Topic: White House Petition to AMEND IRS NOTICE 2014-2 Taxing virtual currency/Bitcoin - page 2. (Read 4409 times)

This is true.

Imagine you mine 1 XBT when the value is $500. The IRS expects you to report that as income on either your W-2 or 1099 depending on how you normally file your taxes.

Then you hold the coin for over a year and decide to sell the coin. The value of that XBT is double what it was when you mined it. You now have $1,000 value of which you paid taxes on $500. The IRS wants you to pay $500 in capital gains on the difference.

The long term capital gains tax rate is currently 20%. Regular income tax brackets are 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. In this scenario you are likely going to pay less in taxes than you would if you paid regular income taxes on your sale amount. If you make more than $36,000 per year your regular income tax rate is greater than the long term rate on capital gains.

So what if you transfer your coins into your personal wallet on a day where the market has flash crashed? Will you be able to claim the daily value of that day for the purpose of determining your regular income tax liability?

The CPA I met with seemed to understand the guidance, and he agreed we need to show something, but I almost think he envisions it being revised at some point. At the end of the day I'm taking his advice, he's not done evaluating it yet, but we will set a strategy that applies the guidance in a way that makes sense for me and stick with it until told otherwise.

What should be understood is this method they have outlined where payouts are recorded as income, and equipment will sit as expenses due to life that doesn't justify depreciation, we will very likely end up with an operating loss. Go ahead and calculate 2014 out so far to see how it looks. Due to the steady decline in price the revenues recorded do not come close to covering the equipment costs made months ago. Stay with me, this has a purpose... The problem is if your "business" generates a loss for three out of five years the IRS will consider it a hobby, and at that point you need to pay taxes on all the income and can only claim expenses greater than some percentage of your gross income- I forget the number but it was high. Basically once the IRS sees your activity as a "hobby" you end up with the worst of both worlds; paying taxes without the ability to write off expenses. So much of the annual profitability depends on market forces, it's just so speculative that there really is no certainty of profit in mining, and if 2014 doesn't turn around most miners will be reporting a loss next year, do that too many times and then you need to actually prove to them it is a business and not a hobby. And if you come out the gate saying it's just a hobby then be prepared to pay out the ass without the ability to claim expenses. This is tricky stuff and the important thing is having a system that makes sense and can be explained, remembering what you do this year sets the precedent for how you handle accounting in the years to come.

I'll be cleaning up some spreadsheets and will report back if my CPA says anything new.

If the IRS considered it currency, your gains would be considered regular income, as is the case with a foreign currency.   By treating it as property, you get a preferential tax treatment for long term gains.

miners had to pay it already, if they were not paying they can keep doing the same "crime", there is no difference now or before

I find it interesting that Bitcoin could even be considered property and not a currency. It has all the qualities of a currency.

I already have. Furthermore, I've stated as much on here for years that the IRS is never getting my cryptocoins - so they can even look at this forum for proof that I don't care what they say.

The IRS means nothing to me. They owe ME money, not the other way around.

Eat shit buddy, why exactly do you think you can call people "idiots"? How much different you must sound face to face, serious keyboard bully syndrome you've got on this thread. I've been usefully adding to these topics for several days, and I promised I would share back what my CPA advises. He's got 20+ years and this was at a glance his first impression. Seriously, in all seriousness go fuck yourself.


Edit: I'm looking through your post history and it seems you have developed a habit of calling people idiots on here. I can't find one post of yours that doesn't have an insulting tone. Hope you understand what happens next...

I can see the timing of the tax evaluation being challenged too.

The publication mentions that the coins will be evaluated as ordinary income at the time they are received. If your mined coins are never received then is there no taxable income?

The Bitcoin protocol defines the ownership of coins by the owner of the private key. When your coins are not in your wallet; they are not your coins... Gox being one example among many.

So when is a Bitcoin actually owned? If you follow the blockchain then there is a clear event that identifies ownership.

Freedom is a ideal that may be out of reach, we should all try/hope for it anyhow.

I suspect the only way I will get any freedom is to leave on a self sustaining ocean house boat.
Solar panels, Desalination facilities, greenhouse, and etc. All too pricy for me at the moment.
Being mid ocean I could have all the salt/fish/seaweed(gross?) I could eat.

Bravo to you to fight for your own freedom. I wish you the best of luck. I'm not trolling.

Some people just don't get it.

To the IRS, it is when you create a taxable event, exchange them for cash or good and services, in a way that is reported to the IRS.   For instance, like buying a house with a duffel-bag full of cash or bitcoin.

That wins this debate for sure, congratulations.

Why would a person who is not me be in a huge hurry to spend his/her BTC?

I understand everything you type, You don't understand the real value of BTC outside of it's fiat conversion ratio.

I'm a direct descendent from those who settled this land, More than anything else my lifeforce yearns for true freedom. BTC is small step towards the freedom that I yearn for.
BTC has more value than anything I could ever hold in my hand or consume through my mouth.

Then you're not required to report any of that, the lucky person (LOL) now has tax liability.


The point is MarkM, filing tax is a volunteering work.

You will only have to explain to the IRS the source of the bitcoins that you spend.

If you bought it, then either capital gain or loss applies

If you mined it, then either capital gain or loss applies AND you DID report such mining income .

It is not just theft, I could for example discover when I compare my wallet keys against the blockchain that it was not I who mined those coins at all but someone else.

Until I actually go get those coins I do not know who my machine has really been mining for since last I checked it was really me it was mining for.

Maybe though it would be useful to have an "at time the block was solved" price of bitcoin chart somewhere, adjusted if the chain is re-arranged, so that the value of each block's minted coins can be determined?

-MarkM-

Then you will spend your coins... or you have problems understanding my post too?

The risk of having coins stolen is on you. You acquire a property, you're deemed to carry risk of storing it.

What i can see is the fair market value will be challenged. I bet every miner will use a lower price than current exchange rate.

I've never purchased bitcoins.
I've never wasted my time with a exchange.

Those of you who were/are day traders are the ones effected here.

What taxes are you referring to?
I don't recall admitting any ownership of any BTC.

Where is the proof?

Clearly you lack the ability to read/comprehend basic English, I'm ignoring you.

Do you realize the report isnt from ppl who sold you coins right?

Its when you spend them or sell on exchanges. If you sell your coins locally, then the risk is carried over to the buyer.