Topic: IRS says mining is "income" (40% tax) instead of cap. gains (20% tax) - page 2. (Read 4235 times)

as stated in a previous post my bank screwed up my wire xfer 6x the main bank did not like that and did an investigation....knowing this i wen t "legal" and paid taxes thus when they asked ....could show legal and their mess up (changed banks). I'm in USA if i could have I'd simply have held coin till say next year when imho some of these dumb IRS rules would be modified....but alas was not to be...but then again I don't have an itchy feeling on my back as an IRS target now.....so as a newb wire xfers are like an IRS wildlife 'tag' imho

As long as you don't think they'll be able to identify you on the blockchain sometime in the next 7 years, go for it.  But I have a feeling they might.

that is what I ment I'm depreciating assets from last year...but this years equip i should do your 179 option...again last year I think I had more equip then the 179 was worth doing....so she depreciated in stead..20% 5 year method....but this year with the coin i make the equip i have on order ..it looks likely to make sense this year...again she also wanted me to show "some profit" as a new business as a hedge down the line..must show profit for 5 yrs biz type of thing

not sure...again I'm trying to remember stuff from april 2013 when forms were flying...i may not have it exactly right but at least I'm getting enough info to ask the CPA stuff this year...but I seem to remember this coming up and she depreciated the stuff as computer equip (5 year plan) instead ...we can only go by the guidelines..i'd assume this year or next the computer designation will go away for bitcoin miners..and we did call the IRS hotline too...so...anyway...I shoulda paid 4K only paid 550 usd..and my taxes show my equip being depreciated on 5 yr plan...not sure what the IRS hotline said ...on the call...she was doing the talking and a lot of u-huh's going on.


again just trying to muddle thru

thanks for your help

Searing

You can't take a 179 deduction for assets you didn't purchase the same year.  You can't take a 179 deduction for assets that you are depreciating. 

well likely that is what my CPA was gonna use last year 2013..but probably I had more equip then I had income...so she
did straight 20% deduction on my equipment instead I think...to push the benifits of such into the next year...again
this is what I think my have no basis in reality...if what you say is true with deductions from last year 20% this year
and the 50% off eguip this  year I will likely use this...(or more on section 179 as you state) I will definitely be able to use such this year (knock wood) in that
I expect to make 75 to 100 coin.....er "the tax man cometh"

so it goes

Searing
 

Yeah none of that has anything to do with a Section 179 Deduction.

again from my previous post as I remember stuff..this seems to ring a bell...but I think it is 50% max this year....I thought also it was 50% last year (perhaps I did not need all my deductions in that manner...i did pay a bit to show profit most I got out of) ...anyway....this has NOT been passed yet a far as I can tell congress is holding up these tax befits for small business the republicans at the moment are using it as a lever in the senate..we will see

it is helpful but if I made 10k mining and had 10k of equipment....my amount being Taxed will be 5k which means my taxes at 50% would be 25% against that 5K  would be 1250 usd vs 2500 usd w/o the equip deduction..10k in equip is  a long way around the park to save 1250 usd!..this is OK..if you are planning on equip anyway....but again this years 'exceptions" on such are currently being held up in congress from what I understand

again this is my 'skewed' understanding of such...consult a CPA

anyway......main point is IRS says I am legit I pay IRS its 25% cut I can play depreciation equipment games up to a point...

still way behind on how all this hangs together that is what the CPA is for ..anyway in USA consult a CPA if you plan to be "legal" on your btc stuff (or are backed into such like me) heh

Searing

I believe he was just giving the absolute worst case scenario. The highest tax rate you could probably receive if you made THAT MUCH money.

Small businesses can elect to deduct 100% of the cost of an asset value as an expense instead of depreciating it.  It is called a "Section 179 Deduction".  
http://en.wikipedia.org/wiki/Section_179_depreciation_deduction

It is the single best tax deduction for small businesses and there is absolutely no reason for a miner to not use it unless it is not available.  The bad news is that for years through 2013 the max deduction was $500,000, but in 2014 it drops to $25,000.  Still if you purchased less than $500,000 in mining hardware in 2013 and/or less than $25,000 in mining hardware in 2014 there is no reason to not take the section 179 deduction.   Essentially you are getting the full depreciation deduction "up front" in the first year instead of over the life of the equipment.

Note this should not be considered tax advice and is only informational. Your tax situation may vary, always consult a tax professional.

WARNING: This is a long post and cumbersome and illustrative of my way of paying taxes in USA 2013  'mining bitcoin"
under guidelines of IRS 2013 of mining bitcoin. ...for illustrative purposes only on my situation... best I can remember it.
ANY info you find of note here contact your own tax professional CPA ..this was for .2013 and we (CPA & I)
are going by the '2013 IRS Guidelines" ...much fuzziness imho.
IF you don't like long posts or the way I write or are outside of the USA with our 'nutty' IRS
...feel free to skip this whole post!

By the by I went "legal" on my bitcoin mining due to bank errors on wire xfers they screwed up...too much
paper over 10k ..thought it was a mess ..thus why I went legal glad I did had to prove such to bank that
they made the errors and used my 2013 legit miner tax forms to prove I was legit ..so being paranoid was
good..or I'd be in a world of hurt with IRS ...so I can live with being 'legal' on my 2013 mining for sure!

32K I think it was of miner equipment (think that was the figure) 35 coin made....mining profit was pennies short of 16K usd.
w/o deductions I would have owed the IRS 4K in taxes (the price I thought I had to pay for the bank drama)

w/ deductions (assuming my miner amount above is correct can't remember) at 50% knocked off this 2013 year if I remember correctly
for 'stimulating economy on biz equipment..etc..

16K of deductions equip  vs 16K of coin income...0  bucks  in taxes owed
..had some other stuff home biz....1st time biz other breaks..
other deductions that quite frankly I'm clueless about..but anyway

Tax CPA lady said best to show a profit ..she tweaked some stuff
.so anyway I ended up owing the IRS 550.00 usd on my 35 coins for 2013.did not have to pay 3450.00 taxes I thought

This year my knc jupiter will End of life at 15 btc...I also have a BFL refund in the equipment above 8.5k that now that I REFUNDED (miracle) it will also count as income
so this year at $450 a coin and the BFL refund have already made mining/refund $15,250.00 mining income and that is BEFORE my Titan 300mh scrypt miner, alpha vyper
16mh (likely 16mh virtual compensation added) and another unit I plan to order spondoolies for 5K..so if I really pump out coin this year I may have wished for
more bitcoin equipment?...I could be in for quite the Tax hit if btc goes to 1000 a coin...but you play the hand you are dealt.

so as you can see the more coin I make the more 25% the IRS gets from the bigger pie....on the other hand being a legit biz and IRS considers this land/property
you can depreciate equipment...the CPA lady said you are a 'farmer' only way to make btc is mine..thus like a farmer you can depreciate equip to make the btc
IRS wants you/btc to be successful CPA lady said so they can get 25% mining tax for next 40 years etc

anyway that is my above imperfect remembrance how this works and this year using the "guidelines" she put the stuff under computer equip depreciation (ie it computes)
for 5 years...I did tell her that a "miner" of any sort scrypt/bitcoin
 it is only likely to be good for 1 year at most her reply was best we can do with 'guidelines' may change in the future just keep equip..can
only go by what the IRS put out as a guideline she says....computer equipment (5 yr depreciation)
so keep the equipment 5 years (ideally hooked up) even if you don't use it often....I eventually can write off 2013 equipment
unless they retroactively change 2013 it should depreciate...again under 'current' guidelines CPA lady said.

now also there MAY be to stimulate economy again 50% off new equip rather then the 20% normal depreciation normal depreciation you'd usually
have to take this year..plus 20% or so off last years equip etc
so anyway the game I'm trap'd in so far...and again best I can remember how it was explained to me..

well ..It works ...so far.....will try the game this year this way as well..then of course I may have fumbled how I explained this and or my CPA lady is nuts
either way...my amended taxes are in somewhat in the above manner for 2013 and likely will use the same method for 2014....should this more or less
stay in place for 2014 (as i expect it to) till after the Nov 2013 congressional elections in USA..i expect more specifics for bitcoin in 2015 tax year.

again this is a rough idea of why/how i went legal and approached this in the USA...the above is not exact ...illustration purposes at best
contact your own CPA but again was what my CPA got from the IRS guidelines and we called the IRS help line...and so went with it for 2013
and making biz considerations this year 2014 on the same

anyway I be a "farmer" i guess (hope next years crop is good frigging bitcoin tractors better pay for themselves!

Searing

I'm not a tax expert, but I'm pretty sure it works something like this:

If you buy mining equipment for 20k, then you can depreciate your mining equipment and deduct the depreciation from the mining income. Depreciation is over several years, so it won't be 20k. It will be more like 7k (assuming 3 years). If your income is 8k and the depreciation is 7k, then you will have a 1k gain and not a 12k loss.

If you buy cloud mining shares for 20k and you have 8k income, then your income is 8k, and you pay capital gains on the difference between the buy and sell amount in the year that you sell your shares.

Losses carry forward but if you have a 12K mining loss it is applied against your other income for that year first so it would only carry forward if you had less than $12K in income from other sources.

are losses carried year after year?
for example, if I put 20k or mining, this year get 8k and next year, other 8k, will I have in the next year to declare 8k profit or declare loss?

I know that, I say that from the angle that America (I apologise for saying this because it's kinda a "double edged sword") likes to play "World Police"
Being right next door to america, with our current Harper goverment, I'm sure America would try to push the laws as a "standard" that their allies must apply to try and prevent offshore mining.

Fwiw, I am personally biased Against the USA's Goverment

OP, you need a better accountant. Stat.

Good news bro!  IRS doesn't tax Canadians.



*and wars are so ...unrainbow.

I am pretty sure many miners are profitable but for those who produce a loss there is no income tax and the net loss will reduce the overall income reducing overall taxes.

OK... so none of the Bitcoin miners in the US will be paying any taxes to the IRS. I don't think that Bitcoin mining is profitable anywhere in the world. So the net income is in negative.

http://www.logicallyfallacious.com/index.php/logical-fallacies/97-faulty-comparison

https://en.wikipedia.org/wiki/Decline_of_the_Roman_Empire