Bitcoin Forum

Anybody knows of a good lawyer or accountants who deals with bitcoin? I need to do my tax before April 15.

Some information from TurboTax on bitcoins.

http://blog.turbotax.intuit.com/2011/07/18/bitcoins-the-taxless-currency/

I don't care about some blog post. I care about getting my tax done with the least pain and the least money lost.

I personally am treating it as a barter transaction, and logging them at the market value at the time of which each transaction took place.

If I later spend the bitcoins or convert to cash, I will then figure out a capital gains/losses at that point. Until then, and change in value is unrealized and nontaxable.

(I am not an accountant. This is just my opinion.)

Is this for profits from mining or trading on an exchange like MtGox?

Neat blog, but it doesn't say anything about taxing it.


Say you have 1k bitcoins, and you buy a car with the coins itself.. you never had 'money' you merely traded a good for a good.
Do you get taxed?

Taxed the same as a barter transaction imo

If it's from trading at Gox it's probably more like spot Forex than anything.  That's a well-documented tax treatment.

if you mine and sell then it's an income and you would pay income tax - like if you farmed a field of carrots and sold them

if you buy BTC then sell at a profit, then it's a capital gain, like if you bought some stock.

No tax if you buy goods with your BTC, then the vendor might have to add sales tax before pricing in BTC (this is less clear - because it depends whether the vendor is using BTC as purely a medium of transfer and then using e.g. bitpay to pay them in USD)
 
That's how I see it, anyway.

Will

Kind of but not quite.  Again, it's more like spot Forex than stocks.  Forex gains are taxed like futures transactions and get 60/40 tax treatment (60% long term cap gain, 40% short term)

In the US, if you buy goods with your BTC it is possible you could trigger either a capital gains tax or possibly need to report it as a Schedule C (essential it could be viewed as a barter transaction).

sure - that must be a US tax, in the UK, it's all counted as a capital gain.  Can't speak for other jurisdictions.  Moral of the story: check your local tax laws!

Will

BTW I don't trade at Gox, but I was wondering.  Does Gox send out tax reporting forms to US customers at year end like a regular broker would?

pretty sure they don't.  It would also be very hard, because currency can come into mtgox via BTC or via USD - unlike regular brokers where all currency arrives and leaves in USD and so can be traced.  Example, I could transfer some USD to EUR account, then buy some BTC on bitcoin-24 for EUR, then send the BTC across to mtgox and sell, at profit for USD.  There is no way this could be accurately reported by mtgox, it's up to the individual to report this income themselves.

Will

First, bitcoins might not be considered a foreign currency. They are not backed by any foreign currency so it seems like they would not be. But it is possible that the IRS *might* considered them to be.

Most people seem to view bitcoins as personal property which they barter with in which appreciation would be considered capital gains.

If they are foreign currency then they are only eligible for 60/40 tax treatment if you fill out the appropriate forms to elect out of IRC 988 treatment. This has to be done when you make the trade! It is likely too late for you!

And you are going to consider them a foreign currency, why not just use them to buy gold or something to avoid taxes. (I'm not sure this is possible, but I have an accountant looking into it).

In the US, most people pay taxes they don't owe because they're ignorant.  Educate yourself. (http://www.losthorizons.com/ADocumentedCtCSuppressionHistory.pdf)

No you would not need to declare capital gains because you are not converting into dollars.

this is wrong. please stop perpetuating this uninformed myth. tax on capital gains is realized upon any disposition of capital assets, except where there is a specific exception (as for gifts, for example). you are making uninformed assumptions about how the united states tax code works.

Most people are making uninformed assumptions about how the united states tax code works.  Here, I'll quote myself:

It actually depends. If the money you have is in a foreign currency for personal use and you use it to pay for goods and services you don't owe taxes on the appreciation. I don't really understand exactly how it works but basically you don't owe taxes if you are spending foreign currency when traveling and that currency appreciates. I'm trying to figure out whether this could be true for bitcoin too.

Here is a sentence from some legal jargon about the possibilities of places like MtGOX and other exchanges to report your dollar amounts to the US Federal Government...

"There is a Report of Foreign Bank and Financial Accounts (FBAR) filing requirement for financial accounts in a foreign country when the aggregate value of the accounts exceeded $10,000 at any time during the calendar year. There is the likelihood that this requirement applies to bitcoins or USD funds held in non-US bitcoin exchanges or wallet services."

So, if you aren't close to that amount you probably don't have to worry about the feds 'knowing' exactly what you are doing. Kinda like doing side work for friends and family and not claiming it as income.

DISCLAIMER: This is not good tax advice. Just sayin'...

There's reasons why some people dream of owning a bar one day... same goes for trading BitCoins sorta. If they don't know... don't tell.