Topic: Taxes and Bitcoin (Read 808 times)

Bitcoin tax and taxing is really new. I have not really briefed myself on that but I sure know that it is with the developed countries and it is a source of income to the government.

Taxe in Bitcoin is normal because it is a source of income. What is scary is that the government might abuse Bitcoin and impose unreasonable high tax.

Taxes or  Bitcoin?

If taxes you will deducted by 10% of your salary or any kind of purchase product and it is centralized.If bitcoin it free in taxes and it is decentralized money.
I will choose bitcoin because it is decentralized and it's encrypted and it secure and no way can hack or stole.

Yes I am not sure in other country, but in my country yes, the exchanger will taxed  us directly when you convert it fiat, so whenever I convert to fiat there will be deduction and it is the aim of the government to make exchanger taxed us, because it is consider as income according to the government 

Yes that is right, some countries are regulate the taxation of bitcoin. Even in the past austraia was make regulation to take double taxation in bitcoin but now it is no longger aplied.

All countries have get closed monitoring on financial status, how much they earned in a month from different establishments for them to survive. Since lot of people are using bitcoin now, probably it could affect the financial status because there is no tax collected from bitcoin holders. And it makes the government worried about in the future, that's why the authorities makes an action with that before it getting more complicated.

Obviously, as bitcoin gains a lot more traction it makes sense that the US wants to tax it. The more people that start using it over fiat currency means the fewer people paying taxes. So, since the debt is so high, the US would try to put into place anything that allows them to tax this new currency. Not sure what this means in terms of bitcoin price -- I don't know if it'll drop when this news comes out or not, but there's a strong chance that it will (however, probably nowhere near as much as the drop after the China news).

When a new law is made and given official authorization, in a short people tries to find the holes in it and tries to make them an active way to tax evasion. Such issues have been found around and now taxes have been regulated by most of the authorities.

Really? I always thought income tax is your responsibility to take care of and not the exchange's. I've never heard of exchanges deducting income tax from people's withdrawals. They are paying their own taxes from profits they get from running the platform and users are supposed to pay their own taxes from profits they got in a given tax year.
I've also never heard of a country where you're not supposed to pay income tax.

In the countries that I know of, BTC is already taxed when you convert it into fiat.  It's subject to capital gains tax, just like any other asset would be.  To be honest it would be pretty stupid for it not to be.
I don't see how this is new to you.  Significant personal possessions that you sell, for example antiques, would also be subject to CGT.  In some countries it's higher than 15%.

Frankly, you're very lucky it's exempt from VAT (in Europe at least, I don't know about the US).  If you want to sell it, try actually spending it at a merchant instead.

Most people buy their first bitcoin with Coinbase or Gemini or some other way that links your bank account to your first wallet. This is easily tracked by the government as those services have to give US government all purchase information. Then exchanges will soon be forced to give US government information on all users. Fidelity, Scottrade, eTrade, they all comply with US government.

If you think this is a bad thing, then let me ask you this. Why do you think that paying taxes is a bad thing? Don't you want to build roads, provide schools for your kids, bomb innocent children in countries far far away?

It's where things gets interesting. It would take larger resources for the US government to track every transaction from it's people.
It has not jurisdiction for people around the world and bitcoin transaction doesn't require specific IP or SSN.

It might be shocking to some reading about US implementing taxes on bitcoin transactions but to me not really. United State as the model of democratic freedom of choice but has regulation to all, it is one example why us still the number one country in this world. They do wanted to be the first of all the rest.

I am sorry, just quote it for reference.

Everyone who lives in USA should know about this, and every country has different regulations about cryptocurrencies obviously.
Unfortunately for them who have to do business with IRS, fill the documents about your long term investment, 15% is a big amount.
No wonder why so much people trying to avoid taxes in US if you have to pay 25-35% for trading.
Trading records can be imported from all major trading exchanges, including Coinbase, Circle, Bitstamp, and BTC-e, to produce a complete annual trading history. https://en.bitcoin.it/wiki/Tax_compliance#U.S.

If taxed will be included with bitcoin transactions I think that's the main reason why it will crash in the future. That shouldn't be because it's different from fiat money which is taxable currency, so better be remained with the usual freedom that we had for several years and nothing should be changed. Maybe that should be discussed well in the future if tax is the best solutions in order bitcoin to be legalized.

Probably in US but in my country we are not required to pay taxes yet.  Else the  exchange we are using would have deducted or charged us with tax since they are complying with the government's AML and KYC. 

Buying BTC directly in my country is somehow impossible since there is no establishment accpeting BTC yet except for that restaurant where meet up event are hold.

There are similar threads in the legal section, you guys can find a lot of useful information there.
Unfortunately you are required by law to pay taxes from the fiat that you've gained through bitcoin. This is based on the fact that each fiat transaction ends up on your bank account and is registered there along with your wage and other sources of income. If you want to avoid being robbed by your government you can try holding and buying things directly with BTC.

That happens in almost every country that exists. If you sell your bitcoins for a bank transfer and then you withdraw $20k for example, you will need to say from where did you get those funds. Here in my country we have to testify from where did we get those funds.
Once that i withdraw btc money from a bank, i had to make a "script" showing my blockchain transactions and how did that money get to there, and they opened me a new type of account in my bank, and i get charged for about 3% of every withdraw i make from the atm.

It's not just about selling coins for US dollars. Any time you buy an asset and later sell it for a profit, there is likely capital gains tax to be paid. Many people operate under an incorrect assumption that they can trade altcoins tax-free, and only incur tax liabilities when they sell for USD. I've even seen people apply this logic to BTC futures contracts, which is absurd. Every trade is a taxable transaction.

The time you hold a position makes a drastic difference, too. Long term capital gains taxes are significantly lower than short term, no matter what tax bracket you fall into.

When you have business no one cares what kind od that is, you have to pay taxes. What is bitcoin? Currency of course (for some people more than currency). So when you exchange two currency, you have to pay fees despite the fact that one is crypto currency and second one is just well known USD.

In United States you have to pay tax on your bitcoin earnings when purchase services or products using Bitcoin. Chances are - you won't get in trouble if you don't. But all of your accounts (coinbase, exchanges) are being tracked. And sooner or later all that data will be in the hands of IRS. When this happens, they can retroactively fine you for not paying taxes.

This is US only, but your local governments may do the same. Original poster is in US, so it's fair to use US as an example.

when you start using your bitcoins to buy things or converting them into fiat then you have to pay taxes

I don't think you have to pay taxes on using or owning bitcoin anywhere in the world (don't quote me on that though). But if you decide to cash out, or selling your bitcoins for your local fiat currency, it's very possible you will have to pay a tax on your earnigns. It's important to fully inform yourself before you decide to cash out. Since bitcoin is still relatively young a lot of governments haven't been to specific on how bitcoin earnings have to be taxed. Perhaps it's for the better to consult an accountant if you're cashing out huge amounts of money.

That's a tough question. My understanding is not perfect, so check my statements and don't quote me.

* I will use the word "Bitcoin" but it applies to all crypto coins.

When to pay tax?
In USA you are only supposed to pay taxes when you pay for something in Bitcoins or cash out your Bitcoins into your bank account or USD. So technically, if you keep your bitcoins in your wallet or exchange - you don't pay tax until you cash out or use it.

I cashed out. How do I pay tax?
You should pay at the end of year when you file your taxes.

How much is the tax?
It's taxed as short-term or long-term capital gain. If you just buy Bitcoins or altcoins and HODL for over a year - you pay long term capital gain tax. That's about 15%.

If you trade actively, then its short term. Which is 25-35% depending on your income bracket, plus your state tax which is 0-5% depending on your state.

You only pay for gains. So if you bought Bitcoin for $2,000 and sold it for $4,500; then you are taxed for $2,500. If you actually lost money on your trades, you file capital loss and you get some money back in the form of tax deduction.

What forms do I need?
You need to fill out Schedule D (Form 1040) form, where you would include every single transaction. Not sure how it's supposed to work, since I have over 100,000 transactions this year =/ But there are some bitcoin tax tools, if you just google for it. Those will surely come in handy.

Good luck! Please correct me if I'm wrong on any of these.

Thanks for the info Hazir, Interesting read.  I sort of find it similar to gambling.  If you lose money on Bitcoin, basically nothing can be done.  But if you benefit from Bitcoin, they want to make sure they get some of your money.

Bitcoin is slowly gaining momentum - going mainstream and become the most intriguing investment method of our generation so I wouldn't be surprised that governments, not only US want to 'legalize' and tax it.
From what I know IRS classified bitcoin as intangible property so if you have traded Bitcoin you should report capital gain to the IRS. Note: intangible property is not a security.

If you want to know some more please read this article: https://www.forbes.com/sites/greatspeculations/2017/02/21/if-you-traded-bitcoin-you-should-report-capital-gains-to-the-irs/#5dc72b07e3d8

Don't know about US but in most countries bitcoin is taken as an asset so buying btc you are making an investment (not just exchanging your money). The rates are specific in diferent countries (I think in the US they could be even different in different states) but if you won't withdraw it in large amounts everything would be fine.

I am not really sure where to post this.  I have heard rumors and even read certain things about taxes on Bitcoin in the US.  If you try to withdraw coins into US currency that you will get taxed on the money you get.  In other words you are essentially trading coins for currency.  Is this true?  Any thoughts on where I can read more about this. 

Thanks