New IRS rules for BTC as related to US Tax payers - page 3.

Aseras

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Quote from: philipma1957 on March 25, 2014, 10:53:41 PM

Quote from: MinorError on March 25, 2014, 06:02:18 PM

I like the way you guys are seeing things. I guess it's just the pessimist in me being negative Nancy...I really hope you're right. On a more selfish note, how should I, as a small time miner, keep track of my daily payouts? I'm open to any and all suggestions.

look at blockchain info. it will tell you what the transaction was worth in usd at the time you made it.

on what exchange? btc "value" is all over the charts, especially last year.

if that's how you determine basis, well just tumble your coins by sending them to your own addresses every few days to keep the "basis" jumping about with the markets.

what's going to happen is the IRS is going to try and say everyone's basis is 0 unless you can prove you paid X for whatever which is almost impossible.

bobdutica

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Quote from: MinorError on March 26, 2014, 11:31:26 AM

Quote from: h@shKraker on March 26, 2014, 10:27:03 AM

MinorError,

In the US cash based accounting transactions assume FIFO for the currency / cash asset on the balance sheet.

H@shKraker

Can you put that in terms an idiot like me can understand?

He means "First In, First Out".
In other words, the first Bitcoin you spend is considered to be the first Bitcoin you purchased, the second Bitcoin you spend is considered to be the second Bitcoin you purchased, etc.

Bonam

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Quote from: MinorError on March 26, 2014, 09:08:25 AM

Maybe you can clear this up for me. Let's go back to the coffee analogy. Let's say one day I buy a bitcoin for $1. The next day I but a bitcoin for $2 because the worth has doubled. I now have 2 bitcoins worth $4, one has doubled in value but the other still has the same worth as what I bought it for. If I buy a coffee for $2 with one bitcoin, how do we know which bitcoin I used to buy the coffee? They are all in the same wallet. So essentially I have two bitcoins...one of them I would owe capital gains tax of $1 if I used it to buy the $2 coffee. The other bitcoin I would owe no capital gains tax on if I used that bitcoin. How is that determined? And I'm not being a dick...I really just don't understand how that would work.

Capital gains are based on the average cost. If you bought 1 bitcoin for $1, and 1 bitcoin for $2, you now have 2 bitcoins, that you bought for a total of $3 dollars. Therefore your average cost was $1.5 / bitcoin. So when you buy a coffee for $2 using 1 bitcoins, you should calculate that you only spent $1.5 to acquire that 1 bitcoin (on average), and therefore you made a $0.50 profit.

Most investors used the above method, called the "average cost basis method", in their accounting of capital gains for stocks and such.

You can also use the first in first out (FIFO) method. That means if you bought bitcoin for $1 first, and then later bought another bitcoin for $2, then later you bought something with 1 bitcoin, you would calculate your cost to acquire the bitcoin as $1 (since that was the first bitcoin into your wallet, it is the first bitcoin out of your wallet: hence "First in first out").

You can pick either the average cost basis method or the FIFO method in any given year, whichever is more tax advantageous for you.

MinorError

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Quote from: h@shKraker on March 26, 2014, 10:27:03 AM

MinorError,

In the US cash based accounting transactions assume FIFO for the currency / cash asset on the balance sheet.

H@shKraker

Can you put that in terms an idiot like me can understand?

h@shKraker

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MinorError,

In the US cash based accounting transactions assume FIFO for the currency / cash asset on the balance sheet.

H@shKraker

Sindelar1938

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The removal of uncertainty in the US was critical
Great news actually

MinorError

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Quote from: Foxpup on March 26, 2014, 08:28:33 AM

Quote from: MinorError on March 26, 2014, 04:56:55 AM

Also, as a consumer, if you have 2 bitcoins in your wallet one day (let's say for simplicity sake you bought the. For $1 each) and then you go buy a cup of coffee for $2, but at the time of your purchase, your bitcoins doubled in value and are now worth $4 so you only need to spend one of them. Now in the eyes the government you just PROFITED $1.

So? You did profit $1. You started with a bitcoin worth $1, and exchanged it for a cup of coffee worth $2. Unless your accountant is skilled at bistromathics, $2 - $1 = $1 profit.

Quote from: MinorError on March 26, 2014, 04:56:55 AM

For now at least, it is completely not feasible for any consumer to keep track of this. And you can say yes it's impossible to keep track of AND enforce....but the tax manwillnot give a fuck if they audit you. "You didn't keep diligent records on your bitcoin purchases and expenditures....fuck you, pay me."

Actually, it's impossible not to keep track of this. Your wallet software keeps track of all your transactions, so all you have to do is export it to a spreadsheet, email it to your accountant and let them figure it out. Simple (unless you're the accountant, but that's you get paid for).

Point taken, but this does not make using bitcoin easier or more attractive to either the consumer or the merchant. I thought bitcoin was supposed to eliminate the middleman? Seems to me it's becoming more complicated and therefore more middlemen/opportunities for middlemen will pop up. To be clear, I am NOT against the IRS taxing of bitcoin, but I think it should be treated as a foreign currency, not property.

Maybe you can clear this up for me. Let's go back to the coffee analogy. Let's say one day I buy a bitcoin for $1. The next day I but a bitcoin for $2 because the worth has doubled. I now have 2 bitcoins worth $4, one has doubled in value but the other still has the same worth as what I bought it for. If I buy a coffee for $2 with one bitcoin, how do we know which bitcoin I used to buy the coffee? They are all in the same wallet. So essentially I have two bitcoins...one of them I would owe capital gains tax of $1 if I used it to buy the $2 coffee. The other bitcoin I would owe no capital gains tax on if I used that bitcoin. How is that determined? And I'm not being a dick...I really just don't understand how that would work.

ryanmnercer

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Quote from: Amph on March 26, 2014, 06:34:55 AM

they can't know how much bitcoin i have, they search for every pc? lol

also it's impossible to track miner

Good luck with that if you plan on ever converting them to fiat.

Foxpup

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Vile Vixen and Miss Bitcointalk 2021-2023

Quote from: MinorError on March 26, 2014, 04:56:55 AM

Also, as a consumer, if you have 2 bitcoins in your wallet one day (let's say for simplicity sake you bought the. For $1 each) and then you go buy a cup of coffee for $2, but at the time of your purchase, your bitcoins doubled in value and are now worth $4 so you only need to spend one of them. Now in the eyes the government you just PROFITED $1.

So? You did profit $1. You started with a bitcoin worth $1, and exchanged it for a cup of coffee worth $2. Unless your accountant is skilled at bistromathics, $2 - $1 = $1 profit.

Quote from: MinorError on March 26, 2014, 04:56:55 AM

For now at least, it is completely not feasible for any consumer to keep track of this. And you can say yes it's impossible to keep track of AND enforce....but the tax manwillnot give a fuck if they audit you. "You didn't keep diligent records on your bitcoin purchases and expenditures....fuck you, pay me."

Actually, it's impossible not to keep track of this. Your wallet software keeps track of all your transactions, so all you have to do is export it to a spreadsheet, email it to your accountant and let them figure it out. Simple (unless you're the accountant, but that's you get paid for).

MinorError

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Quote from: philipma1957 on March 25, 2014, 10:53:41 PM

Quote from: MinorError on March 25, 2014, 06:02:18 PM

I like the way you guys are seeing things. I guess it's just the pessimist in me being negative Nancy...I really hope you're right. On a more selfish note, how should I, as a small time miner, keep track of my daily payouts? I'm open to any and all suggestions.

This is really good news and or complete death of alt coins. Nothing in between. Hoping it is good news. I have an accounting degree and I did my 2012 taxes based on just about exactly the rules they picked today. Pretty much the only correct method to do them. The business articles that mention this as a blow to miners are written for people that have no training in finance/accounting/tax law. All necessary evils in a civilized world.

I agree that bitcoins had to be brought into the civilized world eventually for them to succeed. Anyone who thought they could be used under the tax radar forever was fooling themselves...but I also see a lot of the childish mentality on here of "how will they know how many bitcoins I have ROFL LOL OMG" etc. The thing in my mind that is a huge blow here is that it's treated as property and not currency. Because wasn't the point of Bitcoin to be treated as currency eventually? If it's treated as property it renders numerous amounts of small transactions by business on a day to day basis impossible.

cdog

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1. Buy mining hardware which never ROIs

2. Write off losses

3. Profit???

precrime3

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PM for journalist,typing,and data entry services.

Quote from: precrime3 on March 25, 2014, 05:15:28 PM

What does this mean regarding minor miner? How am I supposed to file self-employment taxes?

anyone?

Amph

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they can't know how much bitcoin i have, they search for every pc? lol

also it's impossible to track miner

Gotone

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我擦我什么也看不懂

MinorError

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Quote from: Wesly on March 25, 2014, 11:11:59 PM

Quote from: MinorError on March 25, 2014, 04:38:09 PM

I don't see how this is good news. I am not trying to troll here, I was just talking to people the other day and telling them my arguments for Bitcoin being around for a very very long time. I was really excited about Bitcoin.

But this is a deathblow. How will businesses keep track of what a coin was worth when they exchanged a good or service for said bitcoin? This Bloomberg article puts it perfectly

"Today’s IRS guidance will provide certainty for Bitcoin investors, along with income-tax liability that wasn’t specified before. Purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of gross income for the coffee shop. "

http://www.bloomberg.com/news/2014-03-25/bitcoin-is-property-not-currency-in-tax-system-irs-says.html

I am no economics major, but can someone please explain to me how this is a positive bit of news? I was hoping Bitcoin would be handled as a currency, or at least a foreign currency...this pretty much means any business trying to adopt bitcoin will have to think long and hard about the implications.

I am no economics major either, but just common sense tells me how is it different if the customer is paying the coffee shop $2 cash or credit card payment for the same cup of coffee? The coffee shop point-of-sale system still record it as a $2 income if it is paid via Bitcoin.

It's completely different because cash and credit are valued as currency and not subject to capital gains. So this is no different than going into a store and paying with $2 worth of google stock. It holds serious and very confusing repercussions for both the merchant and the consumer. Also, it renders bitcoin as a currency useless. The only reason you buy stock is that so you can someday trade that stock in for fiat currency, preferably at a profit. You don't buy stock so that you can trade it for goods and services.

Also, as a consumer, if you have 2 bitcoins in your wallet one day (let's say for simplicity sake you bought the. For $1 each) and then you go buy a cup of coffee for $2, but at the time of your purchase, your bitcoins doubled in value and are now worth $4 so you only need to spend one of them. Now in the eyes the government you just PROFITED $1. For now at least, it is completely not feasible for any consumer to keep track of this. And you can say yes it's impossible to keep track of AND enforce....but the tax manwillnot give a fuck if they audit you. "You didn't keep diligent records on your bitcoin purchases and expenditures....fuck you, pay me."

SportsBet

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Quote from: bitcasino on March 25, 2014, 03:46:42 PM

I hate taxes ...

I feel you on this, however I feel that many more merchants (some of them big preferably) would adopt BTC. This piece of news would encourage some that up till now were on the fence.

elvizzzzzzz

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I am not a US taxpayer, and just speculating that it could happen to me.

If bitcoin is property, then presumably I paid for electricity and hardware in order
to obtain the goods, in a manner similar to the process of barter?

And that should be offset against the current value of the coins I mine? Otherwise
there would be no point in mining. IANAL BTW.

htcfox

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will this rule drive investors out of US？it rises the cost of a trade with bitcoin，not a good idea at all

Wesly

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Quote from: MinorError on March 25, 2014, 04:38:09 PM

I don't see how this is good news. I am not trying to troll here, I was just talking to people the other day and telling them my arguments for Bitcoin being around for a very very long time. I was really excited about Bitcoin.

But this is a deathblow. How will businesses keep track of what a coin was worth when they exchanged a good or service for said bitcoin? This Bloomberg article puts it perfectly

"Today’s IRS guidance will provide certainty for Bitcoin investors, along with income-tax liability that wasn’t specified before. Purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of gross income for the coffee shop. "

http://www.bloomberg.com/news/2014-03-25/bitcoin-is-property-not-currency-in-tax-system-irs-says.html

I am no economics major, but can someone please explain to me how this is a positive bit of news? I was hoping Bitcoin would be handled as a currency, or at least a foreign currency...this pretty much means any business trying to adopt bitcoin will have to think long and hard about the implications.

I am no economics major either, but just common sense tells me how is it different if the customer is paying the coffee shop $2 cash or credit card payment for the same cup of coffee? The coffee shop point-of-sale system still record it as a $2 income if it is paid via Bitcoin.

philipma1957

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'The right to privacy matters'

Quote from: MinorError on March 25, 2014, 06:02:18 PM

I like the way you guys are seeing things. I guess it's just the pessimist in me being negative Nancy...I really hope you're right. On a more selfish note, how should I, as a small time miner, keep track of my daily payouts? I'm open to any and all suggestions.

look at blockchain info. it will tell you what the transaction was worth in usd at the time you made it.

This is really good news and or complete death of alt coins. Nothing in between. Hoping it is good news. I have an accounting degree and I did my 2012 taxes based on just about exactly the rules they picked today. Pretty much the only correct method to do them. The business articles that mention this as a blow to miners are written for people that have no training in finance/accounting/tax law. All necessary evils in a civilized world.

If all those that believed mining was going to be under the radar from the tax man are a big factor in mining this will be a big blow against mining and coins. I am more of it is a sellout and partnership with the 'man' so to speak. That should be good for price. But we shall see.

Topic: New IRS rules for BTC as related to US Tax payers - page 3. (Read 5922 times)