Topic: IRS Releases Tax Rules on BTC (Read 11064 times)

Disjointed pre-coffee statements, none are really connected to the others.

My personal suggestion (which should not be taken as tax advice) is to treat it like hobby income unless you made a significant amount, then unless you want to go the LLC route, sched C as a sole prop. Section 179 your mining equipment if you intend to be mining for a few years. (The idea someone earlier used as depreciation is not what is going on there, it is amortizing the start up costs for a business over a 5 year period. that being said it is "expected" that things written off here would last that amount of time, but hey this will let you write off maybe not so much now, but over the next four years as well.. on top of it. take a loss on mining equipment. Sell it on amazon or ebay when near the end of life, but still where people will buy it. )

Warning: sec 179 is a red flag if you go crazy with it. If you are essentially a whale looking for a way to limit your tax liability, do it another way. This is for the little guys.

This year there will be quite a bit of "leeway" since the IRS is aware they don't really understand it well enough.

Let's see there was something else, besides Self-employment tax suuuuucks. What was it? OH! I'm not sure of the exact "rules" here
but if you have to itemize, and you can't beat the standard deduction, I "think" you can take the standard deduction anyway.
I'm pretty sure that will be how places like turbo tax will do it. So itemizing doesn't have to screw you... anymore than the irs was going to
anyway.

The idea of paying taxes on the value of a mined coin at the time it was mined is silly, a wasted of everyone's resources including the IRS's to try to do that. If BTC is property it can't have any "value" as income until it is moved. If I mine $100 worth of BTC I didn't make that yet. if by the time I sell it it is $97 then THAT'S what I made as income. ex: If I build rocking chairs all day long, and pile them up, they are neither a capital gain or loss. They are not income. Once I sell one NOW it's income.  If I trade 4 rocking chairs for a goat, then you get into all that taxable barter stuff, but again it had no value by way of how the IRS does things until it moves. If they want to treat it like currency, then maybe I could see value at time of mining, otherwise it's kinda pointless. Like the people who bought a pile of BTC early on, and held on to them, and perhaps continue to hold on to them, should they pay taxes on what is it? right now about $350 per coin? That's crap. Now if those same people suddenly sell it, hey it's money now. Pay your freakin' taxes.  Until it moves, it's like having a collection of snowglobes. If you are the twisted freak that had your company pay you in snowglobes, and they actually did it, then it's income. pay your taxes.  If you just bought (or made) a thousand snowglobes and you sit all day polishing them and rocking back and forth hugging them, dude it's not income, it's just stuff.

Now I'm off for coffee filled with a vision of a crazy man talking to his friends, the snowglobes. No matter what else happens today, I'm going to chortle all day. While on hold with ups for them having sent my s1 upgrades half way across the country, and talking to the irritating people who can't help me... all the while will be a little guy in my head hugging snowglobes.

As a company, or self-employed, you can deduct all applicable expenses from your net profit, electricity, etc, as well any mining hardware in the year it went into service. But If you set up as self-employed, you'll also be paying the share of self-employment taxes (social security and medicare).

As an individual, hobby expenses can be deducted but only up to the profit you make from your hobby (mining in this case) and no more than 2% of your AGI. You also have to include it as part of your Schedule A and itemize all your deduction, which could come out as less than the standard deduction anyway, in which case not worth it.

In the end it matters how much expenses you have and whether it's worth claiming it through an SE business.

Yeah, that's the way it should work but not the way the IRS set things up.



Does anyone know if I have to form an LLC to claim my mining expenses for equipment and electricity, etc...  Or is there a way to claim them on a normal return using Turbo Tax.  I'm thinking under self employment or a sole proprietorship.  I welcome your thoughts....

Since "virtual currency" is considered a property by IRS, wouldn't property tax rules will apply then even when you mine your coins?

Also correct me if I am wrong but different states have different property tax rules and you have to report them to your local county. 

This does not work for wallets, it only works for trading.

An artist creates a work of art.  The work of art is property.  Does the artist owe income tax on the day the piece of art is complete?  I doubt it.  Creating the accepted block of Bitcoin transactions is a beautiful work of art.

An artist sells a work of art.  The artist owes income tax.  A Bitcoin miner sells/uses the block reward.  The miner owes income tax.

A miner mines a lump of rock out of the mine.  Little does the miner know there's a piece of gold inside the rock.  Does the miner owe income tax right away?  Later the miner breaks open the rock and finds a shiny piece of gold-colored metal.  Does the miner owe income tax yet?  The miner tests the metal and discovers it is gold.  Now does the miner owe income tax?  The miner doesn't have the money to pay and would have to sell the gold in order to have enough money to pay the tax.

The IRS visit list!

It is based on the rigid philosophy that bitcoin should only be used to break the law, which makes bitcoin a target for criminal investigation.   It would seem to me that law breakers would want public and legitimate adoption of bitcoin to grow, lessening the notion that bitcoin is used only for tax-evading/money laundering/black market activities.

How it can give you the freedom and actually right not to pay taxes as it is the government who force you to pay taxes/?

and who said i'm going to convert in fiat? i can hold my btc until they can be used directly to buy things that don't generate invoice(like foods), then where is your tax?

Sign in a Petition:(US citizens only)
AMEND IRS NOTICE 2014-2Taxing virtual currency/bitcoin as property stifles new technology&creates untenable requirements
https://petitions.whitehouse.gov/petition/amend-irs-notice-2014-2taxing-virtual-currencybitcoin-property-stifles-new-technologycreates/z7WtKZGY

Well, it is not bitcoin it is the government who want everything to be controled !

Bitcoin gives you the freedom of choice - to pay or not to pay tax.

Assuming you never bought through coinbase or other "trackable" source, you may always declare that every spent bitcoin was bought for cash the same day on satoshi square or localbitcoins

These Tax rules suck and are going to kill home / individual hobby mining and will cause individuals to either dump or hide all the coins they have and never use them.

 

I do not advocate for tax evasion but I do advocate for tax avoidance as permitted by law.

Watch for my next offering.

My $.02.

It's not bitcoin's fault the IRS decided to tax them.

+1

The proof will be apparent when and if you cash out, make purchases trackable to you and maybe even do business privately with someone who is an undercover government agent.

My $.02.

Probably not, but you probably would need to explain the source of the bitcoins when you cash out your mining revenue through a bank.    Filing a tax return and deducting your mining expenses might be preferable to the IRS making the assumption that you are a cyber drug dealer and having you pay the tax on the entire amount.

What if someone mined direct to exchanges? No way to prove what's been mined.