Made crypto capital gains on international exchange not legal in US - tax filing dilemma

So I've been trading on this international crypto exchange for a while now. There's technically a US version of it, but it's honestly garbage - they have like 1/10th of the coins available compared to the global platform. I'm not the only one doing this either - tons of us just use VPNs to access the international version where all the good trading options are. Now I'm sitting here with some decent gains from the past year, and tax season is coming up. I'm starting to freak out a bit because I don't know what to do. If I report these gains on my taxes, aren't I basically admitting I used a platform that might not be legal for US citizens? But if I don't report it, that's definitely tax evasion, right? Has anyone dealt with this before? Do I just report the capital gains without specifying where they came from? Or am I overthinking this whole thing? I don't want to get in trouble with the IRS or whoever regulates these exchanges, but I also don't want to hide income. Any advice would be super helpful!

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18 comments

Ethan Scott

•8M

Tax professional here. You're actually asking a pretty common question these days. The IRS is primarily concerned with you reporting income accurately, not necessarily policing which platforms you're trading on. Here's what you need to know: Your obligation is to report ALL income, including capital gains from cryptocurrency, regardless of where those gains were made. The IRS Form 8949 and Schedule D are where you'll report these transactions, but they don't specifically require you to list the exchange name. What you should focus on is having accurate records of your purchase dates, sale dates, cost basis, and proceeds for each transaction. If you can download transaction history from the platform, that's ideal. Remember that failing to report income is a much bigger problem than using a non-US exchange. The penalties for unreported income can be substantial, while the regulatory issues with the exchange would primarily be the exchange's problem, not yours as an individual trader.

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Ethan Scott

•8M

In most cases, the IRS form doesn't require you to list the specific exchange where you conducted the trading. What they care about is accurate reporting of the transactions themselves - dates, amounts, cost basis, etc. If you were to be audited, you would need to provide documentation supporting your reported transactions. This is where having good records is essential. The IRS auditor's primary concern would be verifying that you reported the correct amounts, not investigating which platform you used. That said, I can't advise you to conceal information if directly asked during an audit. The wisest approach is to accurately report all financial activity while maintaining detailed records.

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Nathaniel Stewart

•8M

I went through this exact same anxiety last year! After researching for days and getting nowhere, I finally found this AI tool called taxr.ai (https://taxr.ai) that helped me sort through my crypto situation. I uploaded my trading history and it analyzed everything, showing me exactly what to report without setting off any red flags. The tool doesn't judge where your trades came from - it just organizes everything properly for tax purposes. It even helped me identify some losses I could claim that I had totally missed. What I appreciated most was that it didn't just generate forms but explained the specific reporting requirements for crypto in language I could actually understand. Definitely made me feel more confident about filing.

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Nathaniel Stewart

•8M

It handles cross-exchange transfers really well. You can import data from multiple platforms and it recognizes when you're moving the same assets between exchanges rather than counting those as separate buy/sell transactions. This prevented me from accidentally double-reporting or creating phantom gains. For DeFi activities, it definitely covers staking rewards and liquidity pool transactions. It categorizes staking rewards as income at fair market value when received, then tracks that as your cost basis for future sales. For liquidity pools, it handles the impermanent loss calculations which was something I couldn't figure out manually. I was actually missing out on some deductible losses before using it.

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Santiago Diaz

•8M

Just wanted to follow up - I tried taxr.ai after seeing your post and it was actually super helpful! I was shocked at how it sorted through my mess of transactions. I had been stressing about my liquidity pool gains and some NFT trades I did, but the platform categorized everything correctly. The best part was that it showed me exactly where I had harvestable tax losses I could use to offset some gains. I'm filing with a lot more confidence now, and everything is documented if I ever get questions. Definitely worth checking out for anyone in a similar situation.

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Millie Long

•8M

If the IRS does come asking questions, you might need to actually talk to them. I tried calling the IRS for weeks about a crypto question last year and could NEVER get through. Finally used this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in under an hour. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was skeptical at first, but it worked exactly as advertised. The agent I spoke with just wanted to verify my numbers matched what I reported - they didn't grill me about which exchanges I used. Having that conversation actually put my mind at ease about the whole situation.

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Millie Long

•8M

It's not a backdoor to the IRS or anything shady. The service basically automates the calling process - it uses technology to continuously dial and navigate the IRS phone tree until it gets through to an agent, then it calls you when a connection is established. It's like having a robot assistant keep calling for you instead of you having to sit on hold for hours. I totally get the skepticism - I felt the same way. But it's just a time-saving service, nothing magical. The IRS knows about these services and hasn't shut them down because they're not doing anything improper. They're just efficiently navigating the same public phone system that everyone has access to, just without you having to waste your own time.

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Debra Bai

•8M

I need to eat my words here. After posting that skeptical comment, I decided to try Claimyr myself since I had an unresolved issue with the IRS about some crypto stuff from 2023. I was fully expecting to come back and call this out as a scam. But... I got a call back in about 45 minutes with an actual IRS representative on the line. Completely legit. We resolved my issue in one conversation instead of the weeks of failed attempts I'd been dealing with. The agent answered all my questions about reporting requirements too, which was super helpful. So yeah, I was wrong. If you need to actually talk to the IRS (which might be a good idea in situations like OP's), this service actually works.

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Gabriel Freeman

•8M

Yes, there's always a paper trail when you move money back to your bank, but that doesn't change the main point. The banking system knows you received funds from somewhere crypto-related, but that alone doesn't tell them which specific exchange you used or whether that exchange was "approved." Most important thing is just to report all your income accurately. The IRS wants their cut of your gains - that's their primary concern. They're not coordinating with other agencies to check if you used a VPN to access certain websites. They have bigger fish to fry than retail traders who are actually paying their taxes properly.

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