Topic: Let's share tax advice related to Bitcoin! - page 2. (Read 4766 times)

all of you saying, "the IRS doesn't know/care so don't worry about it" is the same thing as tax avoidance (which the OP stated to leave out of this discussion)
In the US all income is taxable.  If you find a penny on the ground, that's a 'treasure trove' and it is technically supposed to be included in your income reported.  Money made through buying and selling bitcoin is no different and I think the question is 'what other taxes (if any) apply?'

I bet your fellow Dutch miners will place a nice BTC bounty on your head when they find out what you've done!

A couple of days ago I called the official Dutch tax information line out of pure interest.
After explaining bitcoin a couple of times they faced a tax problem.
Simplified version of my question:
What if mining would earn me 5000 euro's a month?

The Dutch tax system simple has no regulations for this type of thing. Its not extra income, because this needs to be backed up by a product or service you provide. Neither is it a form of stock trading etc., because money is basically generated.
As far as they could tell its a new and legal way of "printing extra money". And therefore there is no regulation at the time.

The advice I got was that if I was going to generate those amounts of money, I should write down the whole story and send it to a government tax advisory bureau so they can come up with something for me. That way I wouldn't be avoiding taxes.

I bet there are some people really breaking their brains about how to add this form of money to the tax system right now

Thank you for that.  Should have thought to search for it myself.


But I be so askeert a dem revenuers.

You pay taxes on dollars.

If your entire income is in bitcoins and you keep them in bitcoins, how many dollars did you make?

0.

(Yes, I know that they'd have to pay taxes on the dollar value on any products or services rendered, but this is pretty much impossible for the IRS to enforce)

(Off Topic) That's great a law outlawing potential compliance to another law. Thanks for telling me something like that exists.

That's called structuring and it's guaranteed to thrust you in a world of shit much quicker than an over-10.000$ currency report.
http://en.wikipedia.org/wiki/Structuring

  Relevant wiki article:
  - http://en.bitcoin.it/wiki/Tax_compliance


What does your broker statement include?   Probably will want to keep records with the same information
 -  date of trade, description of trade, qty & price, and fees

So how is this added up?  If I make a thousand trades and come out X amount of dollars ahead, can I just use the final amount for reporting?  And what records should I be keeping?

Not that I'm bound to make any money at this.  I'm at a loss so far, but I'm keenly interested in complying with tax laws. 

so then I guess just do transfers at $9,999.99 

WU will by law report any transfer above 10.000$
No, not to the IRS directly.

Thats where your wrong my friend. The IRS cares about everything! Even that $2 you stole from your friend in the 3rd grade



God I love when WU is subtle   

This is what they sent me in an email when I asked:
 
Hello xxxxxxxxxxxxxxxxxxxx (name changed to protect myself)

Thank you for contacting Western Union. We are writing regarding your inquiry.

Please note that we do not report Money Transfers to the IRS.

Best regards,

The Western Union Customer Care Team

All these completely unregulated, fake "exchanges" are not sending tax information to the IRS like a legit broker.  The IRS has no idea what you're doing and probably doesn't care.

o_O

I did not know that *cue devious laugh*

Western Union doesn't report transfers to the IRS.  Just sayin'

Good Topic!

I'm pretty sure at this point (unless I'm missing something) If you wired $1000 USD to mtgox, and your investment tripled, so its now worth $3,000 in USD, if you keep it in BitCoin the IRS has no way of knowing. Depending on how you get it back into USD they may find out. If you sell it for cash, or paypal, you could probably get away with it. There are BTC launders on Silk Road as well.

BEFORE YOU READ: This thread is not for debate on the morality or the legitimacy of our (our any) federal government's claim on our money.  If you don't intend to pay your taxes, that's your cross to bear.  Please keep the discussion related to tax advice and planning.  Thank you!

Okay - We all know its coming.  If you're converting it to USD, the IRS already knows about it.  Let's swap ideas on how to set up logs of our gains and expenses so that when the time rolls around we're ready to file.  I live in the US, so anything I say will naturally be related to that. Experts on the subject are highly encouraged to participate and correct errors or misconceptions.  I am not such an expert. 


Now, what I understand so far is that profit made by purchasing bitcoins low and selling them high qualifies as capital gains tax, which in normal situations is identical the income tax rate as indicated by the individual's income tax bracket. 

Here's a simple example of what that could look like for you when you file in 2012, using 2011 tax rates;
If you are single, and you did very well for yourself, earning $60,000 for yourself through Bitcoin speculation, you'd fall into the bracket that owed $4750 + 25% of income over $34,500, which comes out to be $11,125, before deductions.  If you used the standard deduction of $5,800 for single persons with no other benefits or bonuses, you'd owe a total of $5,325 to Uncle Sam.  Of course there are many ways that individuals and corporations can pay less (and sometimes are forced to pay more!) than this example.

I have read that bitcoins held for over a year before being cashed in may qualify for long term capital gains rates, which are substantially lower. I don't have that kind of advanced tax knowledge to be certain of this.  Does anyone know?

Another subject of particular interest to me, is that miners may be subject to very different rules.  Can miners consider their bitcoins an asset produced as inventory, and would that mean different tax rules?  Would a miner be able to consider rigs, equipment and power consumption as expenses for purposes of determining their net profit?