Topic: Will miners in USA be able to remain competitive due to huge tax burden? - page 3. (Read 4169 times)

Anyone knows how the value of bitcoin at the time of mining is calculated? Whats stopping me from 'selling' my bitcoins for $1 (and declaring their value this way) at an exchange located abroad?
I dont know what are the particular laws in the land of the free but in many other countries the central bank has to give you exact exchange rate for such situations.

The people saying that BTC will be squashed or destroyed because of taxes don't get ho business works, and why the IRS position is actually a good thing. I was at a panel at Harvard Business School on Tuesday and the challenges of BTC were discussed and the big one was the fact that there was no guidance, position, or opinion on how BTC would be treated financially. Because of this lack of understanding, and a host of other things - all of which have to do with maturity around regulatory and compliance issues - the adoption of BTC was going to remain slow.

The fact that there is now a position means that businesses can get on with factoring in the tax burden to their costs. A company doesn't leave the US because of taxes, they figure out what the laws are, what the loopholes are and manage to the rules of the game. Saying that BTC will implode because of taxes is just not true, it gives businesses some guidance on how to compute the costs, which up until now were zero, and could have been 100% because there was no guidance.

As for Belgium (or the next 30 countries) saying they won't tax BTC isn't necessarily a great deal either because the real estate taxes, VAT, cost of living, healthcare systems, price of gas/power etc. all go into factoring the total expense base which may in fact be WAY higher than the US and the laws there may not be what people see as just either.

What will kill Bitcoin is that people don't understand it a year from now anymore than today. Businesses can still use cash, pay taxes, and know what the rules of the game are.

This is why I don't think bitcoins have much longer to live. When everyone realizes what a nightmare that is, why would you possibly want to use bitcoin instead of cash? I'm going to continue mining because I'm getting free electricity...but I started mining initially because I BELIEVED that bitcoin could make a difference and be something special, and I wanted to be a part of that. This tax code kills it for the average consumer.

Ok sure the burden has always been there, but most miners have not been paying tax and in addition to every American miner having to keep track of the fiat price as their coins are mined the consumer is now going to be even more confused.

Every time someone buys a product with their bitcoins, they now have to declare profit or loss for that transaction compared to value of that coin when they earned/mined it.

But I digress, my point was more about how American Bitcoin miners can no longer remain competitive in the world. Before at least we could go under the radar so to speak, we had to otherwise the rest of the world would be too efficient for it to be worth our time. But now it's in stone, Bitcoin mining in the United States will essentially be impractical. Hardware that is cost effective in China most likely will not be cost effective in the United States.

I could easily be wrong, in fact I want to be.

i mine a good bit and even use them everyday. Not a single USD hits my bank account that comes from the exhange of crypto to dollars. There are services out there, in non reporting/taxing countries, that can give you a cash/gift card for bitcoins.

There are legal ways to minimize your tax footprint. Also remember you can declare expenses to deduct including the cost of the machine, electricity, internet, etc.

Factor in your expenses and i guarantee you wont hit over 10% on mining

so either mine for 10%-15% tax or work and get taxes about 40-50%

ya.....this is not bad news....at all for miners.

While this may not change much (if anything) for how miners are required to report income, it has huge repercussions for merchants and consumers. Why would I as a consumer want to buy something if I have to worry that the currency I use to buy it will require me to pay capital gains taxes after the purchase? It renders bitcoin as a currency useless. If you considered buying bitcoins as an investment, like stocks or index funds, then no, not much has changed. BUT...bitcoin is supposed to function as a currency, not an asset.

Denmark announced no taxes on BTC.. if you have a mining operatoin creating +10k a month why stay in america?

BTC will survivie, it's only the land of the slaves errrr free that this applies to.

Also.. any large mining operation will move no questions asked.

 Your question shows a complete lack of understanding tax laws.
 the burden has always been there. .
 All miners in all taxing  countries were obliged to pay taxes.

 This changes nothing and if you understood a litlle of USA tax law you would be happy the IRS-US government finally gave guidelines.

That sounds pretty legit. Let me see if I'm following you here because I might adopt a similar practice....basically at the end of the month add up your mined BTC total. Then calculate the average worth of bitcoin over the same month, and then that's your monthly income?

Its actually not as bad as people are stating. You can claim all your expenses on your taxes as deductions. Im going to log how many bitcoins in mine at the end of each month, divide by 30 for average per day and if i get audited in the future ill just find the dates per year the value was the lowest, calculate my 15.2% self employment tax, minus my expenses and pay that as tax. with the expenses deduced it will be well below 10%.

So can I buy mining hardware which wont ever ROI and write it off? 

Yes you can definitely claim hardware and electricity as operating losses. Check out the first link the OP posted. It's still very confusing...there's a lot of grey area as far as how you can spend an accept bitcoin and how to keep track of what it was worth at the time you either bought/mined/spent/received bitcoins.

Hmm what about overheads, money spent on mining hardware, electricity paid for, do these count as losses? Does that mean those mining at a loss can write it off on tax as a loss?

Surely bitcoin needs legitimacy and of course it will be impossible to trade in it and bypass every nations' laws (none of us expected to anyway), but there's so much to yet be defined...

so if the IRS considers bitcoin property subject to property tax.. what if we host our wallets on servers located in other countries.. would we have to claim it then? so many questions..

For those of us who don't want to pay an insane amount of back taxes, maybe lose our home, or worse, end up in jail, let's pretend for the sake of argument that they do know how much you mined. Most miners are eventually going to change their bit coins to USD, and in that case, it will be very hard to cover up.

What I really don't understand is that no one seems to be talking about it on this forum.

how would IRS know what you mined?

The new tax code is a logistical nightmare. I can't see bitcoin surviving this. So am I supposed to keep track of my daily mining payout AND how much bitcoin was worth at said payout.? Then at the end of the year you would have to figure out how much the payout from each individual day fluctuated by years end to come up with your net gain or loss? Is that right, or am I missing something...because that seems insane.

User modeless on hackernews reckons all USA miners will have to pay 40% of every mined coin!

http://i.cdn.turner.com/money/2014/images/03/25/IRS_Notice_2014_21.pdf?iid=EL

https://news.ycombinator.com/item?id=7467721

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


It seems like the latest tax advice from the IRS will put American miners in a less competitive position in relation to other companies that will likely never pay any meaningful tax.

Basically you have to deduct the amount earned in fiat in real-time as you mine your coins. People who mined during the peak and did not convert into fiat are now liable to sell double the bitcoin just to pay their taxes.