Topic: Btc taxes (Read 2272 times)

wouldn't that be shitty if you turned a 10,000 profit but didn't pay the tax only to have them lost or scammed and then have the irs start an audit from linking addresses then telling you that you owe a few thousand to them...WOOPS! (profit from trading within an exchange fiat to btc over and over ,then coining out in btc to hide it) or in the case of gox bcz it takes too long to wait for a cash out !

Be careful that local exchange might not hide much. For example, say I have an account at an obscure exchange and I withdraw 100 bitcoins with a USD value of 10K. Bitcoin wallet addresses are not obviously linked  real world identities. However, all transactions are on the block chain as a permanent public record.

If at any point some agent found my identity was linked to a certain address (lots of things can link this), then saw 100 coins go to that address that might trigger an audit if I never explained it come tax time. Even if I sold those coins locally the IRS auditor might want to know what happened to that 10K USD worth of value.

Now what's interesting is that the digital nature of bitcoins makes it incredibly easy to lose them, accidentally and permanently (scams/theft). It's going to be very messy for agents trying to enforce taxes on something as fleeting as virtual currency.

Thus Spake DancingNancy

IMO, just pay the taxes on capital gains.  Just went through this with the accountant myself.  If BTC really takes off in the future and the IRS has a 3 year lookback, you could really find yourself in some trouble.  The only way I would say you could avoid this is by selling in cash locally/buying locally. 

They don't need that. You have to ensure they can never link your computer or associated IP address with Bitcoin related activity. The way the Internet, computers, and Bitcoin works makes doing that pretty trivial unless the user has broken all the links which can be done using, for example, tools like Tor and coin mixing services, but still requires the knowledge and diligence to do it.

I cant vote for any of these options. It all depends on what the taxes are for. If they are for closing borders, thereby squelching commerce and reducing the total amount of wealth available, enforcing intellectual property and drug laws that favor special interests, and funding imperial resource wars so that the rate of obesity and associated health care costs can continue rising, I am against it. If they are for providing free meals and tents to homeless and maintaining free clinics, then I don't have much of an issue. Since the government doesn't seem to be to skilled at using tax money (10,000$ toilet seats for the pentagon, gang wars for the rights to scavenge army garbage dumps in iraq, etc.) I would rather just pay my contribution to society directly by giving money to people who need it.

It is trivial for them if you do your transactions through exchanges that you have provided with your name, and other identifiable information.

Disclaimer: I am not a tax professional and this is not tax advice.

Generally speaking there are two U.S. taxes for an individual to be concerned with, income and capital gains.

If you receive crypto-coins regularly, say from someone giving you tips to an address in your signature, then convert that into US dollars the government will want you to pay taxes on that as income. If you invest say 1K USD into crypto-coins and that doubles in value to 2K USD and you convert it back to USD then the government will want you to pay taxes on that extra 1K USD as a capital gain.

There was a member that posted a Bitcoin related tax filing with H&R Block which eventually classified the bitcoin activity as "hobby".

The key thing to be concerned with is conversion of crypto-coins (or any other virtual currency) to US dollars. If you purchase or receive crypto-coins/virtual currency and never convert it to USD then whether or not you have a tax obligation is less clear. I wouldn't think so.

The guidance issued by FinCEN clearly says exchange of virtual currencies directly for goods/services by individual users is not subject to regulation. Say I'm part of a small town and we print up a bunch of notes that say "small-town-coins" and exchange them among each other for food/services, etc. That's called bartering, and there may be taxes even due on that activity although one wouldn't expect it and it's less clear when. Bitcoin is in a similar situation.

A good strategy is simply keep good records of all the crypto-coins you buy or receive. The simplest way to stay compliant is don't convert anything to dollars, and report it as necessary at tax time. If you ever do convert crypto-coins to dollars then you should make a record of that along with whether or not you received a capital gain. If you are only exchanging from crypto-coin to crypto-coin that wouldn't require documentation (I wouldn't think).

It still isn't clear when you need to pay taxes on Bitcoins in the USA. Do you need to calculate for every transaction you make from one cryptocurrency to another? If I trade one value (BTC) for an equal value (LTC), how is that income?

Agreed. However, modern governments could function perfectly well reduced in size by 75%. This means that taxes could be reduced by 60% (in order so that balanced budgets could be run). Most people do not object to paying 15% or 20% taxation. It is the insane levels which exist in OECD countries now coupled with Mr Creosote-sized government bureaucracies which has taxpayers everywhere crying "enough".

its just a dumb poll no need to go into manipu;ation theory..thought about adding a few other categories but decided not toi ...just wanted to gauge the basic difference in opinion  w out going into the anarchist, minimalist, federalist argument... I tend to favor the minimalist stance but  govts always go well beyond....still doesn't mean that I like to pay, just that it sometimes needed and yet understand the voluntariest stance to a point on overreach so free market forces could take up most services

Personally?  Not so much, but aware enough to know that your poll is incomplete and missing valid alternatives.  Uncertain if this is due to negligence or intent to manipulate the results.

BTC taxes depends on which jurisdiction you are from, for such matters I rather ask an accountant and pay their fees.

ahhh a minimalist I see?

You are missing an option in your poll:

I dislike taxes, but recognize that there are certain services I require from a government (examples: enforcement of contracts and national defense).  I realize that these necessary services have an associated cost and the only way a government can provide these services is to collect payment from the citizens.  As such, I am willing to pay a reasonable amount of taxes for the minimum necessary government services.

Just pay the taxes, people. It's not worth it.

Remember Bitcoin is NOT anonymous. People still get this mixed up. Bitcoin can be used anonymously if you know what you're doing and take great care. If you're not absolutely certain you know how to use Bitcoin anonymously you should assume you're not anonymous.

It would be trivial for interested government agents to link your identity with Bitcoin related activity. That means a likely audit if anything trips a flag. Keep good records and pay your taxes as required. That's my advice.

I think we all dislike taxes.

Taxes are good when you collect them!

112 looks and no votes looks like the feds got everyone afraid to blatantly vote option 3...I myself didn't vote either for anonymity reasons...lol.... maybe that's the smart route! glad I have no taxes to owe in the first place... I thought there'd be at least one taker

there are also some non business people using btc on exchanges across borders who have registered their aml/ky bona fides who would be financially obligated to at least option 2//luckily i'm not in that group yet !  ,,, by sending those in they have basically given up on option 3 or would need to hide...yes, it will be interesting

Compliance is the biggest issue, not the will to comply. There aren't many BTC payment processors or businesses which enable you to easily extract information required in an audit.

Considering many (possibly most) BTC businesses operate without proper registration (at least in the US), the IRS may not even accept evidence from them - and don't expect the IRS officer to know how the fuck a link on blockchain.info proves a transaction. 

It'll be interesting.... if Bitcoin continues to grow, there'll be quite a few new landmark cases.