How to report crypto withdrawals from gambling site where I used gift cards to deposit and withdrew in ETH? Tax software showing capital loss

So wait, if I'm understanding right - when OP gambles and wins, they report that as gambling income. But then when they withdraw as ETH, they get a NEW cost basis at that moment? So if the ETH drops in value after withdrawal, that's a legit capital loss they can claim? Does OP need to keep records of exactly when they withdrew to establish that cost basis?

Yes, that's exactly right. When you receive the ETH as a withdrawal of your gambling winnings, your cost basis for the ETH is the fair market value (in USD) at the exact time you received it in your wallet. You absolutely need to keep detailed records of the withdrawal, including the exact date, time, and the USD value of the ETH at that moment. Screenshots of the transaction and the market value are highly recommended. Most crypto exchanges can provide this historical data if you need it later.

Does it handle other crypto situations too? I've been mining and staking, plus doing some DeFi stuff, and my regular tax software is completely confused about it all.

I'm a bit skeptical about using AI for tax stuff. How accurate is it really? Does it produce actual forms you can file or just give advice? Because advice is easy to come by, but properly filled out tax forms that don't get you in trouble with the IRS are another story.

It absolutely handles mining, staking, DeFi protocols, liquidity pools - pretty much any crypto transaction type. It even correctly handled my cross-chain transfers which my previous software was marking as "unknown" transactions. As for accuracy, that was my biggest concern too. What I found is that it's built specifically for crypto tax compliance, with actual tax rules programmed in. It produces completed IRS forms (Schedule D, Form 8949, etc.) that you can file directly, not just general advice. I double-checked some of the calculations with my accountant friend and he confirmed they were handling the transactions correctly - especially the complex DeFi stuff that other software struggles with.

How does this Claimyr thing actually work? Are they just calling the IRS for you? Couldn't I just do that myself and save whatever they charge?

Yeah right. There's no way you actually got through to the IRS in 20 minutes. I've tried calling them multiple times this tax season and either got disconnected or was told the wait time was 2+ hours. I'm calling BS on this one.

They use a system that navigates the IRS phone tree and holds your place in line. When an agent becomes available, they call you back immediately. So yes, they are essentially waiting on hold for you, but the difference is you don't have to sit there with your phone for hours. Regarding whether it's real - I was skeptical too. I had tried calling the IRS directly three times before and got disconnected twice and waited over an hour once before giving up. With Claimyr, I got a callback in about 20 minutes while I was making dinner. It was a complete game-changer during the busy tax season when IRS wait times are at their worst. The IRS agent I spoke with was super helpful once I actually got through to them.

Unfortunately, yes, you technically need to report all transactions. The IRS considers each crypto transaction a taxable event. For gambling specifically, you report your net winnings as income, but for the crypto side, each time you receive or sell crypto, that's a separate transaction for tax purposes. Some tax software can aggregate similar transactions to make reporting easier, but you still need the underlying data. If you're doing high-volume trading or gambling, you might want to look into specialized tracking tools that can export to tax formats.

Thanks for clarifying. That's gonna be a nightmare with how many transactions I've made. Does the IRS really expect average people to track all this? Do you think there's any wiggle room for small transactions under a certain amount?

The IRS does expect all transactions to be reported regardless of size. There's no minimum threshold that exempts you from reporting crypto transactions, unlike some other areas of tax law. That said, practically speaking, many tax professionals use software that can consolidate similar transactions, especially numerous small ones. The important thing is that your overall tax liability is accurately reported. If you're dealing with hundreds of small transactions, I'd strongly recommend using specialized crypto tax software that can import your transaction history directly from exchanges and wallet addresses. This can save countless hours of manual data entry while ensuring compliance.

I tried using TurboTax for my crypto last year and it was a disaster for anything beyond basic buying/selling. Had to switch to a dedicated crypto tax software halfway through. For gambling specifically, they have you report winnings under "Other Income" on Schedule 1, but they don't handle the crypto withdrawal part well at all.

Thanks for the response. That's what I was afraid of. Did you end up using a different tax software altogether or did you just supplement TurboTax with something else for the crypto part?