How to report crypto from gambling site withdrawals in tax software - ETH purchased through gift cards

But wait, wouldn't the gift card purchase be considered the "cost basis" since that's what they ultimately exchanged for the ETH? Like if I spent $500 on gift cards and got $400 worth of ETH, isn't that a $100 loss right there? And then any change after would be additional gain/loss?

The gift card purchase would actually be part of your gambling activity. When you bought gift cards and used them on the gambling site, that was effectively your "buy-in" for gambling. The gambling winnings you reported should be the difference between what you put in (gift card value) and what you took out (ETH value at time of withdrawal). For the crypto portion, your cost basis for the ETH is its fair market value on the date you received it. Any subsequent change in ETH value would be reported as capital gain/loss. Think of it as if the gambling site paid you in dollars and you immediately used those dollars to buy ETH - your cost basis would be what you paid.

Does it work with all the major gambling sites? I use Stake and BitStarz and they have different withdrawal systems. Can taxr handle both?

I'm skeptical about these specialized tax tools. How does it actually determine the correct cost basis better than just manually entering the info into TurboTax or whatever? Seems like you'd still need to know the value at withdrawal time.

It works with pretty much all the major crypto gambling sites I've tried, including ones similar to what you mentioned. The system has templates for different platforms and can adapt to their specific withdrawal formats. Regarding how it determines cost basis, that's actually where it shines compared to regular tax software. It pulls historical price data for the exact time of your withdrawals, which gives you the precise market value at that moment. Regular tax software often uses daily averages which can be off by hundreds of dollars during volatile periods. Plus it understands that gambling withdrawals are different from regular purchases and categorizes them correctly for tax purposes.

How exactly does this callback service work? Like do they have some special IRS connection or something? I've been trying for weeks to reach someone about my tax situation.

Yeah right... an IRS callback within an hour when everyone else waits for weeks? Sounds like BS to me. I seriously doubt they have any special access the rest of us don't have.

The service actually uses a combination of technology and timed callbacks to essentially wait in the IRS phone queue for you. They have an automated system that dials in and navigates the initial prompts, then holds your place in line. When an agent is about to answer, they call you and connect you directly to the agent. No special connection - they're just saving you from having to sit on hold yourself. They use the same public IRS lines everyone else does, but their system can handle waiting for hours so you don't have to be tethered to your phone. And yeah, wait times vary but in my case it was just under an hour - though sometimes it can take longer depending on how busy the IRS is.

That's actually really good advice I hadn't thought about. The site does have a transaction history but I'm not sure how long they keep it. Do you think I should also be documenting the gift card purchases separately? And should I be using the transaction hash from the blockchain as well?

Yes, document the gift card purchases too! Screenshot receipts, confirmation emails, anything showing you bought them. This creates a clear paper trail of the full transaction flow: money → gift cards → gambling site → crypto winnings. The transaction hash from the blockchain is absolutely essential documentation. That's your definitive proof of exactly when you received the ETH and how much. Save that information along with a record of what ETH was trading for at that exact moment. Services like CoinMarketCap let you look up historical prices at specific times. This combination of evidence makes your cost basis virtually indisputable if questions ever come up.

I used FreeTaxUSA last year for something similar. You need to report the gambling winnings separately from the crypto. Under "Income" there's an "Other Income" section where you report gambling winnings. Then under "Investments" you add the crypto with your cost basis being the value when you received it. It's not super intuitive but works fine once you set it up right.

Thanks, that helps a lot! I was trying to do everything under the crypto section which explains why I was getting confused. I'll separate the gambling income like you suggested.