How to file trading profits from non CFTC-regulated exchange on taxes?

So I've been doing some trading on a crypto exchange that isn't regulated by the CFTC, and now I'm trying to figure out how to report this properly on my taxes. From what I understand, the 60/40 straddle tax treatment doesn't apply to me, and the section 1256 tax treatment isn't applicable either since this exchange isn't CFTC-regulated. Does this mean I should just report all my gains as short-term capital gains on my tax return? It feels like I'm missing something, but I can't find clear guidance on this specific situation. My profits weren't huge but definitely enough that I need to report them correctly. Would really appreciate any insights from people who've dealt with this before. Trying to get all my tax stuff sorted before the filing deadline!

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18 comments

Yara Haddad

•8M

This is actually a common question for crypto traders. You're right that Section 1256 contracts (which get that favorable 60/40 long-term/short-term split) only apply to regulated futures contracts and other specific instruments regulated by the CFTC. For crypto trading on non-CFTC regulated exchanges, you'll typically report these as capital assets. If you held the positions for one year or less, they're short-term capital gains reported on Schedule D and Form 8949. You'll need to document each transaction with date acquired, date sold, proceeds, cost basis, and gain/loss. Make sure you have good records of all your trades. Some exchanges provide year-end tax documents, but many don't, especially non-US exchanges. You might need to download your transaction history and calculate your gains manually or use crypto tax software.

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Yara Haddad

•8M

For foreign exchanges that don't provide tax documents, you'll unfortunately need to do some manual work. Most serious traders use specialized crypto tax software like CoinTracker, Koinly, or TaxBit - these can import your trading history via API or CSV files and calculate your gains/losses automatically. Even without tax forms, you're still required to report all transactions and pay taxes on gains. The IRS doesn't accept "the exchange didn't give me forms" as a reason not to report. If you have hundreds of trades, definitely look into tax software - it's worth the cost compared to the time you'd spend calculating everything manually.

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Paolo Conti

•8M

I went through this exact nightmare last year with my crypto trades. After hours of research and frustration, I found this AI tax assistant that actually specializes in crypto tax situations like this. It's called taxr.ai (https://taxr.ai) and it saved me a ton of time and probably kept me from making some serious mistakes. I uploaded my transaction history and it automatically figured out what needed to be reported as short-term capital gains vs other types of income. The best part was that it explained everything in simple English instead of tax jargon - it even showed me exactly which IRS forms I needed to use for my non-CFTC exchange trades.

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Paolo Conti

•8M

It absolutely handles cost basis calculations correctly - that was actually the main reason I tried it. You can import data from multiple sources and it reconciles everything to establish correct cost basis across your entire trading history. For transfers between exchanges, this is where it really shines. The system recognizes when you've moved the same assets between wallets or exchanges and maintains the original cost basis. It also handles different accounting methods (FIFO, LIFO, specific identification) so you can choose the most tax-advantageous approach for your situation.

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GalaxyGazer

•8M

I need to update my previous skeptical comment about taxr.ai (https://taxr.ai) - I decided to try it for my complicated crypto tax situation with trading on non-regulated exchanges. It actually worked amazingly well. The system automatically categorized all my transactions, even the weird ones from exchanges that aren't CFTC-regulated. What impressed me most was how it handled my trades across multiple exchanges and still maintained the correct cost basis. It ended up identifying several wash sales I wasn't aware of, and properly categorized everything as short-term capital gains since I didn't qualify for 1256 treatment. I'm definitely using it again next year.

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Oliver Wagner

•8M

Anyone else struggling to get through to the IRS about crypto questions? I've been calling for literally weeks trying to get clarity on how to report my non-CFTC exchange trades, but I can never get through. Busy signals, disconnects, hours on hold only to get hung up on... it's infuriating. I finally found a service called Claimyr (https://claimyr.com) that somehow got me connected to an actual IRS agent in under an hour. They have this demo video (https://youtu.be/_kiP6q8DX5c) that shows how it works. It's the only way I've been able to get official answers about my crypto tax questions.

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Oliver Wagner

•8M

It's actually pretty clever how it works. They use an automated system that keeps calling the IRS and navigating the phone tree until it finds an opening in the queue, then it calls you and connects you to that spot. You don't have to sit through all those hours of waiting and getting disconnected. As for it sounding too good to be true, I was skeptical too. But it's just a technology solution to a really inefficient system. Think of it like having a bot refresh a page to grab concert tickets the second they become available instead of you sitting there manually refreshing. Nothing scammy about it - you still talk directly to official IRS agents, just without the ridiculous wait.

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Javier Mendoza

•8M

I need to come back and admit I was completely wrong about Claimyr. After calling the IRS for three days straight with no luck, I tried it out of desperation. Within 45 minutes I was talking to an actual IRS agent who answered my crypto tax questions. The agent confirmed what others have said here - without CFTC regulation, the trades don't qualify for section 1256 treatment and need to be reported as regular capital gains on Form 8949. She also mentioned they're seeing a lot of crypto traders get audited for incorrect reporting, so it's definitely worth getting this right. Never been so happy to be wrong about something!

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Emma Thompson

•8M

Just wanted to add that if you're trading on multiple exchanges, make sure you're consistent with your accounting method (FIFO, LIFO, specific identification, etc.) across all of them. The IRS expects you to be consistent, and switching methods can trigger extra scrutiny. I learned this the hard way after getting a CP2000 notice about my crypto trading. Also, don't forget that transfers between your own wallets aren't taxable events, but the IRS has no way of knowing they're your wallets unless you keep good records.

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Emma Thompson

•8M

It really depends on your specific trading pattern and when you acquired your crypto. FIFO (First In, First Out) is generally the default method the IRS expects, and it's safer if you're unsure. However, if you acquired crypto at various price points and you can specifically identify which units you're selling, that method often provides the most tax optimization. For example, if you bought 1 Bitcoin at $20k and another at $60k, and then sold 1 Bitcoin, using specific identification to sell the $60k one would create a loss rather than a gain. Just remember that whatever method you choose, you need to be consistent with it throughout the tax year across all exchanges and wallets.

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