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Managing In-Person/Over-The-Counter (OTC) Transactions: Taxes and Tracking

  • Is there a proper way to handle transactions made in person?
  • How to account for the fiat currency used when making over-the-counter transactions?

If you’ve ever had questions similar to the ones above, this article is for you. This article will go over what in-person or over-the-counter transactions are and how to manage them properly.


Overview

Over-the-counter transactions, also known as in-person transactions, typically refer to trades that occur while offline. But in our case, this can also refer to trades that happen outside of an exchange. These types of trades can include the buying or selling of crypto, and purchases made using crypto. We will learn how to handle each of these cases in the following sections.


Over-The-Counter Buy Transactions

The first over-the-counter transaction involves buying cryptocurrency with either fiat or another kind of cryptocurrency. Some examples of these kinds of transactions are as follows;

  • Pay in cash to a friend in return for some crypto.
  • Using Apple Pay to send money to a family member which sends you crypto in return.
  • Buying crypto with a decentralized payment processor, similar to MoonPay.

If you noticed, there is one thing in common among all these examples. That similarity is that they will all create a single deposit into your cryptocurrency wallet. That deposit will not account for the currency used to pay for the transaction. To account for this, we just need to create a manual “Withdraw” transaction of the currency used. Don’t forget to include any transaction fees involved. For now, you can leave the transaction unclassified, and I’ll show you what to do with it later. If you paid using Fiat currency, you also need to create a manual “Deposit” transaction of the amount. The classification for that transaction is “Add Funds”, which is done automatically.

The following screenshot will show what doing this would look like if you used Fiat currency for the over-the-counter transaction.

Example of the transactions that need to be added.
Example of buying 1 BNB for $300 with a transaction fee of $20

Next, we will just need to classify one of the unclassified transactions as “OTC”. Doing so will provide the following pop-up.

Popup provided when classifying a transaction as OTC.
Example popup when classifying a transaction as “OTC”

Now, you’ll just need to select the associated transaction and click on “Next”. if it doesn’t show up automatically, you can search for it using the options provided. Just make sure the transaction you are looking for is unclassified. Once finished, your OTC transactions should look like the following.

example of the in-person transactions classified properly
Example of the transactions classified properly

Over-The-Counter Sell Transactions

The second type of OTC transaction involves selling crypto, either for fiat or another kind of currency. Some examples of these kinds of transactions are as follows;

  • Receiving cash from a friend in return for some crypto.
  • Sending crypto to a family member which then sends you money using Venmo in return.

Similar to the section above, this also creates a single transaction in your crypto wallet. This time, though, this transaction is a “Withdraw” transaction. It also doesn’t consider any currency received. We can fix this problem using a similar process to the in-person buy transactions.

Start by creating a manual “Deposit” transaction for the currency received. You can keep it unclassified for now. If the currency received was fiat, then create a manual “Withdraw” transaction of that currency as well. This is classified as “funds removed”, which is done automatically.

Following the same examples from earlier, this is what the in-person sell transaction would look like.

Example of the sell transactions
Example of selling 1 BNB for $280.

Next, just like the above section, you would just need to classify them as OTC. You do so by following the same process as before. By doing so, it should change your transactions to look like the following example.

example of the finalized transactions.
Example of the finalized in-person sell transactions.

Over-The-Counter Purchase Transactions

The third type of over-the-counter transaction that we will cover is when you purchase any goods or services using cryptocurrency. This is a little different from the other topics we covered in this article. This is because the transactions are already being handled properly by default. If you would like to keep your transactions organized though, classify the “withdraw” transactions as “payment”. Doing so would make your transaction look like the following screenshot.

example of an in-person purchase transaction being classified as "payment"
Example of classifying the payment for a product or service as “payment”

Conclusion

As you can see, accounting for the fiat used in your in-person or over-the-counter transactions is easy. Unfortunately, this takes some manual effort to fix. Although once fixed, it provides you with an accurate transaction history. Which helps you to not overpay on your taxes.


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