using Monero or similar, everything that happens is transparent and out in the open on the blockchain. You don't need some auto-CSV feature to see that. However, it becomes harder to prove who controlls an address the more addresses away it gets from the exchange. Plus any auto generated transaction CSVs are likely to be inaccurate, and/or won't necessarily factor in cost basis, etc.
It's better to keep all of your own records like I described and let the DEX be responsible only for trades that occured within your account.
If the point of your comment is, don't try to hide taxes, then I agree. The IRS already contracts with companies like chainanysis during audits.

[Anonymous No.57241305]

>>57241026
>>57241082
>>57241130
If you want to prove you qualify for long term capital gains, how do you do that if you're not on a cex? Do you have to use something like cointracker, or can you just like print out a copy of like etherscan or whatever?

[Anonymous No.57241360]

>>57241305
All you need to do is state in your tax filing when you sell an asset, the date on which you acquired it and at what price. If it's over a year, it counts as longterm capital gains.
The key is being able to defend your claims during an audit. That is why record-keeping is important.
You can use cointracking programs, but ALL of them are notoriously inaccurate for complex transactions (like DeFi), and will all give different results. ALL of them list zero guarantee of accuracy and zero liability, in their terms of service.
Even if you use a cointracking program, I recommend you also manually keep records in Excel sheets of all transactions you do that aren't on a DEX. Something as simple as "2X swapped for 6Y on 1 January 2023". Include the transaction hash and the wallet and address(es) involved. If you prefer, also list the prices of the coins as they were at that time as well.

[Anonymous No.57241387]

>>57241360
Awesome, thanks for the replies

[Anonymous No.57242934]

Bullsit, the IRS cannot know your metamask wallet.

[Anonymous No.57242947]

>>57242934
why would a bull sit before jumping out of a plane?

[Anonymous No.57242980]

>>57240562
not unless you were holding it for a year. you have to report all dex trades not just the amount you send to coinbase. a lot of people will go to jail just paying taxes on the amount they send to an exchange and not reporting income from on chain activity. if its linked to an account that touched a kyc cex they will find out eventually unless you are talking about small amounts

[Anonymous No.57243066]

Bump, following this.

[Anonymous No.57243081]

To think i would see the day of a /biz thread with actual useful information without someone saying the n word. A tip of my hat to you frens

[Anonymous No.57243087]

>>57241360
Correction. That aren't on a **CEX** is what I meant to say.
Keep manual records for all activity that does not occur on a CEX (centralized exchange). So anything that happens on Uniswap, Thorswap, etc.

[Anonymous No.57243128]

>>57241130
Another correction:
"and let the **CEX** be responsible only for trades that occured within your account."

Meant to say CEX, not DEX, in that sentence.

[Anonymous No.57243148]

Wtf I love the IRS now

[Anonymous No.57243154]

>>57240979
Another correction:
>DEXes will be sending the IRS records of your DEX trades, and if your tax return does not account for these records, you will get audited.
The DEX, by the way, doesn't know what your cost basis was on the 300,000 USDC in the above situation.
Every instance of the word DEX in the above paragraph, should say **CEX**.

[Anonymous No.57243209]

>>57241026
Another correction:
>Your tax return needs to include any 1099 or similar document that a DEX generates for you.
I should have said **CEX**.