Definitely consult your attorney on the proper course for taxation. If you have enough bitcoin, it may be profitable enough for you to move to somewhere like the Emirates for a year to take advantage of their tax structure.
If you're a U.S. citizen, you are expected report and pay tax on all foreign income no matter where you earned it or what foreign taxes were paid. Yeah, pissed me off too when I was living abroad for a time.
You won't get away with it unless you have some sort of dummy account on an exchange or sell it all face to face (or computer to computer, as the case may be). Alternatively you could renounce your U.S. citizenship, but I suggest you find another form of citizenship before you do that.
Not true, you may qualify for the exclusion:The IRS qualifies you as eligible for the Foreign Earned Income Exclusion.
Your salary must be paid by a company or agency in your country of residence or by a U.S. company operating in that country.
You must reside in a foreign country for an entire tax year or for at least 330 days during a 12-month period.
That is what I thought was the case. But I imagine though bitcoin cashing out is a whole other issue and probably fairly complicated. I'm not sure where that lies for U.S. citizens residing abroad.
