Topic: Bitcoins and Tax - page 2. (Read 9603 times)

I can't understand how the IRS determines that your bitcoins are in the US? They can track only those dollars which are credited to your account. As far as I know the United States still do not recognize bitcoin currency. This means that your savings in bitcoin can not be considered income.

If the bitcoin will be legal it will pay a tax. There is many rules, regulation, limitations that you need to follow on that. But if the bitcoin will not be legal I will be happy because there is no any rules, regulation, limitations that you need to follow from the government. There is no any problem that you will face.

You could use a software to calculate or you could use the average price for the year.

I am baffled by the number of people who clearly seriously believe and continue to post arguments like this.  As a US citizen:
1) You would most likely get paid once every week or two, and each payment would be a lot, not each day's portion of the payment.
2) If you were paid in a foreign currency daily, you would need to track the value and the cost basis the same way, too.
3) If you were paid in a foreign currency, you would also owe taxes on the value in US dollars at the time of payment (argument that the company paying you would withhold presumably applies to BTC as well if it is on a payroll).
3) If you were taking losses on currency as personal losses (because you clearly aren't a business), you couldn't claim them against your taxes like you can capital losses on investments.
4) If you were to find a chunk of pure gold in your back yard, you would owe taxes at the time of receipt the same way and may have to sell those items in whole to pay the taxes.
5) When you sold the gold, you would pay the collectibles tax rate, which is even higher than the currency tax rate, which is higher than the capital tax rate that applies to bitcoin.

Getting BTC treated as a currency would be like shooting yourself in the foot just so you could shoot someone who you are jealous of in the foot as well.

If you think I am wrong on any of these points and would like to convince me as much, please thoroughly review these two threads about the same before doing so:
https://bitcointalksearch.org/topic/m.9768244
https://bitcointalksearch.org/topic/m.9768244

Circle has some pretty lousy buy and sell limits though even if they approve your account, and right now it's on a pretty bad delay for approval.

Even after verifying my bank account and a card they'll only let me sell $1000 of bitcoin...pretty lousy and the rules for increasing the limits are complete mysteries compared to Coinbase.

The tax situation in the US is a COMPLETE NIGHTMARE.  If you get paid 0.5BTC per day as part of your income or whatever when it comes time to do your taxes you have to actually figure out how much BTC cost on every single day to figure out your income and thus your income taxes.  Even worse, if you sold it off you have to then calculate out how much you sold it for and whether you're taking a capital loss or a capital gain, which is a complete nightmare.

Even worse than that is that if you run a bitcoin mining business and you hold onto your bitcoins you can end up owing a ton of money in taxes despite not holding bitcoins worth anything close to what you're being taxed for.  That is, if you mined 50 bitcoins when they were $1000 but never sold any of them, the IRS will tax you on $50,000 of income, nevermind that you still hold the bitcoins and they're only worth $315 now.  This actually *FORCES* miners to sell a large portion of their bitcoins to at least be able to pay their taxes.

And selling the bitcoins themselves is a nightmare because if you keep mining and you are selling let's say, 30% of each day's minings will the IRS force you to use a FIFO accounting method for the capital gains?  Because if so, you will NEVER benefit from long term capital gains rates because you're constantly forced to sell off your oldest bitcoins.  Since bitcoins are actually trackable and do differ in quality (older coins are spendable without fees whereas newer ones usually require more tx fees) one could make the argument that you can sell specific coins such that this does not apply, but that of course requires you to track a whole other layer of complexity to prove to the IRS that this is legitimate.

The only people who really benefit from this ridiculous taxation scheme are people who bought their bitcoins early on, who'll actually get to use the long term capital gains tax rate if they sell off their bitcoins.  That and my accountant who is going to be billing me some serious hours for going through the bitcoin charts and figuring out just how much income the 0.02 bitcoins I mined were worth on what day.  That's 365 days of math to add up, and then even more nightmares trying to figure out which bitcoins I spent are which-I'll probably end up paying income taxes but having large capital losses that can't be used against the income but can only be carried forward against future capital gains.  This taxation is complete garbage right now and this is WHY THE PRICE IS SO LOW.  No business can currently hold bitcoin without being subject to owing tons of income taxes on money they don't even have if the price of bitcoin drops.  That is completely insane and the reason why nobody is holding the bitcoins they receive.

Honestly if you want to build a serious bitcoin business I wouldn't even bother to do it in the US, the tax rules are moronic because they're clearly not meant for a digital currency. 

bitcoin was never about evading taxes remember that first

if you want to evade taxes there are multiple ways to do this




secondly

this I believe is how governments will tax bitcoin, but all they can do is hope people will declare what they have

https://www.ato.gov.au/general/gen/tax-treatment-of-crypto-currencies-in-australia---specifically-bitcoin/


this in itself makes it a legitimate currency, but who cares, people now have a way to make and have their own currency however they want

interesting to see how the governments are going to keep up with legislation and regulation when people have multiple avenues to increase wealth that is not illegal but not within the legal framework


e.g. how many people are going to pay capital gains tax when using localbitcoins or a decentralised exchange

States do that : they don't help in anyway but they want their cut when it suceeds, mafia style : "pay us so we can "protect" you"

I would caution anyone trying to convince themselves that there are no taxes on bitcoin in the U.S. That is false. You owe on the appreciation in value of any bitcoin you own. That is to say you owe capitol gains. If your salary is being paid in BTC then you also owe income tax.

It is quite possible that the IRS is behind the learning curve on this and may not be able to determine if you owe. In that case you may be able to stick the bill to those who pay your share of taxes. However, if you are caught do not waste your time and money fighting it. You will owe the back taxes plus penalties and late fees.

Not applicable to US residents but we just released a report on the taxation and regulation of several Bitcoin activities in Germany. It may be an interesting read even for non German-residents. At least it shows that Governments have cryptocurrencies on their radar and that you should not try to evade taxes just because this technology is new and awesome.

i want some info on that too.
thank you

You can actually sell to them then?  Is it safe and legit?

I don't really see the problem, it took me 15 min to get familiar with: https://www.circle.com

Great information. 


What should I be using then?  Circle I am not familiar with?  I am living in the US and am not sure what other places I can sell coins to if I so choose to.  Thanks for the help!

Dont use Coinbase! There are much better alternatives, i.e. Circle, ..

Bitcoin purchases aren't tax deductible. But you can claim capital losses from trading at a loss, up to the value of your other gains that year and $3,000 income.

So if I can't use Coinbase to sell my coins, what can I use?

And does this work the other way around, if you purchase coins can you use them as a deduction on your taxes?

All the reason to stay away from coinbase.com. 
They are in bed with the banks, and according to Andreas Antonopoulos, most likely have a goal to sell out to JP Morgan.

I think the government will start getting a lot more serious about taxing/tracking bitcoin transactions once corporates start using it widely. They wouldn't want any revenue to go under the radar.

Mark my words, coinbase.com will be the first crypto web wallet site to start issuing 1099s to their users.   They are basically like the paypal of cryptos. 

Taxation is the only reason governments are really looking at regulation.   At the end of the day, they really don't care if a few people are using it to buy drugs.   If they can tax the sale of the drugs, they will be more than happy.