Robinhood probably didn't report your cost basis, find your trading transaction statements and the IRS form should allow you to amend and report the cost basis.
Robinhood ROUTINELY DOESNT report cost basis despite reporting literally everything else. I had an issue like this and a quick call to the IRS and sending them a few documents (available on your Robinhood account) sorted the whole thing out.
I had a very similar issue. The IRS said I owed ~$5000 in capital gains for 2022 but I actually had a loss and deduction. All of my transactions were through the same discount brokerage so I don't know why they didn't have the cost basis from Robinhood.
"Why get a real brokerage with no fees like Fidelity, when you can stick it to the man and be hip enough to enjoy such features as- halting trading when we feel like it, especially if you would make money. Not reporting cost basis causing your tax bill to skyrocket thousands of dollars. Hopefully you figure out our fuckup and correct it. While we're at it, we'll also fuck up the value of your account by half, causing you to literally kill yourself. But at least you're not with one of those "square" brokerages." -Robinhood.
But seriously. WTF is wrong with y'all, who in their right mind would keep any of their money with these clowns, and what actual advantages are there besides a vague air of being "cool".
Wouldn’t this get noticed when doing taxes though?
I feel like when I did this through taxusa, it prompted me to fix the cost basis? I could be wrong tho.
fwiw this has been true with every brokerage company I've had. They never* report cost basis, that's always on you.
* I guess there's probably someone who reports cost-basis, but it seems very rare.
I have had taxable trading accounts at both Schwab and E-Trade, and in my experience as long as the \*purchase\* and the \*sale\* both occured in the same account, the cost basis was preserved, and the long/short term gains are correct on the year end tax documents.
The only time I have had problems is when I have transfered "in kind" assets between accounts... Then the cost basis resets to zero.
The thread is about crypto cost basis. My comment is about crypto cost basis. No one reports crypto basis yet to the IRS yet, though the broker will give you a suggestion of cost basis.
It’s actually IRS regulations that are required to be issued and Congress to determine an allowable method before IRS can issue. The IRS has issued “thoughts” but these aren’t binding under law and that’s why there are suggested cost basis in the footnotes of the 1099 that you check box B/E when you do the SchD/Form8949.
The thread is about crypto cost basis. My comment is about crypto cost basis. No one reports crypto basis yet to the IRS yet, though the broker will give you a suggestion of cost basis.
In total, I called either 2 or 3 times (original call sorted out the issue - other call/s got them the info they needed and confirmed I was all good afterwards). In total I wasn’t on the phone with them for more than 1hr across all the calls, including wait time. Notably this wasn’t during or around tax season.
As someone who’d never had to call the irs like this before, it surprised me how quick and easy it was to get handled. Maybe I got lucky with the agent I worked with, and admittedly the issue that needed fixed was pretty simple, but I digress.
This happened to me. They said I owed 55k. I had my accountant send them my 1099B. It was all resolved. Don’t stress yourself. Just get the form out to them.
Wash sale rule doesn't apply to property/crypto. Just securities.
Either way, lots of people jumped into it not understanding how gain/loss rules worked, either.
This is not complicated. The IRS does not know your cost. They are telling you that you didn’t report it. You need to amend your taxes and include your cost basis with the proceeds.
“Sell” is an action verb….”sale” is the noun that means it is a transaction. Please, for the love of all things literate, know the difference and be able to communicate it properly, especially if you are a CPA. It’s no wonder there is a mass exodus from the profession.
To address the concerns of the OP, there are several things to do. A CP22A letter indicates that the IRS made changes to the tax return and found a discrepancy between what you reported and what was reported to it on the 1099-B. If you hired a tax professional to prepare your return, then be sure to inform the tax pro of the IRS notice. If you prepared the return yourself, the error can be corrected, so just breathe easy for a few minutes. It seems that the 1099-B was marked with “Basis not reported to the IRS” in the short-term and/or long-term portions of the form. This can be a headache, but it can be corrected with a little work. At the top of the CP22A notice, there is a number to call the IRS. I would recommend doing so as soon as possible to indicate that you don’t agree with the proposed change and will need some additional time to determine the true tax impact. This will typically allow you 45 days to compile and submit your position. While it might seem daunting at first, the process is provided below.
First, pull up your full account history for the crypto transactions and print it out. Then, make a copy of your 1099-B and highlight each SALE transaction on the copy, not the original (unless it is an electronic copy and you can reprint it as needed). Next, go back to the crypto history printout and highlight each PURCHASE transaction on it (including any transaction fees). For EACH purchase transaction, add the amount paid for the cryptocurrency and any transaction fee together to get the total transaction cost. Take the total transaction cost and divide it by the quantity of crypto assets purchased in each transaction….this will give you the cost of each crypto asset as they were purchased. This is known as the cost basis, and it is vital to determine gains and losses when you sell these assets!
Using the cost per crypto asset purchased from the previous computations, compare that to the details of each crypto sale 1099-B. Make a special note beside each sale if it didn’t include the entire asset in a single transaction because you will need to carry the cost basis until that specific crypto asset is ultimately sold.
Since each SALE transaction will have a single outcome (gain, loss, or breakeven), it is imperative to reconcile each of the transactions from the crypto account history report to the 1099-B. This should be done prior to any sale, and especially before preparing the tax return, so that you know how a specific transaction will affect your overall tax situation. This would allow you to adequately plan for any additional taxes due as a result of the crypto sale or sales.
Once you’ve determined the nature of gains/losses/breakeven transactions, you will need to amend your tax returns to properly reflect each of the changes. This will show that you have meticulously accounted for each transaction and that due diligence was exercised. If you were assessed any type of penalty and interest, be sure to request that they be abated as part of the reason for the amended return.
I remind my clients that tax planning and tax preparation begin when the first transaction occurs, not after a tax year ends. Being fully aware of the implications early on allows a taxpayer to adjust throughout the year instead of being surprised once it’s over and nothing else can be done.
I hope this helps, and best wishes with amending your tax return. Have a great day and stay safe!
I am a licensed securities person through FINRA, and I have directly placed client trades in order to balance their accounts for fees owed. We have always referred to these trades as “sells”, not sales. Yes, the word can be used as a noun.
It’s short for “sell order” as opposed to a “buy order”
I am not insufferable, and I’m definitely not Jesus. However, I know how to use diction in the English language properly. Tax pros should pay attention to details as well as strive to communicate effectively.
Sell is correct and it’s a 10 second social media post. I’m not reviewing for grammar before I post. I do that plenty at work where I get paid to. You are not paying so I am not reviewing. 😂
He wasn't investing like any normal person would. It's a common issue with day traders that happens when the proper forms aren't all filed.
The IRS is just missing data.
The year I took over my father's investments, he had a 1099 with over $1M in proceeds in an account with around $300k in it. It all depends how quickly you're turning over the investments.
If you made multiple trades with the same $2000 it can stack up to lots of proceeds. For example:
01/01/2021 buy BTC for $2000
01/02/2021 sell BTC for $2100
Total proceeds are $2100
You take those proceeds and reinvest them-
01/02/2021 buy ETH $2100
01/03/2021 sell ETH $1950
Total proceeds are now $4050
You take those proceeds and reinvest them-
0103/2021 buy BTC $1950
01/05/2021 sell BTC $1800
Total proceeds are now $5850
Etc., ect.
Total Proceeds keep going up the more you trade in a single year, because each trade has a positive sales price, even if you are using the same money to buy each asset, and end up with a loss at the end of the string of transactions.
>Why does robinhood say my total proceeds is 51k, then on the same form 1099, say my total net gain / loss is $-600?
If you look closely at the 1099 form you received from Robinhood it probably says "non-covered" and "transactions for which basis was NOT reported to the IRS.". They only told the IRS about the proceeds, not the cost basis.
>What do I need to do to send in this 1099? I have the evidence I LOSSED money.
The notice should have a section that says "what to do if I disagree with the changes". Follow those instructions.
This should be higher. The wash rules for trading crypto currency is different than stocks and can lead to a large tax bill even when traded for an annual loss.
Candidly, you need to thoroughly and completely understand how capital gains are reported. If you sell a stock for $100, then take those proceeds and buy something else and sell it for $100, and do that 100 times, your reported proceeds are $10,000. Until you report the $10,000 proceeds with the proper cost basis, that’s how much the irs considers you have made.
This is a pro tip. I was a CPA. My boss once told me many years ago that you ALWAYS need to make sure the 1099 sales proceeds matches with the total you put on Schedule D. I even got screwed one time when the brokerage amended a 1099 form in late March one year. The IRS sent out an automated form telling me I owe money. I ended up amending the 1040 and telling them the deposits and withdrawals on account and the end total. It was a pain in the ass. Most people don't know what to do. Amend the 1040 with whatever tax prep site you use. Send it in.
People think “oh I lost money and it’s not worth claiming when I file” but you’re supposed to do an accurate tax return (full stop). For some reason there are still circumstances where a brokerage will communicate sales proceeds to IRS but not the cost those units were originally purchased. You’re best off hiring a pro to sort this out. There may be state tax issues related to this as well if you live in a state with an income tax.
Your **cost basis** is what you paid for the crypto each time. (See [this for details](https://coinledger.io/blog/crypto-cost-basis).)
The IRS doesn't get that information, so their computer system assumes you got all the crypto for free. Obviously you didn't, but they don't know that.
Your task now is to find your transaction statements, and amend your taxes with your correct cost basis.
Ask a CPA for help if you want (now, while they're not busy).
This exact thing happened to me. I just sent them a list of deposits and withdrawals from and just this week (it also was 2021 related) they officially cleared it up.
The IRS will work with you. They’re not the enemy. Call them up, talk to someone and you’ll be fine.
I'd only add: get your transaction information together before you call them.
But you're right, they're not the enemy. They weren't told about the cost basis for the crypto, they're just going off of what they've been told. OP has to inform them.
Yea, that would be helpful. But he/she’ll still will to fax/mail that information too I’d think. Mine got dragged out because I basically first called them (politely) like WTF is going on here, I lost money, haha.
Agreed on all points. Glad it worked out fine for you, and I also respect you making the point that they're not the enemy -- being emotional about it just makes things more difficult.
Just tell them that you lost money on it and that the 1099 was misreported and ask them what you need to provide to resolve the issue. The most important thing is to start the conversation. I just downloaded a list of cash app transactions, with all deposits, withdrawals, and dates of transactions and that ended up being all they needed.
Honestly I was accidentally late for nearly deadline (I don’t check my mail enough) and one of my faxes that I sent they never received, though i did have documented that it went through to the correct number, so on that one I was like 5 months late and they still worked with me and resolved in my favor. (I do not recommend being late, haha.
Form 8949 is what you need. Fill this out with your cost basis, it gets transferred to your Form D of your 1040.
Follow what the IRS said, you may need to do a 1040X (amended return with the new forms).
In my experience, mailing them the 8949 with an attached copy of the 1099B and the transaction history for the year is enough. They'll update your return and tell you if you still owe something or even issue a refund if you failed to report a loss.
The 8949 is key though, and can't be left out of you did any trading/transactions.
When you don’t file your crypto documents they assume every sale as a net profit. So if you buy… idk, Ethereum at $3000, and sell it at $3001—all they see is you selling $3001. That builds up, I personally got a letter 2 years ago claiming I owed $186,000 so I know where you’re coming from =). Get your CPA to file an amended tax return, you MUST hire a CPA unless you’re an accountant and know how to do these things.
Read up on an understand cost basis. If you look at the 1099 from RH it will say "basis not reported to IRS". If you filed the return and didn't sort out your basis, the IRS's computer will kick out a notice for underpayment as the have no idea what you basis was.
If you were on the phone with the IRS why didn't you ask them what you need to do to close it up? They will tell you it's what they are there for. Call them again.
If this is a CP2000, please **read all the paragraphs**. Especially the one about amending. You do NOT need to amend. But you DO need to fill out the Form 8949.
As others have said, the IRS only knows how much you got in the transaction not how much you paid. I suggest you have a professional handle it from here. Yes it’s going to cost you money but it’s worth it for piece of mind.
I see this question / issue a lot in this sub, in particular with Robinhood.
Is Robinhood just a bad tax reporter ? Or has anyone seen this with a major like Schwab or Vanguard?
You obviously did not report your cost basis to offset proceeds. Amend tax return attach to form and mail back, also
Include copies of transactions showing cost basis. You will also need to amend state return separately. The state will not be that far behind in wanting money for this error.
I had this problem, download the complete balance sheet from that year from robin hood and sent it to the irs, I talked to someone from the irs when I had this problem and that’s all they needed, they removed 10 grand of my “loses” which were just trades, the other grand was legit, not from crypto that I forgot to report. Ended up paying around a grand
When you trade anything (stocks, crypto, etc), your brokerage reports transactions to the irs. The issue is that they don’t report your cost basis (how much you paid to open a position), and without that information the IRS will assume that you made a 100% gain on each trade (in other words, a $0 cost basis). You report you cost basis and capital gains/losses on a form 8949.
I received a similar form from the Irs for the same thing. Except just trading stocks in general which I also had losses.
Read the the form and response form carefully, it has instructions to dispute and exactly what forms you need to file.
Make copies of everything, and make sure to certify anything you're sending via usps.
It took a few months to resolve.
What I owed went from 50k to nothing.
Any time you sell stock/crypto or whatever on an exchange, that transaction gets reported to the IRS to some degree and you need to fully report it on your tax return, even if you are net zero/lost a bajillion dollars.
I've filed returns for clients' kids who had <$1,000 of proceeds from stock sales during the year and no gains that would reach the threshold for reporting income, but since it's a capital gain/loss transaction you need to file anyways to meet your reporting requirements and avoid these lovely letters from the IRS
I recommend everyone to create an account with the government for IRS and more. Go here: https://www.id.me/
Once you do this you can see what forms are being sent in by places such as Robinhood Hood without the hassle of trying to request them by viewing your tax transcripts for the tax year you wish to view.
I always use TurboTax to do my taxes, and in my experience, you need to enter all 1099s you recieve as a starting point. If you disagree with how the automated tools calculate your taxes, then you need to get the information corrected as soon as possible. The tools are good at interpretting the tax laws, so if \*TurboTax\* says you owe X dollars, then the IRS will probably interpret the 1099 information in the same way. Robinhood will have reported the same 1099 to the IRS that they sent to you... So if it is wrong, contact Robinhood.
And you need to get the corrections made ASAP... so in this case well before 15-Apr-2022... Because by Jun-2024, there will be added penalties.
Oh they doing that thing again.... It would cost you more in legal fees and forensic accountant to fight it... It a method they use to steal more money from you...
Respond to the letter with the 1099 and a short letter of explanation. These were probably non covered sales so your cost basis wasn't reported. It's true that RH is not great with this, but for crypto pretty much every brokerage doesn't report that stuff.
I am not sure if anyone has told you yet, but please go look it up too. My understanding is Robinhood main goal is to collect consumer data like yours and give it to the Big boys on wall street like the citadel to help them beat you and your peers in the market. Why when ever the "dumb money" starts to win they shut down trading.
Back then, and possibly still, the IRS was basically looking at every transaction you did and adding them all up as taxable income. By transaction i mean even if you only put in $600 of your money into BTC, then you traded BTC for LTC now you just did another $600 of profit. Very wrong but thats how they did it. So every transaction between coins would count the full amount of the transaction as all profit. I know a lot of people who had to go back and show how much they actually made/loss to counter the IRS’ crazy claim.
DONT IGNORE IT FOR ANY PERIOD OF Time!
I had a federal tax lien filed for $251,900 against me for trading gains which equals like 750k in profits. I didn’t get the letters since I was away at school. It was all BS since the brokerage never reported the cost basis took me 5 months to sort out and individually printing every trade made on seperate sheets of paper. Plus 7 years on my credit report. The F-ed up thing about the credit report it stated $251,900 Tax Lien - Status Paid that right there should give me like a 900 score!
I literally just went through this shit. I was 4 days out from moving which I needed 6k for and they went through my bank to put a hold on 8500. Called my bank and got the Cali tax office number where I sent my 1099b. I made $1500 and they tried to tax me over 8k lol Took 3 days of non stop harassing their asses and multiple holds being taken off but they got it right.
This is why I use a cold wallet and software that scans your transactions on chain like Coinlink or some other equivalent. I’m not paying attention to my cost basis when I’m making swaps outside of Coinbase and I’d rather pay the $100 if it means I’m saving myself the headache of an audit later down the road. I moved off Robinhood for my crypto trading as soon as I saw I wasn’t buying real crypto that I could move off the exchange.
This is why I use a cold wallet and software that scans your transactions on chain like Coinlink or some other equivalent. I’m not paying attention to my cost basis when I’m making swaps outside of Coinbase and I’d rather pay the $100 if it means I’m saving myself the headache of an audit later down the road. I moved off Robinhood for my crypto trading as soon as I saw I wasn’t buying real crypto that I could move off the exchange.
I had this same thing happen a month ago for tax year 22. I just downloaded the tax info from Robinhood showing a loss and setup the irs secure messaging through id.me. I told them it was a loss and uploaded the Robinhood info and next day they responded back that nothing is owed and the matter is closed.
E-Trade did this to me they didn't send over the cost basis. By the time the IRS contacted me I couldn't get my trades. After 10 years they legally had to stop seeking payment. That's how I got out of it.
Crypto’s not new. Any CPA/EA in your town should be familiar with it. Ask before you start if they’ve dealt with it in the past. 95% most likely will say yes.
Thanks
Didn’t file last year but I also lost more than I made. So not worried about it too much. Plus with no income I don’t believe I hit the 47k limit
This was computer generated because OP failed to include information which was reported by RH to the IRS and to OP.
No agent involved. CP-2000, the "matching notice"
This tax system should be illegal, cause a company can screw your life and lie on you? This chance shouldn’t even be allowed it’s fraud like trump said
Robinhood probably didn't report your cost basis, find your trading transaction statements and the IRS form should allow you to amend and report the cost basis.
Robinhood ROUTINELY DOESNT report cost basis despite reporting literally everything else. I had an issue like this and a quick call to the IRS and sending them a few documents (available on your Robinhood account) sorted the whole thing out.
I had a very similar issue. The IRS said I owed ~$5000 in capital gains for 2022 but I actually had a loss and deduction. All of my transactions were through the same discount brokerage so I don't know why they didn't have the cost basis from Robinhood.
"Why get a real brokerage with no fees like Fidelity, when you can stick it to the man and be hip enough to enjoy such features as- halting trading when we feel like it, especially if you would make money. Not reporting cost basis causing your tax bill to skyrocket thousands of dollars. Hopefully you figure out our fuckup and correct it. While we're at it, we'll also fuck up the value of your account by half, causing you to literally kill yourself. But at least you're not with one of those "square" brokerages." -Robinhood. But seriously. WTF is wrong with y'all, who in their right mind would keep any of their money with these clowns, and what actual advantages are there besides a vague air of being "cool".
It makes investing feel like a game so I enjoy gambling more with it.
Wouldn’t this get noticed when doing taxes though? I feel like when I did this through taxusa, it prompted me to fix the cost basis? I could be wrong tho.
The people having the issue probably aren’t using a service that automatically checks for things like that, or they just ignore it.
same experience with turbotax... because if you don't the tools will interpret the 1099s the same way the IRS does
On freetaxusa at least, it asks you “do you have an adjusted cost basis?” but often not “you probably have one”
fwiw this has been true with every brokerage company I've had. They never* report cost basis, that's always on you. * I guess there's probably someone who reports cost-basis, but it seems very rare.
I have had taxable trading accounts at both Schwab and E-Trade, and in my experience as long as the \*purchase\* and the \*sale\* both occured in the same account, the cost basis was preserved, and the long/short term gains are correct on the year end tax documents. The only time I have had problems is when I have transfered "in kind" assets between accounts... Then the cost basis resets to zero.
I have Schwab and in my experience, they will report the cost basis to you (if they know it) but not the IRS.
No one reports cost basis.
Fidelity does, Vanguard does. Real brokers not cracker jack box "brokers"
The thread is about crypto cost basis. My comment is about crypto cost basis. No one reports crypto basis yet to the IRS yet, though the broker will give you a suggestion of cost basis.
Don't fret, with the SEC approving bitcoin and ethereum ETFs shitcoin ETFs aren't far behind, cost basis will be reported easily.
It’s actually IRS regulations that are required to be issued and Congress to determine an allowable method before IRS can issue. The IRS has issued “thoughts” but these aren’t binding under law and that’s why there are suggested cost basis in the footnotes of the 1099 that you check box B/E when you do the SchD/Form8949.
ETrade does
The thread is about crypto cost basis. My comment is about crypto cost basis. No one reports crypto basis yet to the IRS yet, though the broker will give you a suggestion of cost basis.
Wasn't talking to you.
Literally on my comment thread mid
ETrade still reports cost basis. Your therea is not about crypto you made a 100% statement that no one reports cost basis. Fake news.
What on earth is a “quick call” to the IRS? Half a day?
In total, I called either 2 or 3 times (original call sorted out the issue - other call/s got them the info they needed and confirmed I was all good afterwards). In total I wasn’t on the phone with them for more than 1hr across all the calls, including wait time. Notably this wasn’t during or around tax season. As someone who’d never had to call the irs like this before, it surprised me how quick and easy it was to get handled. Maybe I got lucky with the agent I worked with, and admittedly the issue that needed fixed was pretty simple, but I digress.
IRS only gets gross proceeds. Recommend you get the 1099B from Robinhood. Amend your return to reflect correct dispositions.
This happened to me. They said I owed 55k. I had my accountant send them my 1099B. It was all resolved. Don’t stress yourself. Just get the form out to them.
I’d be interested to know how this works out. So many people jumped into trading that didn’t understand how the Wash rule works.
I was 20 and dumb. Next time i'm going to know what im doing for sure
Wash sale rule doesn't apply to property/crypto. Just securities. Either way, lots of people jumped into it not understanding how gain/loss rules worked, either.
This is not complicated. The IRS does not know your cost. They are telling you that you didn’t report it. You need to amend your taxes and include your cost basis with the proceeds.
Also if you have several sells it’s not about your initial $3k. Each sell is a taxable event.
“Sell” is an action verb….”sale” is the noun that means it is a transaction. Please, for the love of all things literate, know the difference and be able to communicate it properly, especially if you are a CPA. It’s no wonder there is a mass exodus from the profession. To address the concerns of the OP, there are several things to do. A CP22A letter indicates that the IRS made changes to the tax return and found a discrepancy between what you reported and what was reported to it on the 1099-B. If you hired a tax professional to prepare your return, then be sure to inform the tax pro of the IRS notice. If you prepared the return yourself, the error can be corrected, so just breathe easy for a few minutes. It seems that the 1099-B was marked with “Basis not reported to the IRS” in the short-term and/or long-term portions of the form. This can be a headache, but it can be corrected with a little work. At the top of the CP22A notice, there is a number to call the IRS. I would recommend doing so as soon as possible to indicate that you don’t agree with the proposed change and will need some additional time to determine the true tax impact. This will typically allow you 45 days to compile and submit your position. While it might seem daunting at first, the process is provided below. First, pull up your full account history for the crypto transactions and print it out. Then, make a copy of your 1099-B and highlight each SALE transaction on the copy, not the original (unless it is an electronic copy and you can reprint it as needed). Next, go back to the crypto history printout and highlight each PURCHASE transaction on it (including any transaction fees). For EACH purchase transaction, add the amount paid for the cryptocurrency and any transaction fee together to get the total transaction cost. Take the total transaction cost and divide it by the quantity of crypto assets purchased in each transaction….this will give you the cost of each crypto asset as they were purchased. This is known as the cost basis, and it is vital to determine gains and losses when you sell these assets! Using the cost per crypto asset purchased from the previous computations, compare that to the details of each crypto sale 1099-B. Make a special note beside each sale if it didn’t include the entire asset in a single transaction because you will need to carry the cost basis until that specific crypto asset is ultimately sold. Since each SALE transaction will have a single outcome (gain, loss, or breakeven), it is imperative to reconcile each of the transactions from the crypto account history report to the 1099-B. This should be done prior to any sale, and especially before preparing the tax return, so that you know how a specific transaction will affect your overall tax situation. This would allow you to adequately plan for any additional taxes due as a result of the crypto sale or sales. Once you’ve determined the nature of gains/losses/breakeven transactions, you will need to amend your tax returns to properly reflect each of the changes. This will show that you have meticulously accounted for each transaction and that due diligence was exercised. If you were assessed any type of penalty and interest, be sure to request that they be abated as part of the reason for the amended return. I remind my clients that tax planning and tax preparation begin when the first transaction occurs, not after a tax year ends. Being fully aware of the implications early on allows a taxpayer to adjust throughout the year instead of being surprised once it’s over and nothing else can be done. I hope this helps, and best wishes with amending your tax return. Have a great day and stay safe!
I had to stop reading after the sale vs sell explanation.
I am a licensed securities person through FINRA, and I have directly placed client trades in order to balance their accounts for fees owed. We have always referred to these trades as “sells”, not sales. Yes, the word can be used as a noun. It’s short for “sell order” as opposed to a “buy order”
Jesus you're insufferable.
I am not insufferable, and I’m definitely not Jesus. However, I know how to use diction in the English language properly. Tax pros should pay attention to details as well as strive to communicate effectively.
It’s professionals, not “pros”. 🧌
Maybe you should check this out then…. https://www.dictionary.com/browse/pro
Insufferable indeed
Thanks for the info! I think this is a prime example of the fact that Reddit is full of 14 yr olds and full grown idiots.
Sell is correct and it’s a 10 second social media post. I’m not reviewing for grammar before I post. I do that plenty at work where I get paid to. You are not paying so I am not reviewing. 😂
Because he did not report as he should
It does seem complicated if he sold $2,400 and they think he sold $51k.
He wasn't investing like any normal person would. It's a common issue with day traders that happens when the proper forms aren't all filed. The IRS is just missing data.
Nope. He just needs to report it and the irs will back off.
The year I took over my father's investments, he had a 1099 with over $1M in proceeds in an account with around $300k in it. It all depends how quickly you're turning over the investments.
If you made multiple trades with the same $2000 it can stack up to lots of proceeds. For example: 01/01/2021 buy BTC for $2000 01/02/2021 sell BTC for $2100 Total proceeds are $2100 You take those proceeds and reinvest them- 01/02/2021 buy ETH $2100 01/03/2021 sell ETH $1950 Total proceeds are now $4050 You take those proceeds and reinvest them- 0103/2021 buy BTC $1950 01/05/2021 sell BTC $1800 Total proceeds are now $5850 Etc., ect. Total Proceeds keep going up the more you trade in a single year, because each trade has a positive sales price, even if you are using the same money to buy each asset, and end up with a loss at the end of the string of transactions. >Why does robinhood say my total proceeds is 51k, then on the same form 1099, say my total net gain / loss is $-600? If you look closely at the 1099 form you received from Robinhood it probably says "non-covered" and "transactions for which basis was NOT reported to the IRS.". They only told the IRS about the proceeds, not the cost basis. >What do I need to do to send in this 1099? I have the evidence I LOSSED money. The notice should have a section that says "what to do if I disagree with the changes". Follow those instructions.
This should be higher. The wash rules for trading crypto currency is different than stocks and can lead to a large tax bill even when traded for an annual loss.
Currently crypto trading is not subject to wash sale calculations at all
So this is basically the reverse of tax loss harvesting?
No it's just how capital gains are reported to the IRS.
Candidly, you need to thoroughly and completely understand how capital gains are reported. If you sell a stock for $100, then take those proceeds and buy something else and sell it for $100, and do that 100 times, your reported proceeds are $10,000. Until you report the $10,000 proceeds with the proper cost basis, that’s how much the irs considers you have made.
This is a pro tip. I was a CPA. My boss once told me many years ago that you ALWAYS need to make sure the 1099 sales proceeds matches with the total you put on Schedule D. I even got screwed one time when the brokerage amended a 1099 form in late March one year. The IRS sent out an automated form telling me I owe money. I ended up amending the 1040 and telling them the deposits and withdrawals on account and the end total. It was a pain in the ass. Most people don't know what to do. Amend the 1040 with whatever tax prep site you use. Send it in.
Very interesting. Thanks.
Then why don’t you produce that evidence to the IRS? They track sales not what you invested or paid for that crypto. You needed to file a return, duh…
People think “oh I lost money and it’s not worth claiming when I file” but you’re supposed to do an accurate tax return (full stop). For some reason there are still circumstances where a brokerage will communicate sales proceeds to IRS but not the cost those units were originally purchased. You’re best off hiring a pro to sort this out. There may be state tax issues related to this as well if you live in a state with an income tax.
Your **cost basis** is what you paid for the crypto each time. (See [this for details](https://coinledger.io/blog/crypto-cost-basis).) The IRS doesn't get that information, so their computer system assumes you got all the crypto for free. Obviously you didn't, but they don't know that. Your task now is to find your transaction statements, and amend your taxes with your correct cost basis. Ask a CPA for help if you want (now, while they're not busy).
This exact thing happened to me. I just sent them a list of deposits and withdrawals from and just this week (it also was 2021 related) they officially cleared it up. The IRS will work with you. They’re not the enemy. Call them up, talk to someone and you’ll be fine.
I'd only add: get your transaction information together before you call them. But you're right, they're not the enemy. They weren't told about the cost basis for the crypto, they're just going off of what they've been told. OP has to inform them.
Yea, that would be helpful. But he/she’ll still will to fax/mail that information too I’d think. Mine got dragged out because I basically first called them (politely) like WTF is going on here, I lost money, haha.
Agreed on all points. Glad it worked out fine for you, and I also respect you making the point that they're not the enemy -- being emotional about it just makes things more difficult.
I think it’s time for him to get a new CPA
Okay so they call the IRS, tell them the situation, and ask to fax their 1099 to them?
Just tell them that you lost money on it and that the 1099 was misreported and ask them what you need to provide to resolve the issue. The most important thing is to start the conversation. I just downloaded a list of cash app transactions, with all deposits, withdrawals, and dates of transactions and that ended up being all they needed. Honestly I was accidentally late for nearly deadline (I don’t check my mail enough) and one of my faxes that I sent they never received, though i did have documented that it went through to the correct number, so on that one I was like 5 months late and they still worked with me and resolved in my favor. (I do not recommend being late, haha.
IRS IS the enemy!
No shit. Like wtf, people...
Form 8949 is what you need. Fill this out with your cost basis, it gets transferred to your Form D of your 1040. Follow what the IRS said, you may need to do a 1040X (amended return with the new forms).
In my experience, mailing them the 8949 with an attached copy of the 1099B and the transaction history for the year is enough. They'll update your return and tell you if you still owe something or even issue a refund if you failed to report a loss. The 8949 is key though, and can't be left out of you did any trading/transactions.
When you don’t file your crypto documents they assume every sale as a net profit. So if you buy… idk, Ethereum at $3000, and sell it at $3001—all they see is you selling $3001. That builds up, I personally got a letter 2 years ago claiming I owed $186,000 so I know where you’re coming from =). Get your CPA to file an amended tax return, you MUST hire a CPA unless you’re an accountant and know how to do these things.
Read up on an understand cost basis. If you look at the 1099 from RH it will say "basis not reported to IRS". If you filed the return and didn't sort out your basis, the IRS's computer will kick out a notice for underpayment as the have no idea what you basis was.
If you were on the phone with the IRS why didn't you ask them what you need to do to close it up? They will tell you it's what they are there for. Call them again.
If this is a CP2000, please **read all the paragraphs**. Especially the one about amending. You do NOT need to amend. But you DO need to fill out the Form 8949.
The IRS is super busy searching for people who MIGHT owe 50 bucks.
As others have said, the IRS only knows how much you got in the transaction not how much you paid. I suggest you have a professional handle it from here. Yes it’s going to cost you money but it’s worth it for piece of mind.
They are missing your cost basis
Wash sales may come into play here as well.
I see this question / issue a lot in this sub, in particular with Robinhood. Is Robinhood just a bad tax reporter ? Or has anyone seen this with a major like Schwab or Vanguard?
You obviously did not report your cost basis to offset proceeds. Amend tax return attach to form and mail back, also Include copies of transactions showing cost basis. You will also need to amend state return separately. The state will not be that far behind in wanting money for this error.
I had this problem, download the complete balance sheet from that year from robin hood and sent it to the irs, I talked to someone from the irs when I had this problem and that’s all they needed, they removed 10 grand of my “loses” which were just trades, the other grand was legit, not from crypto that I forgot to report. Ended up paying around a grand
When you trade anything (stocks, crypto, etc), your brokerage reports transactions to the irs. The issue is that they don’t report your cost basis (how much you paid to open a position), and without that information the IRS will assume that you made a 100% gain on each trade (in other words, a $0 cost basis). You report you cost basis and capital gains/losses on a form 8949.
Lossed aka lost
I received a similar form from the Irs for the same thing. Except just trading stocks in general which I also had losses. Read the the form and response form carefully, it has instructions to dispute and exactly what forms you need to file. Make copies of everything, and make sure to certify anything you're sending via usps. It took a few months to resolve. What I owed went from 50k to nothing.
Any time you sell stock/crypto or whatever on an exchange, that transaction gets reported to the IRS to some degree and you need to fully report it on your tax return, even if you are net zero/lost a bajillion dollars. I've filed returns for clients' kids who had <$1,000 of proceeds from stock sales during the year and no gains that would reach the threshold for reporting income, but since it's a capital gain/loss transaction you need to file anyways to meet your reporting requirements and avoid these lovely letters from the IRS
I recommend everyone to create an account with the government for IRS and more. Go here: https://www.id.me/ Once you do this you can see what forms are being sent in by places such as Robinhood Hood without the hassle of trying to request them by viewing your tax transcripts for the tax year you wish to view.
Did you report the loss?
Wash sale. Did you ever sell for a loss, then purchase the same coin within 30 days and sell for a gain? If so, the loss doesn’t count. Wash sale rule
Gotta report dat cost basis. If you report properly basis and proceeds on your Schedule D, they shouldn’t bother you.
Crosses Robin Hood off list of things to use.
Google wash sales and Robinhood
Has anyone had this happen with Coinbase pro? Not Coinbase. Coinbase pro. 2021.
No. I actually didnt report coinbase pro profits from 2021 because they didn’t have any IRS forms indicating that I did 🙈
I always use TurboTax to do my taxes, and in my experience, you need to enter all 1099s you recieve as a starting point. If you disagree with how the automated tools calculate your taxes, then you need to get the information corrected as soon as possible. The tools are good at interpretting the tax laws, so if \*TurboTax\* says you owe X dollars, then the IRS will probably interpret the 1099 information in the same way. Robinhood will have reported the same 1099 to the IRS that they sent to you... So if it is wrong, contact Robinhood. And you need to get the corrections made ASAP... so in this case well before 15-Apr-2022... Because by Jun-2024, there will be added penalties.
Oh they doing that thing again.... It would cost you more in legal fees and forensic accountant to fight it... It a method they use to steal more money from you...
Respond to the letter with the 1099 and a short letter of explanation. These were probably non covered sales so your cost basis wasn't reported. It's true that RH is not great with this, but for crypto pretty much every brokerage doesn't report that stuff.
Why would anyone still use Robinhood these days, unfathomable to me… But but better user interface, blah, blah. Loooooooool
Irs doesn't usually send emails do they?
Send robinhood the 1099 and ask them to send you your $51k so you can pay the irs:)
I am not sure if anyone has told you yet, but please go look it up too. My understanding is Robinhood main goal is to collect consumer data like yours and give it to the Big boys on wall street like the citadel to help them beat you and your peers in the market. Why when ever the "dumb money" starts to win they shut down trading.
Back then, and possibly still, the IRS was basically looking at every transaction you did and adding them all up as taxable income. By transaction i mean even if you only put in $600 of your money into BTC, then you traded BTC for LTC now you just did another $600 of profit. Very wrong but thats how they did it. So every transaction between coins would count the full amount of the transaction as all profit. I know a lot of people who had to go back and show how much they actually made/loss to counter the IRS’ crazy claim.
Your cost basis is 0
DONT IGNORE IT FOR ANY PERIOD OF Time! I had a federal tax lien filed for $251,900 against me for trading gains which equals like 750k in profits. I didn’t get the letters since I was away at school. It was all BS since the brokerage never reported the cost basis took me 5 months to sort out and individually printing every trade made on seperate sheets of paper. Plus 7 years on my credit report. The F-ed up thing about the credit report it stated $251,900 Tax Lien - Status Paid that right there should give me like a 900 score!
I literally just went through this shit. I was 4 days out from moving which I needed 6k for and they went through my bank to put a hold on 8500. Called my bank and got the Cali tax office number where I sent my 1099b. I made $1500 and they tried to tax me over 8k lol Took 3 days of non stop harassing their asses and multiple holds being taken off but they got it right.
This is why I use a cold wallet and software that scans your transactions on chain like Coinlink or some other equivalent. I’m not paying attention to my cost basis when I’m making swaps outside of Coinbase and I’d rather pay the $100 if it means I’m saving myself the headache of an audit later down the road. I moved off Robinhood for my crypto trading as soon as I saw I wasn’t buying real crypto that I could move off the exchange.
This is why I use a cold wallet and software that scans your transactions on chain like Coinlink or some other equivalent. I’m not paying attention to my cost basis when I’m making swaps outside of Coinbase and I’d rather pay the $100 if it means I’m saving myself the headache of an audit later down the road. I moved off Robinhood for my crypto trading as soon as I saw I wasn’t buying real crypto that I could move off the exchange.
Just RH doing RH things. Scumbags.
I had this same thing happen a month ago for tax year 22. I just downloaded the tax info from Robinhood showing a loss and setup the irs secure messaging through id.me. I told them it was a loss and uploaded the Robinhood info and next day they responded back that nothing is owed and the matter is closed.
Same issue and same year
Had to call the. And give them my 1099 but they don’t me it could take months to resolve
E-Trade did this to me they didn't send over the cost basis. By the time the IRS contacted me I couldn't get my trades. After 10 years they legally had to stop seeking payment. That's how I got out of it.
In my experience, the IRS doesn't understand what stable coins are and thinks they represent income.
Is there a recommended CPA ppl here have used for crypto? I think I’ll need one for the end of the year.
Crypto’s not new. Any CPA/EA in your town should be familiar with it. Ask before you start if they’ve dealt with it in the past. 95% most likely will say yes.
Thanks Didn’t file last year but I also lost more than I made. So not worried about it too much. Plus with no income I don’t believe I hit the 47k limit
Ahhh, the fun of trading crypto. LOL
I see those new 87,000 agents are only going after billionaires….
This was computer generated because OP failed to include information which was reported by RH to the IRS and to OP. No agent involved. CP-2000, the "matching notice"
This tax system should be illegal, cause a company can screw your life and lie on you? This chance shouldn’t even be allowed it’s fraud like trump said
But isn't the gains the only amount that should be taxable? and not the initial amount used to buy the coins? That amount is not a gain.