Topic: Legality of Mining Bitcoins (Read 3897 times)

if you do not declare your income in case it is big enough iot could be seen as illegal or punishable if you want to avoid tax, the point is that they cannot know about your mining activity especially if it is done abroad

what if for example i go to liberland and start a mining activity(my oen private pool with 10 peta) there and receive profit directly to my wallet in my home in new york, no one will ever know about it

lol mining as illegal activity?

Only two countries I know of have restrictions against mining, they are undeveloped countries... I don't think you'll have a problem there... Just selling them is some ways is a bit shaky.

If your earning enough profit to consider it taxable income then you have a whole new set of priorities to consider.  Mine, enjoy, spread the word of BTC...

- Jorge

That's one of the big questions in many countries...
You can try to take a look on Bitlegal

Agreed owning Bitcoins I consider a good thing.   The ones that are getting in trouble are exchanges.  If your a business and a exchange you better have all papers in order in US, and follow KYC rules.

So if in exchange yes lots of legislation.  Owner of BTC not so much.  Either way I keep a log of my expenses for mining.

There is nothing illegal about mining Bitcoins.

From an accounting perspective, you owe capital goods tax for the daily average value of mined Bitcoin on the date it hits your wallet.

Every quarter, I need to send off my mining income BTC details to our accountant so we can get even with Uncle Sam.

The way I read it was it was a capital gain or loss.  So look into that for your situation.

I think with it being a capital asset until sell there is not taxable profit.    But again I'm not a CPA only someone with a lot of accounting classes a while back.

If you are getting big see a CPA.

Ifcourse that you can.

I am located in Wisconsin, USA. I am under 18 years of age. If I earn bitcoins, do I have to pay any sort of tax? Isn't there some sort of threshold that if I pass it, I have to pay the tax?

Maybe you can say that is profit of your parents etc, then pay tax, you can't profiting of selling bitcoins with legal way.

And, can you calculate the amount of bitcoins you will earn by your hashing rate?

On internet you can find some actually calculaters

And I could be wording it wrong.  I am not a CPA I have had a surprising amount of accounting classes, but not way I decided to go.

There is a not a loss but costs when you gain a coin.  The equipment itself is a loss until paid for, and electricity is something you spend money on aswell.    So I would say that it should come out of the gain.    Yes at end you hopefully end up with capital gain and pay tax.

But again CPA all the way. Mine is just my thoughts.

Any answers to taxation questions are going to be varied and inconsistent.  The regulations around virtual currencies are not clearly defined by any stretch of the imagination.

@notlist3d, I'd disagree with this statement you made:
If you're mining, the instant you acquired that coin it is a gain.  There is no loss incurred by the action.  You can certainly try to offset the gain by factoring in the cost of electricity to have mined the coin, but that implies you've set yourself up as a mining business, and are incurring expenses related to the operation of that business.

Short answer: do what notlist3d stated and find yourself a CPA who is versed in virtual currency tax laws.

I would still get a CPA.  I just see some parts can be interpreted different, and these were just a few that jumped out in first minute or so.

For example

A–8: Yes, 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. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.

What does successfully mine mean?  I consider sucessfully mining once I sell for USD.  I don't see it as successful when you just have BTC, as you don't know at time of sale if it's gain or loss.

Or other question

Q–6: Does a taxpayer have gain or loss upon an exchange of virtual currency for other property?

A–6: Yes. If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain. The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency. See Publication 544, Sales and Other Dispositions of Assets, for information about the tax treatment of sales and exchanges, such as whether a loss is deductible.

Notice it say's if you receive at exchange.  You do not receive the fair value until you sell.


Also go on and see in it the mention of "The character of the gain or loss generally depends on whether the virtual currency is a capital asset in the hands of the taxpayer".   If a capital asset as I consider it, I think you need to read up on capital asset taxes.

And I'm not putting you down or trying to be mean.  I'm just saying on something so new and if your dealing with a lot of money see a CPA.  Do not consult the internet for big tax questions.

Yes I am 100% sure


IRS.gov

snippet from irs website

Q–5: How is the fair market value of virtual currency determined?

A–5: For U.S. tax purposes, transactions using virtual currency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of payment or receipt. If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied





Q–8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?

A–8: Yes, 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. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.

What degrees or certifications do you have for accounting?

I find it flawed to say you make money on a investment that is constantly changing.  You need to sell to turn BTC into profit, there is no way to know value until time of sale.   

Also you did completely miss how if you mine or bought that is not a gain with that part.  So it would be taken out when sold as it's not a gain.   

Again see a CPA do not get your tax advice from a forum.

sorry, but are you 100% sure, that it is working like this? When you are mining bitcoin, you are just "calculating some complex mathematical equations" and because of this, you are receiving another computer code, so called bitcoin.

I understands, that you should pay taxes, once you will sell those bitcoins on market (even I don't agreed on it), but why you should pay taxes for mining? Maybe it depends on country, but I really don't think, that taxes are applicable in this case.

when you are talking about stock of a company you are buying and selling something that the company created for a set value.

this type of commodity can sit in your ownership and raise in value and you are not taxed until you sell it.


when you are talking about bitcoin it does not exist until you create it. Also it is not a commodity it is actually a currency. That is why the moment it is created it gets taxed at its value during the moment of creation.

are you sure about that? it does not make sense, they can't tax you in that case you are a net loss, unless you managed to use you bitcoin before the price tanked

if you can prove that you never bought anything with them i'm sure you are not taxable

I would see a CPA honestly if you are talking about big numbers.  There are many different types of investments it's not one size fits all.

For example if you mine your forgetting you have expenses, or buying you have buying expense.  It's not all profit.   

I would also argue it's not value created until you sell it and make fiat money.  With BTC going up and down in price it's pretty much impossible to know how much you will make.  If you sell all and do not keep BTC yes it would be easy.   But if you keep BTC the value changes day by day.

So.... get a CPA.

In the USA if you mine bitcoin regardless of age, You are responsible for taxes.
The way it is valued is....  the minute the bitcoin is mined either solo or paid out in the case of a pool, That is the point that you created value..

if you were to mine 25 bitcoin today your earned income is $7250.00 dollars ... if you quit mining after today at the end of the year you would have to claim that 7250 as earned income...

If you mined 25 bitcoin today and the next day bitcoin price plummeted to 1 cent per bitcoin.  at the end of the year you would still have to claim the entire 7250.00 as earned income.. it is not the governments fault your bitcoin lost value.

here is the really shitty part.

if the value of those bitcoin rise to 1000 dollars each overnight. You do have to pay capital gains when you sell them. so if you sold them the next day for 1000 each, you would have the original 7250 earned income and another 17,750.00 in capital gains... to claim at the end of the year.



I keep a spreadsheet and attempt to keep every single payment and its exact value at the moment it was produced so I can claim it at the end of the year as earned income.
the amount that I actually earn is small and I have no doubt that I can probably get away with not claiming anything.. but I don't want to take that chance. So I attempt to keep good records. and do the right thing

 

yes

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