I know, I know. Intuit and H&R Block refuse to allow that to happen, but if we could stop prioritizing entrenched industries, that'd be really nice.
You, me and most everyone else reasonable. In some countries, taxes are as simple as the tax agency sending you a bill or a check. But, America's love of excess capitalism means our tax code is needlessly complicated and pretty much insists on as many third party businesses to be involved as possible - every company you work for, plus anyone holding your securities, plus Intuit or some other tax preparer, and so forth.
The most sensible requirement, since we're not going to get sensible tax reform ever, would be just making legal exchanges operating in the US have to send out a 1099 variant (maybe 1099-MISC could cover it? Or they could create a new one) so people aren't left scratching their heads all the time. But we'll see if that ever happens...
If the state didn't give a bill, you couldn't figure out what to pay.
I don't think it's fair calling this capitalism. Capitalism is the idea the the production of goods is controlled by private entities, whereas what you are talking about is a government over complicating/regulating an industry at the behest of a company. In a capitalist society, regulation is not a thing, whereas in the corporatist society I believe we live in, regulation harms the citizens through capture and reduction in effeciency.
Unlike stocks which seem to be entirely traded on exchanges, bitcoin could have been obtained through mining (unlikely, but possible) or a true person-to-person trade/barter. In order to calculate capital gains, one needs to know the cost-basis (i.e. the price you paid to acquire the asset). If bitcoins are deposited into your Coinbase BTC account, there's no way for Coinbase to know what you paid for them, hence difficult/impossible for them to calculate the capital gains.
BUT from what I understand, people leave a lot of coins on exchanges and never transfer them back to personal wallets. Coinbase can track that.
See "Basis of Assets" https://www.irs.gov/pub/irs-pdf/p551.pdf and "Investment Income and Expenses" https://www.irs.gov/pub/irs-pdf/p550.pdf
None of that covers cryptocurrency directly yet, but looking at how more traditional investments are treated can inspire you to try to do your taxes in the spirit of the rules to avoid likely problems.
You could have bought stock directly from the company, in an IPO or secondary offering (where it does not go through an exchange), from an individual or broker not intermediated by an exchange, etc.
You can keep stock certificates in a safe deposit box, and then later transfer them into your brokerage account, they have no idea what you paid for them.
This is a solved problem, cryptocurrency is not special. If they have the cost basis they can tell you, if not, they can leave it blank.
>>This is a solved problem, cryptocurrency is not special. If they have the cost basis they can tell you, if not, they can leave it blank.
We're in agreement - this is a solved problem that the retail investor or their accountant needs to calculate manually via aggregation of the entire lifecycle of the asset(s) to properly account for capital gains (or losses).
You should probably call the IRS tipline and say "I think [Schwab] isn't filing their 1099-Bs, you know the thing which reports cost bases and short-term/long-term capital gains for retail investors, and accordingly they're on the hook for billions of dollars of penalties, but to keep the math easy just write me a check for a billion dollars rather than what the law actually says you owe me for this hot tip."
Or, in the alternative, you could look again.
I checked again, and you're right. Interactive Brokers is the only platform I still infrequently use but it does have a list of pre-filled tax forms available for download. Worksheet 8949 is also pre-filled, but this is probably where one would need to submit a revised version if previous cost-basis amounts need to be adjusted as in the specific edge cases we're talking about above.
Coinbase seems to have sent 1099-K documents to eligible customers which isn't as detailed as 1099-Bs since I believe the Ks only report gross transaction volumes over $20K[1].
[1] https://www.irs.gov/businesses/understanding-your-1099-k
https://www.irs.gov/businesses/small-businesses-self-employe...
I cannot account for the discrepancy, but I use Charles Schwab, and it absolutely DOES calculate and display capital gains. In cases where I have moved a security into the account (rather than purchasing it directly within the account) I have had to provide original cost basis information for them in order for the calculations to be correct.
"How much do you THINK you owe?"
"...Hmm, if I have everything correct, I think I owe this much"
"WRONG! Time for consequences!"
- Comic book guy
One of the biggest frustrations of modern life is knowing how efficient and easy things could be if these systems were designed better...and then realizing that nothing will be done about it because entrenched interests hold all the power in American government.
What's funny is that they will. After the fact. I got a notice last year from the IRS about some back taxes I owed because I forgot to include some stock I sold in my taxes for that year.
They were right. I had overlooked it. But their figure for what I owed was a little higher than what I calculated it to be. I sent back a revised tax return with a check and an explanation for how I arrived at my number and the matter was closed.
So just to reaffirm: the obstacle is more political than technical.
How about instead of big-brother style "hand all your metadata over to the state", that instead the state releases an open-source program you can run that collects & analyzes all your metadata and then produces the bill?
But I also agree that you shouldn't have to calculate it. I'm in favor of return free filing.
And in my experience at least, their customer service people are courteous and genuinely helpful. It's nothing at all like the standard substandard DMV experience.
Another cool thing is they have an absolutely fantastic record for providing real opportunities (not just busywork) to disabled persons.
The current tax system places responsibility on you, the investor, to tabulate all of your gains and losses, but it also gives you the freedom to invest in complex and unusual transactions like coins in the first place. Don't be so quick to assume you could give up the one without giving up the other, were it not for those pesky TurboTax lobbyists.
That said, pretending the IRS doesn't already know what taxes to collect from you is definitely naive.
If my choices were to pay the tax man directly or pay a third party to calculate my tax for me because it's too complicated to do myself in part because of that third entities lobbying, then I am always going to choose to cut out the middle man
Also I agree the the IRS can figure out the taxes you'd need to pay if they ever cared to look at you, but I was responding to the parent comment implying that they shouldn't get more information so that they could go outside the regulations
For the 99% of us who aren't small business owners, the IRS already has all our information: my W-2's, 1099's, etc. are already sent there by my employer/bank/broker. Making me do my tax returns anyway is literally useless, just busywork for its own sake.
> The current tax system places responsibility on you, the investor, to tabulate all of your gains and losses, but it also gives you the freedom to invest in complex and unusual transactions like coins in the first place.
As people have explained countless times, letting the IRS compute your returns for you in no way precludes the ability for you to do it yourself, if you desire. That is how it works in every other country - most people just accept the government's return, the people who have complex financials file their own. Stop making the rest of us do pointless work just because of your paranoia.
And your second paragraph makes no sense whatsoever.
They just send you another bill, plus interest.
I think you'd need to get a lawyer for them to even look at your work.
I replied to the bill with the relevant paperwork and a 1 page letter explaining what happened, and the IRS agreed I did not actually owe them anything. No lawyer required.
The current system is like having to write your own credit card statement, mail it in to the CC company, and getting penalized if you get it wrong.