Are you a BlockFi user trying to file your crypto taxes?
BlockFi paused withdrawals for all customers in 2022 — leading BlockFi users to ask questions about whether they would receive access to their holdings.
Let’s break down how the IRS taxes BlockFi transactions and interest payments and share a step-by-step guide to filing your crypto tax return.
BlockFi is a US-based cryptocurrency wallet and exchange. It offers crypto investors low transaction fees and interest on assets like Ethereum, Bitcoin, and various stablecoins.
BlockFi was founded in 2017. The company has received funding from investors such as Coinbase Ventures, Pomp Investments, and Bain Capital Management.
BlockFi was set to be acquired by FTX in June 2023. After FTX’s financial issues and subsequent bankruptcy in November 2022, BlockFi suspended withdrawals for all customers.
At this point, it’s unclear whether BlockFi customers will regain access to their holdings. In a letter to customers, BlockFi stated that the platform had ‘significant exposure to FTX’ but was still exploring options to maximize value for clients.
In the event that you permanently lose access to your BlockFi holdings, it’s possible that you’ll be able to write off the value of your lost cryptocurrency as an investment loss.
For more information, check out our guide to FTX and BlockFi losses.
If you have capital gains or income on BlockFi, you’re required to report this on your tax return — even if you don’t have access to your cryptocurrency.
It’s possible that you can write off the value of your cryptocurrency in the future if you lose access to your BlockFi holdings permanently.
The IRS considers cryptocurrency a form of property that is subject to both capital gains and income tax.
Capital gains events: You incur capital gains or losses every time you dispose of your cryptocurrency. This may include selling your cryptocurrency or trading it for other cryptocurrencies.
Income tax events: If you earn cryptocurrency as a form of income, this is considered personal income and will be taxed accordingly.
Yes. The interest that you earn on BlockFi is considered ordinary income and will be taxed based on your personal income tax bracket.
Yes. Like many other cryptocurrency exchanges, BlockFi issues 1099 forms to customers and the IRS. If you don’t report income that’s been reported on Form 1099, it’s likely that you will receive a warning letter from the IRS.
BlockFi does send tax forms to its users. If you’ve earned more than $600 worth of interest and bonuses on BlockFi, the platform will provide you with a 1099-MISC form. They will also send an identical form to the IRS.
However, the platform does not have a complete view of most users’ cryptocurrency buying and selling history and cannot provide you with the full information that you’ll need to file your tax return.
Here’s an example that shows why it’s difficult for BlockFi to help users accurately report all of their crypto taxes.
In this scenario, BlockFi doesn’t know what David’s cost basis was for acquiring Bitcoin. Since the transaction took place on a different exchange, BlockFi doesn’t know if he acquired his tokens for $1,000, $5,000, or $10,000.
That means if David ends up selling his Bitcoin, BlockFi can have trouble accurately reporting this capital gain.
To accurately report your crypto taxes, you’ll need to record all of your transactions across multiple wallets and exchanges. While it can be difficult to track all of this information on a spreadsheet, CoinLedger makes the process easy. With just a few clicks, you’ll be able to import your transactions from BlockFi and other exchanges.
Here’s how you can upload a full record of your BlockFi taxes into the CoinLedger platform for automatic tax reporting.
1. Log in to your BlockFi account.
2. Click on the Reports option under the user profile dropdown menu.
3. Scroll to the very bottom of the page and click on the .csv download option to get your full transaction history downloaded to a csv file.
4. Navigate to the BlockFi tab on CoinLedger and drag the file you just downloaded into the blue box.
And that’s it! You’ll then be able to create a crypto tax report that includes all of your BlockFi transactions.
Want to get started managing your taxes on BlockFi and other exchanges? Try out CoinLedger, the crypto tax software used by more than 300,000 investors.
Get started with a free preview report - there’s no need to enter your credit card information until you’re 100% sure the information we’re giving is accurate.