Filing an extension - what to put for estimated tax liability with crypto income?

Tax preparer here. You definitely need to file Form 4868 to get an automatic extension to October 15th. However, an extension to file is NOT an extension to pay what you owe. For your estimated liability, don't leave it blank. The IRS expects a good faith estimate based on information available to you. If you truly have no idea, try to make a reasonable guess based on your crypto trading volume and potential gains. If you underpay significantly, you could face failure-to-pay penalties and interest on the unpaid amount. The safest approach would be to overestimate rather than underestimate. If you pay too much, you'll get it back as a refund. If you pay too little, you'll owe penalties and interest on the underpayment. You can file Form 4868 electronically through tax software or the IRS Free File tool rather than mailing it. This is faster and gives you immediate confirmation.

Just wanted to share my experience with this exact situation. Last year I was freaking out about my crypto taxes too and had no clue what I would owe. I found this AI tool called taxr.ai (https://taxr.ai) that saved me hours of stress. I uploaded screenshots of my crypto exchanges and it calculated my potential tax liability before I even finished organizing everything. The tool analyzed my trading patterns and gave me a solid estimate to put on my extension form. It was especially helpful for figuring out the cost basis of coins I'd been holding for years. Might be worth checking out since you're in a similar position.

Just wanted to update after trying taxr.ai that someone mentioned above. I was really worried about my extension since I've got crypto spread across 5 different platforms. The tool actually found some tax-loss harvesting opportunities I completely missed from when the market tanked last September. Ended up putting $4,200 as my estimated liability on my extension form based on the report it generated. That was a much more confident estimate than the $1,000 wild guess I was going to use. The peace of mind alone was worth it! Still going to hire an accountant for my actual filing but at least I feel better about my extension.

If you're trying to get ahold of the IRS to ask about your specific situation, good luck with that... I spent 3 hours on hold last week trying to ask a question about my crypto reporting. I finally discovered this service called Claimyr (https://claimyr.com) that actually got me through to a real IRS agent in about 20 minutes. They have a demo video here: https://youtu.be/_kiP6q8DX5c Basically they use some system to navigate the IRS phone tree and hold for you, then call you when an actual human agent is on the line. The agent I spoke with said for extensions where you're unsure of liability, it's better to make a good faith estimate and pay what you reasonably can rather than putting $0 or leaving it blank.

Alright, I have to admit I was totally wrong about that Claimyr service from my skeptical comment earlier. After waiting on hold with the IRS for 2 hours yesterday and getting disconnected, I was desperate enough to try it. I got connected to an actual IRS representative in about 25 minutes. The agent confirmed that for crypto-related extensions, they recommend making your best reasonable estimate based on available information. She specifically said that leaving it blank raises red flags and that even a good faith estimate that ends up being wrong is better than nothing. For anyone else dealing with crypto tax extensions, don't make my mistake of waiting until the last minute. The IRS agent also mentioned they're paying special attention to crypto reporting this year.

Former tax preparer here - one thing nobody's mentioned yet is that you should also check your state requirements. If you're in Louisiana (as you mentioned), they typically follow the federal extension deadline but you might need to file a separate state extension form. Also, if you have access to your prior year's tax return, one simple approach is to estimate based on last year's numbers plus add 20-30% for your crypto activities. This gives you a reasonable starting point that the IRS would consider a good faith effort.

Just FYI - I messed up my extension last year by leaving the estimated tax blank thinking I would figure it out later. Bad move! Ended up with over $700 in penalties and interest even though I paid the full amount when I actually filed. The IRS doesn't play around with this stuff.