Topic: KryptoTax for Miners ? Similar tools? IRS Notice 2014-21 q8 (Read 1328 times)

Agree 100%, my CPA advised that I paid taxes based on BTC that was converted into goods or FIAT. I am playing conservative and going to pay taxes on mined income as I read it

This is the dumbest statement ever. The pig does not provide the farmer with an income until it's sold at market! Until then it's a commodity. They did say it was a commodity, and not the new US currency, right?

Personally I wouldn't go around spending all the money on a yacth (just yet) but yeah you can still spend it, once IRS starts actually fixing this and not using a POS bandaid solution, thats when you start paying taxes.
And check this out
http://www.streetinsider.com/Press+Releases/BitcoinTaxes+and+Bitcoin+Tax+Solutions+Create+Specialized+Cryptocurrency+Tax+Service/9365593.html

What about CEX.io?  If you don't transfer the BTC out of the site, but reinvest what is the scenario? Did you have taxable income then use BTC (property) to purchase an item which essentially creates two taxable events?  Or would this be considered not for profit since all gains are reinvested?  I do not have a clue.

Once you cash out I understand what the ramifications are, but this is just one of many questions I have.  The biggest being if this is considered a type of self employment, I want to know what is considered a deductible expense.

So again, I appriciate your opinion but this thread is not one that I started to debate these issues, please feel free to start a new thread. I am looking for meaningful ways to track my mining efforts in order to comply with the IRS notice.


But since I cannot help myself a little bit I will challenge your thinking. Great thing about america is we can each have our opinion and we can each share that opinion.

IRS could have done 4 things in my mind.

1. Ignore BTC all together. You are really dreaming if you think this is a possibility.
2. Deem BTC as property. (best option imho)
3. Deem BTC as a foreign currency
4. Adopt BTC as official currency of the US - right!  Stop that dreaming again!

Have you looked at what would be required of you if this was a foreign currency? Have you looked at what you would be taxes at? And looked that it could be counted as ordinary income?  you are a US tax payer yes? If not why are we debating at all.   here is a link that breaks some things down for you: http://www.fxop.com/Forex%20Taxation.html

Fungibility:
The fungibility that we need to protect is that of the spendability of each coin, regardless of its history. Say you get your first BTC, it was used in a silk roads transaction so the government came and said you could no longer use that BTC. That is what we need to fear. Not the cost basis of a coin, that alone does not change the spendability of each coin regardless of which coin it is. Fungibility is in tact with the IRS ruling.

As for the cost of an ATM, have you ever looked into starting your own bank? Yes, lots of regulation and lots of costs. But guess what, We live in a free country and can move. So if you want to own an ATM maybe you should pick a country other than the USA.

It is very easy to establish a cost basis of any amount of BTC when YOU get it. Doesnt matter at all what it was worth when someone else purchased it, and doing this does not destroy fungibility.

As far as official value, nothing in this world has official value. I may have gold. The going rate of gold might be $1000 per unit, but if I say I am not selling my gold to you unless you give me $1050, guess what, we have established a cost basis for your gold. $1050.  Now lets say you buy more gold from the next guy, he really needs US dollars so he sells you an equal amount of gold for $950. Guess what, the value of that gold has been established as $950.  So now you have 2 equal parts of gold. Are they of the same value? It depends on how you want to declare the value. You could say that all of your gold is worth $1000 per unit, or you could say you have two units of gold, some more valuable than the rest. Does it matter? No. When you go to sell your gold, even if you sold 75% of your gold, you would easily be able to establish a cost basis for your gold, and that cost basis did not matter at all to me when the buyer buys it from you.

It's in development and will be in https://bitcointaxes.info hopefully by end April, along with a tracking service for purchasing.

Do you really think that paying taxes on income you get means you are supporting one currency over another?  And what currency is mine? I do not make claim that I "own" the US Dollar nor Bitcoin as a whole.  I do "own" some of each.


I think the fact that some transactions could be considered anonymous is fine. I do not think that all transactions are anonymous. With a "public" ledger, and some hard work a lot of what you think could be anonymous is not anonymous at all, and if you try to keep it that way you could have a ton of work FOREVER to make sure that a transaction cannot be linked back to you. I think you could make BTC transactions totally anonymous but it would require a lot of effort.  I am not doing anything that I think needs to be kept secret. Doing purchases online without the need to give up my credit card number, expiration date, and secret code on the back of my card makes BTC plenty anonymous for me. No one can use that data to take more money from me.

I am not asking on my OP if you think the ruling is legal or not. There are plenty of people who think the IRS as a whole is illegal, and plenty of those people are sitting in jail because of their belief system.  By the tone of my post I wish to comply with the IRS notice. This thread is not to debate the legalities of the ruling, there are other threads for this already started. This thread is to discuss what tools could be in place to help those that plan to comply with the IRS.


You know Money Laundering does not have to involve currencies correct? In fact it normally does not involve a second currency, it involves some other sort of legitimate business or product. The whole point of Money Laundering is to get money gained in illegal means into the financial system thru legal means. (Get money selling drugs, move that money into buying and selling cow hides, put money from cow hide sales into the banking system, money is now laundered). The IRS ruling actually helps people who do sell BTC for US Dollars in that the IRS has said BTC is property. Being Property should mean that you do not need a MSB license or be registered as a MSB. FINCen has also said that if you sell BTC that you had invested in as a personal investment, you do not need a MSB to sell BTC. If you do it as a business, or for a 3rd party, then you do need a MSB.

Money Laundering typically involves property, goods or services.


FINCen tells me I do not need to be a MSB so long as I am selling my own personal investments, like stock certificates. This is great news!  IRS tells me that if I sell my property and made a profit on it I need to pay taxes, like any other property that I own.  I do not see these rulings as offsetting each other nor attacking BTC users at all. If BTC was deemed a foreign currency I think it would have much worse tax implications, as does my CPA. I am quite happy to have BTC considered my property.


Again, I do not see the IRS challenging this at all. Instead you are just setting a cost bases for your coin. There are several ways that you can calculate your taxes, the method that I am going to use is FIFO or First In First Out. That is not the way that you would have to report your taxes, the IRS has not stated which way is required and there is flexibility. You could buy 1 BTC per day for a year and never spend 1 BTC. At the end of the year you add up the total cost of your purchases, you divid this total cost by 365, this is now your cost basis. Next yeat on Jan 1, ALL of your BTC are considered to have a cost basis of the number you came up with last year. They are all considered the same, there is no difference between 1 BTC and another. Fungibility is still in tact.

Thank you for your thoughts, but I was really hoping to find some tools with my post, if you know of any please let me know!

Why would you want to help a competing currency, instead of your own?

One of the properties of Bitcoin is that is pseudo anonymous, and with a little bit of advice from a tech person it is anonymous.

Plus the IRS ruling it is illegal on several counts:

1. The ruling is retroactive.
2. It states you are not allowed to have a competing currency against the dollar which is contrary to the constitution.
3. It challenges the FINCEN ruling, FINCEN says it is money, and the IRS says it is property, it obviously can not be both at the same time, it also challenges the state of NY, since FINCEN was first I would guess that unless the ruling of FINCEN is ruled void, then the IRS ruling has no standing. I am not a legal expert I am using common sense that you can not have contradicting laws.

The Fincen ruling was also retroactive, and the victims were Mtgox, Mutum Milligium, and Dwolla, and everyone that used those services.


If it is property why do people that exchange large amounts of bitcoins get money laundering charges if it is not money, why does FINCEN requires an MSB license if it is properly, will the IRS require a PSB " Property Service Business" license?

Charlie Shrem got falsely accused of money laundering when his exchange did not deal in money only property based on the IRS own ruling.

As you guys can see the ruling it is spaghetti code with extreme poor planning just to make a quick buck, which different government agencies are saying different things, until they get their shit together, I would use common sense since if compliance with one creates violations to the other, you do not want to be in such a situation.

The planning is so poor that it is hard to believe it was not an attack against bitcoiners.

Creating such a tool is impossible since bitcoin is fungible, that is all bitcoins in the wallet are  equal, the IRS is saying they are not, bitcoin has been in use since 2009 will the coins being fungible, so do you believe the IRS that the coins are not fungible?
To create such a tool you would be treating the coins as not being fungible which is against the spirit of any decent currency.

If you really think that bitcoin is not fungible the caos and fiasco it would create would be of a huge magnitude, so it is clear most of us believe bitcoin is fungible.

just my 2 satoshis   

Hello all!

I am sure that you have read IRS Notice 2014-21 Question #8:

"when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income"

So, is there a KryptoTax type site for miners to import their data and have it spit out income and cost basis for your BTC?

Go...