If you transfer crypto to a wallet outside the exchange, does the exchange track this as a sale or a transfer?
More context: Crypto Tax Software has no problem tracking this as a transfer—since it knows about all of your wallets—but I suspect the exchange may track this on the 1099-DA as a sale.
But then the 1099-DA reports a sale while the 1099-B generated by the crypto tax software reports a nothing burger—and may not even report this transaction since it's just a transfer.
Question: do we need to report the 1099-DA is we use crypto tax software to track all transactions? If so, how to reconcile when the two are different?
Update: if not clear this is about US taxes
Crypto Exchanges, 1099-DA, and Crypto Tax Software?
byu/bestjaegerpilot inCryptoCurrency
Posted by bestjaegerpilot
1 Comment
From what I’ve seen in my friend group, transfers off an exchange to your own wallet usually don’t get treated as a sale by the exchange, it’s just a withdrawal. The tax software picks it up properly as a transfer if all your wallets are connected, which is why it looks like a “nothing happened” event there.
The confusion kicks in if the exchange doesn’t have full visibility or labels something weirdly on their forms. A couple of my friends had mismatches like that and they just relied on their tax software as the source of truth, then used the exchange forms more like a reference check.
Honestly feels like the system isn’t fully synced yet, so people are just trying to reconcile as best they can. Curious if anyone here actually had the IRS question a mismatch like that?