Hey everyone! So I've got a stash of bitcoin gambling winnings from way back that's been sitting in cold storage, and I'm thinking about taking it out. I've reported my winnings as a pro gambler for a while now, and I’m considering two options: either 1) go back and fix my past tax returns to show these winnings or 2) just start declaring my winnings from now on. The thing is, there's been so much rollover that the older winnings have been offset by losses, and the winnings are mostly fresh. I'm curious about the idea of just moving forward and what the possible upsides and downsides might be. Would appreciate any insights!
Hi Lost!
This is exactly what I help with I am an attorney and CPA and every year I help hundreds of clients who have not previously reported (or reported in full) their crypto transactions.
In most cases, it makes the most sense to go back and amend the prior years to report the wins, any capital gains, and income. The IRS is getting more information then ever before from a variety of sources and we get calls everyday from people being audited for not reporting their prior year activity. By reporting the prior years, you'll hopefully reduce your audit risk.
If you report all the gains in the current year, you won't resolve the prior years and you'll still pay taxes on the total gains.
One point we should discuss is which years the gains are from. The IRS typically has 3 years to audit tax returns, but it can be extended to 6 years if there is an understatement of tax of 25% or more. This threshold is fairly easy for the IRS to reach in crypto or gambling audits.
Lets chat and discuss the best path forward!
To begin with, you could say in which country you have to pay these taxes on gambling, as the legislation may vary from one country to another.
I guess you are a CPA in the USA, right?
Hello,
It sounds like you're considering a significant financial decision. Here are some pros and cons: Lone Star College
Option 1: Amending Previous Tax Years
Pros:
Accuracy: Reflects your earnings accurately for each tax year.
Potential Benefits: You may benefit from any lower tax rates or deductions available in past years.
Cons:
Complexity: Amending multiple tax years can be administratively burdensome.
Interest and Penalties: Late payments could result in interest or penalties.
Option 2: Declaring Going Forward
Pros:
Simpler: Moving forward can simplify your tax filings.
Immediate Clarity: You'll avoid the complexities of amending past returns.
Cons:
Audit Risk: Not reporting past winnings accurately might raise flags during an audit.
Missed Deductions: Potential deductions or benefits from past winnings might be lost.
Ultimately, consulting a tax professional is recommended to ensure you navigate this correctly and make the best decisions based on your unique circumstances.
Best Regards,
Joan Martin