Topic: TAX ON MINED BITCOINS THAT ARE SOLD FOR CASH (Read 497 times)

Better clarify from authorities if how are they going to compute the taxes. And most probably it will just be taxed once you convert it to a fiat currency.

If you want to comply 100% with the relevant tax law, I would recommend contacting an accountant or a tax-specialist who you have confirmed has experience with cryptocurrency management.

The state is not interested in indirect taxes. They are interested in direct tax. The more people will take away money the better will live officials. The miners will in the first place under pressure from the government. They are the easiest to detect. There are countries in which corrupt officials in law enforcement have to find the miners at the bill. On the slightest pretext, arrest equipment and extort bribes.

Another complicated subject. Tax on mined Bitcoin is very difficult to control. However, there could be easier solution such as extra tax from electricity which is used for mining Bitcoin. Assuming that the question is about professional mining operations, this could be called indirect tax and i think it could work. It is a good question but i should add that it is more important subjects like tax on tradings and etc. which governments would focus on first.

It will be a very long computation to do. How are they going to calculate your transactions if you have several addresses used in a year and how are they going to confirm that you are the one who used that address?

Also averaging the price before the taxes is a more complex calculation.

If you want to do it by the law then I recommend that you register your offshore company in the country and all the profit withdraw there. There is a very low tax and you will have the opportunity not to pay tax in your country. Between the two countries have agreed not to levy taxes income twice. I don't pay taxes and bring cash to the accounts of different people in small amounts.

The IRS has already issued some guidance indicating that it should be treated like property.

If you are a successful miner, you've probably had to deal with this issue.  Your input will be greatly appreciated.

I've seen a guide online which states that how miners are taxed on their mined coins depends on how the IRS decides to treat bitcoin (https://en.bitcoin.it/wiki/Tax_compliance)

But I need to know how I should file my tax return for 2017 (while the IRS figures out how it will treat bitcoin that is mined and sold for cash).

I can form an LLC.  would this mean that all income would be offset by all expenses? so if i mined @ $100 and sold for cash @ $1000, that $900 income would be offset by my $900 hardware expense so I pay $0 tax?  Or, would I have to pay capital gains tax on that bitcoin I mined and sold for cash?  If i have to pay capital gains tax, would I be able to offset those  capital gains with my hardware expense?

It would seem that at the current time, as the IRS hasn't yet been clear on how bitcoin should be treated for tax purposes, it would be my choice as to whether to treat the profit as income or as capital gains.   Does this mean that until the IRS actually does decide on this, i can choose the method that results in the least tax owed?  For example, in my first year treat the profit as income so I can offset the loss with my expenses and next year, when my profit is much higher than my expenses,  I elect the capital gains treatment so I can pay only 15%?

I want to fully comply with the law.  I also would like to pay the least amount of taxes possible.   In other words,  I want to pay only as much tax as I am required to pay by law.

Anyone with experience,  please weigh in here.   if possible, please use the example I gave above where 1 bitcoin is mined @ $100 and sold @ $1,000... showing the tax owed in different scenarios assuming a $900 hardware and electricity expense.

Thank you all in advance for your help with this.