This is extremely helpful, thank you! One question - when creating this transaction log, should I calculate the USD value of the BTC at each transfer point? Or just focus on the final gain/loss numbers?

Yes, you should definitely record the USD value of the BTC at each transfer point. This is crucial because the IRS considers each crypto-to-fiat or crypto-to-crypto exchange a potentially taxable event, and those values establish your cost basis. When you transfer BTC to your forex broker and convert to fiat, you technically have a taxable event based on whether your BTC gained/lost value since purchase. Then your forex trading creates separate taxable events. Finally, when converting back to BTC, there's another taxable event. Recording the USD values at each step creates a clear audit trail that properly separates the crypto transactions from the forex transactions.

Forex trades under Section 988 (which is the default for most retail forex traders) are NOT subject to wash sale rules. They're treated as ordinary income/loss rather than capital gains/losses. However, if you elected to use Section 1256 treatment (which most retail traders don't), then different rules would apply. Make sure you're consistent in your treatment though. You can't cherry-pick which trades fall under which section to maximize tax benefits.

Thanks for clearing that up! I've definitely been treating everything as Section 988 since I'm doing short-term day trading, so I should be good. I'll override the flag in my tax software and make a note explaining that these are forex trades under Section 988 and therefore exempt from wash sale rules.

Thanks for suggesting Form 8822! Do you know if filing this form would help me get a copy of my W-2 directly from the IRS if my former employer already submitted it to them? And about how long does the change of address usually take to process?

Filing Form 8822 won't help you get a W-2 copy directly from the IRS, it just ensures future IRS correspondence goes to your current address. The IRS typically processes these forms in 4-6 weeks. For getting your W-2 information from the IRS, you'll need to request a Wage and Income Transcript as others have mentioned, but only after employers' deadline to submit W-2s (January 31st). The IRS typically needs a few weeks after that to process all the information, so mid-February is when you can reliably access this information.

Does filing an extension look bad to the IRS? I've heard it increases your chances of being audited. Is that true or just a myth?

Can I just file my state taxes separately even if I normally do them together with my federal? I use TurboTax and I'm not sure how to separate them after I've already entered all my info for both.

Absolutely! Most tax software allows you to file state separately from federal. In TurboTax, after completing both returns, you can choose to e-file just the state portion. Look for filing options during the final steps - there should be checkboxes for federal and state that you can select independently. If for some reason your software doesn't allow separate filing, you can also go directly to your state's tax website. Many states offer free filing options for basic returns, and you can enter your information there independently from your federal return.

Unfortunately, yes. Paper returns are taking 6-12 weeks minimum to process this year, and that's if everything goes perfectly. My brother was in your situation last year and ended up waiting almost 4 months for his refund after paper filing. The non-filer issue seems to flag returns for additional manual review too.

Can I deduct Spotify if I use it to play music for open houses? Or is that stretching it?

That's actually a good question about Spotify. If you're using it exclusively for business purposes like open houses, you might be able to deduct it. However, if you also use it personally (which most people do), you would need to determine what percentage is for business use and only deduct that portion. Generally speaking, you need to be careful with these "dual-use" subscriptions. The safest approach would be to keep track of how many hours/days you use it specifically for open houses compared to personal use. But honestly, for something relatively small like a Spotify subscription, the record-keeping burden might outweigh the tax benefit.

This is such an important point! My friend went through this exact situation and ended up with a big tax bill because the broker wasn't withholding taxes. What questions should OP ask to make sure they're properly classified?

How complicated is the penalty abatement form? Did you need help filling it out or is it something that's pretty straightforward?

The penalty abatement form (Form 843) is actually pretty straightforward. It's just two pages, and for First-Time Penalty Abatement, you basically need to explain that you've had a good compliance history before this issue and had reasonable cause for the failure to pay. I wrote a simple letter stating I had always filed and paid on time previously, was unaware of the proper estimated tax requirements for my new business, and was now taking steps to resolve the situation. Include your contact info, the tax periods you're requesting abatement for, and why you believe you qualify. It took about 8 weeks to get approved in my case.

Thanks for mentioning COVID relief options. My business was definitely affected during that time. Do you know if these programs are still available in 2025? Also, how exactly do they calculate "disposable income" for the OIC formula?

Many of the COVID relief options have expired, but the IRS is still processing applications submitted during the eligible periods. If your tax debt originated during the pandemic years, you might still qualify for certain penalty relief under their broader "reasonable cause" criteria. It's worth mentioning in any communications with the IRS. For calculating disposable income in an OIC, they take your gross monthly income and subtract what they call "allowable expenses." These are based on national and local standards for living expenses like housing, transportation, food, etc. The key is that they use their own standards, not your actual expenses for many categories. So if your car payment is higher than their standard transportation allowance, they'll only count the standard amount. This is where many people run into issues with OICs - the IRS might calculate your disposable income as higher than what you actually have available after paying your real bills.