You may be responsible for taxes on certain transactions you make while using LVL crypto services. LVL provides several reports and emails to assist you with preparing your taxes. These reports and emails do not constitute tax advice. Consult with your tax advisor regarding your personal financial circumstances.
Manually placed market orders, and automated trades from Market Making, are all taxable events. Market Making trades are standard limit orders, and taxed like any other trades.
1099-K
A 1099-K is a transaction report that is provided to both the IRS and you if you meet certain transaction thresholds in a given year. LVL provides 1099-K’s to the IRS and you based on transaction thresholds set by state and federal governments, depending on your state of residency.
The 1099-K represents total trading volume, but does not report income or capital gains. The numbers shown on your 1099-K can be quite large, and this can seem concerning. However, this is not income. For example, if you trade $100 ten times, that is $1,000 in volume, but that does not account for any associated gains or losses. You would still need to use your trading history spreadsheet and 8949 Equivalent to find your capital gains from this total trading volume.
1099-B
LVL does not provide 1099-B’s. You will receive an email with your calculated reportable gains or losses.
8949 Equivalent
LVL does not provide a completed 8949 tax document. You will receive an 8949 Equivalent cost basis calculation as a spreadsheet by email. This calculates your cost basis, and profit/loss, across all trades (manual orders and automated trades). You may be able to submit the 8949 Equivalent directly to the IRS in place of a completed 8949 form. Consult with your tax advisor before sending any LVL forms to the IRS.
Transaction History
For some LVL users, especially users that trade on multiple platforms, it may be necessary to calculate your capital gains using information from multiple platforms. LVL provides a spreadsheet of your complete transaction history along with your calculated gains or losses and 8949 Equivalent.
FAQ
Does LVL report income or capital gains to the IRS?
No, LVL does not. We provide you information which you can use to find and report your own income and gains. If you are issued a 1099-K, this is also sent to the IRS. This 1099-K does not represent income or capital gains. This is only reporting total trading volume.
Why are the numbers on my 1099-K so large? Is this income?
No, the numbers on your 1099-K are not income. This represents total trading volume. If you used the LVL Market Maker, this can generate a large volume. For example, if you trade $100 ten times, then that is $1,000 in volume, but that does not account for any actual gains or losses. You can use your 8949 Equivalent and transaction history spreadsheet to find your actual capital gains, which is what you would report for taxes.
Information provided by LVL does not constitute legal or tax advice. Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances involved. You are responsible for consulting with your own professional tax advisor concerning your specific tax circumstances. Samsa Technologies, Inc. disclaims any responsibility for the accuracy or adequacy of any positions you take in your tax returns.