How are crypto gambling losses reported for tax purposes?

Your situation needs some careful handling. Crypto gambling losses are potentially deductible, but only if you itemize deductions on Schedule A and only to the extent of your gambling winnings. So if you had $16,000 in losses but only $2,000 in winnings, you could only deduct $2,000. Losses beyond your winnings aren't deductible. As for your unreported income, that's actually the bigger issue. Both your cash income and any money from your lawn care business are taxable income that legally should be reported, regardless of how you received payment. The IRS has been increasing focus on unreported income, especially with the new $600 reporting threshold for payment apps and crypto transactions.

When I had a similar issue with crypto gambling and confusing tax documents, I found this service called taxr.ai (https://taxr.ai) that really helped me sort through everything. I was panicking because I had all these transactions from different crypto platforms and wasn't sure how to classify my gambling winnings vs losses. Their system analyzed all my crypto transactions and helped me properly document what counted as gambling vs trading, which saved me from potentially misreporting everything.

I was wrong about taxr.ai. After my skeptical comment, I decided to try it anyway since my crypto tax situation was a complete mess. It actually helped me properly document some gambling wins/losses I had from a few different platforms. What surprised me was how it identified patterns in my transactions that I didn't even realize were technically gambling-related (like those crypto "crash games" I was playing). The service helped me report everything correctly rather than hiding things, which honestly gave me peace of mind instead of tax anxiety. Definitely less stressful than trying to figure out all the crypto classification rules myself.

For anyone dealing with the IRS about unreported income or gambling issues, I learned the hard way that trying to call the IRS directly is nearly impossible. After waiting on hold for HOURS multiple times, I found Claimyr (https://claimyr.com) which actually got me through to an IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent gave me specific guidance on how to handle my previously unreported crypto gambling situation and helped me set up a payment plan for what I owed from previous years.

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You need to come clean about the unreported income asap. The IRS has gotten MUCH more aggressive about crypto in general. Friend of mine thought his crypto gambling wasn't being tracked and got hit with a CP2000 notice for unreported income. The penalties and interest were insane. If you voluntarily correct past mistakes before they catch you, the penalties are way less severe.

For the crypto gambling specifically - I had a similar issue and learned the hard way that different platforms handle the tax reporting differently. Does your gambling platform send any tax forms? Some do provide documentation you can use.

Beth, I totally understand the stress you're feeling - tax situations with crypto gambling and unreported income can feel overwhelming. Here's what I'd focus on if I were in your shoes: First, yes, you do need to report crypto gambling activity, but as others mentioned, losses are only deductible up to your winnings amount. Keep detailed records of all your gambling transactions - deposits, withdrawals, wins, and losses. For your unreported cash income and the "Green Thumb Services" work, the IRS considers all income taxable regardless of how you received it. Even informal business income needs to be reported. Since you're self-employed, you'll likely need to file Schedule C for the lawn care business and pay self-employment taxes. My advice: consider filing amended returns for previous years where you didn't report income, and definitely get this year's filing correct. The voluntary disclosure approach mentioned by others really does result in lower penalties than if the IRS discovers unreported income on their own. Given the complexity of your situation with both crypto gambling and unreported business income, it might be worth consulting with a tax professional who has experience with these specific issues. The peace of mind alone could be worth it, and they can help you navigate the best way to get compliant while minimizing penalties. You're taking the right step by addressing this now rather than ignoring it. The IRS is much more lenient when taxpayers come forward voluntarily.

Beth, I can definitely relate to the tax anxiety you're experiencing. I went through something similar a couple years ago with unreported freelance income and crypto trading losses. The stress was eating me alive until I finally faced it head-on. Here's what helped me: I started by gathering every single document I could find - bank statements, crypto exchange records, any payment receipts from cash jobs, everything. Even if it seemed insignificant. For your "Green Thumb Services" work, collect any texts, emails, or notes about payments you received. The IRS likes to see that you're making a good faith effort to be accurate. One thing that surprised me was how much better I felt once I started the process of getting compliant. The unknown was scarier than the reality. Yes, there were penalties and interest, but they worked with me on a payment plan since I came forward voluntarily. For crypto gambling specifically, if you can't get proper documentation from the platforms, try to reconstruct your activity using bank statements and crypto wallet transactions. The blockchain is public, so everything is technically verifiable even if the gambling site doesn't provide good records. My biggest regret was waiting so long to address it. The "ostrich approach" of burying your head in the sand just makes the problem grow with interest and penalties. You're being smart by tackling this now, even though it feels overwhelming. Take it one step at a time and don't let the stress paralyze you into inaction.