Bitcoin Forum

This is something my 'friend' said to me when discussing bitcoins, how do i(you) respond?

I think right now capital gains is only 20%
Tell them..


Who cares? I'll pay it.

Every $100 profit, you pay $20..

Who cares? Pay it.

Write off your electric, internet, home office space (rent), computers, websites etc.

I believe I can speak for all Bitcoin users in saying that we will abide by all government rules and regulations and will be paying all of our highly justifiable taxes to the kings of our era who so mercilessly allow us to bath in the glory of their great countries.

Any IRS hero who happens to be reading this need not worry one bit about our loyalty to dutifully pleasure them with our money in our desire to reward their greatness.

I believe that should clear it all up.

If I have no choice but to pay taxes I'll gladly pay Bitcoins to a government department of my choosing that I actually believe in, so no military funding for youuuu! :P

Large miners should be treating their operations as a business and taking the appropriate deductions - there are many.  Otherwise look into treating it as a hobby.  If you are just speculating, you are probably paying the full capital gains, but only on realized $ gains.  You aren't taxed if your google stock skyrockets until you cash it out, BTC should be no different.

Seconded. We are the most fortunate people in history to live with such a sensible and necessary government and its tax code and I hope every Bitcoin user gives them every cent they deserve.

that is long term cap gains (position held over 12 months).   less than that is full income tax.   And it is not 20%.   It is 20% plus 3.8% for the obamacare surtax.   But if you make less than a certain amount it will be LOWER.    

It's basically a government-sanctioned mafia.

Or give them even more than they deserve.

Capital gains only apply when you *sell* bitcoins. Tell your friend that you're planning on spending them, and that there isn't an IRS dedicated to Bitcoins yet because we pay a network tax instead and don't have a seastead to start our libertarian government up proper.

What made you decide to them you wouldn't be reporting your capital gains?

I didn't bring them up or say i would or wouldn't

I'm stealing this  :D

I have been doing that but with bitcoin getting so high now, I am worried about mom finding the cash stash and narcing me out.

Why would anyone admit to tax evasion to their coworkers or friends who are actively accusing bitcoiners of tax evasion?

Really? Wow, even better, you don't start paying taxes for a long shot, I think I didn't start paying taxes for 10.7k profit.

Better yet. Don't cash out.

Use your coins in the BTC-economy. Win-win.

you have misunderstood how realization of capital gains works in the united states and similar tax systems. while it is true that if you buy or mine bitcoins you probably don't owe tax until you 'sell' them in most cases, 'sell' in this context basically means 'dispose of'.  if you spend $1 to mine 1 coin and then use it to buy something worth $140, you have realized $139 in (capital) income at the time of your purchase.

the same would be true of stocks: if you bought GOOG at $400 in the past and trade it to someone for something worth $800 today, you have 'sold' it for $800 for tax purposes.

I am anti-tax, and I believe that we should work hard to get them lowered and reformed to be more fair, but you should pay them nonetheless. Bitcoin is just like cash.

Not to governments as far as I know.  None of them have said they recognise bitcoin as cash, to my knowledge. 

Well, we recognize them as cash, so the government needs to pick up the pace.

Make sure you write off the value of the thousands of bitcoins you lost to pirate. I'm sure you can find a log of the transaction somewhere....

Paying taxes on bitcoin is likely to raise flags. Once they know what you're involved with Bitcoin, they're gonna presume you're underreporting and audit you.

How do I respond?  That I report all my income and capital gains.  Why would anyone assume that I'd be a tax cheat for using cryptocoins?  You have to report income.

What?  You don't even have to specify exactly what the gain was from.  Just put "Services Rendered" on the Schedule D.  Also, if you can't even cite a single instance of this happening, you're just a total FUDmaster here.

Actually, you can't write off losses on personal loans.  Look it up before tax time!

Do you live in the UK? Because if you do, please let me know what HMRC's response is when you report your income in Bitcoin and that they need to tax your Bitcoin (without changing it to fiat).

Because it's taxable when you change it to fiat (as company/business earnings, though if you show its offset by fiat expenditure then HMRC will have trouble trying to tax you even a small amount).

But ye, seriously, let us know how they tax you, especially if they tax you in Bitcoin.

edit: I'm all for paying taxes, just need the system to accept my taxes in btc.

This is correct.  You realize the gain whether you spend it or trade it for fiat.  The same goes for gold, silver, bacon, cheese, guns, etc.  Technically, you have to report the fair market value as income upon receipt, and when you dispose of it, you have to report the gain.

It was theft. Deductible.  You can deduct losses in Ponzi schemes.

Maybe, but I'm pretty sure you can claim back taxes previously paid on unrealised gains of the Poniz that turned out to be fabricated, I heard that Madoff's "investors" did.

Seems to be lots of these FUD-like thread topics appearing, maybe getting close to an interim top I wonder?

really? go buy a house with btc (ofcourse seller accept btc), and see where the fun is when IRS raid your new house with tax evasion.

Its pretty clear, you're in Jap as a vagabond while rambling this nonsense.

Of course no one can cite an instance of audit caused by suspicious IRS filings related to Bitcoin. I should have said (for the statistically impaired): I strongly suspect that anyone who writes "Bitcoin trading" on their tax return is going to markedly increase their odds of being audited.

Implying we live in the U.S.

The best analogy to describe the world I've heard so far is that every country is like a drunkard, every drunkard drinks a bottle of vodka until he is lying with the face in the mud unable to stand up properly, the U.S. however is a pretentious drunkard that also works as a school bus driver, so it's not really that other countries are necessarily better or worse than the U.S., it's just that the U.S. allows itself wayy wayyy too much for the state it's currently in.

The country can't even go a decade without invading a foreign country and exploiting it in exchange for natural resources. If I was you bitcoin taxes would be the least thing I'd worry about.

Exactly. Im pretty sure most people here are holding or trading BTC for alt coins, and spending their fiat money they would otherwise invest in something else.

Do you have to pay income/capital gains if you say take USD to buy Euros, then use those Euros to buy football tickets to see Germany vs. France on a Friday night?  No, then why should you have to with bitcoin?

Do you have to pay taxes on those Euros you bought if they just sit in your wallet/purse inactive even if Euro price appreciates vs the dollar?  No, then why should you have to with bit coin?

Now on the flip side, do you pay taxes/capital gains when you buy Euros with USD and when their value vs USD goes up you sell the Euros for more USD than you started with (thus a profit)?  Yes, then you should do the same with bitcoin.... but really the goal in developing bit coin is to improve the first scenario, not this scenario.... this scenario will be happily pulled up by the first scenario.

The likely IMHO most violated tax depending on each persons applicable laws are sales taxes and all their forms.....

For the love of god, just charge a uniform added value tax or a sale tax.

Who fricking cares about capital gains, income tax, property tax, etc?

ONE TAX! ZERO LIABILITY!

And no, you can't use the tax law to implement your favorite social engineering scheme. Also, I don't give a damn about those fucking turbotax and the rest of the tax preparation industry. Go do something more productive and fulfilling than doing tax.

This, though for different reasons. If you need to put 'friend' in quotes, it's probably a bad idea to say or even imply that you're breaking any laws. The narcing capabilities of misguided retards are not to be underestimated.

I wonder how the sale of the Porsche for 300 Bitcoins went.  What do you do when registering?

Why does your friend assume you are not going to pay taxes? Consider yourself lucky to only pay 20% on any gain in value. The money you work your butt off for, that is income, likely costs you 30+%.

Look, paying taxes is like praying to god except its real. Enough people stop paying and the world crumbles.

Oh, you :D

It sucks that it costs like 30% of your paycheck but what sucks more is the stress brought by overly complicated tax code.

If all 300 million people pay a simple tax of 1000 bucks a year to the US gubernment, they would have something like three hundred billion dollars to work with every year. Very simple tax and plenty of money for the government to run.

Alas, our government is not a lean, efficient machine.

Hundred of billion of dollars are lost every year to inefficient military research program, pointless wars, jails, porks, paperwork for social security, and enforcement cost for the US' byzantine tax code.

I will be paying my taxes, next year...

+1
It's not the concept of taxes that irks me. It's the foolishness with which our government incompetently fritters it away.

Don't forget the billions wasted on generating misleading scientific publications due to the publish or perish atmosphere they have created.

Track what you put in and take out and pay the taxes on the balance an you should be fine.  These are not stocks so it's not capital gains.

If tax laws where simple and short, how do you create loopholes?

You know only 75% of the United States is 18+ right?
46% of working Americans don't pay any taxes or get refunds at the end of the year.

You can tax that way with the current system, a lot of people are barely making it, and the tax money at the end of the year is very helpful, let alone a husband and wife, with their 2 - 18yo just graduated kids owing 4k to the government.

Your friend is correct if you sell any of your bitcoins. Any bitcoins you sell/trade for $$$ you are suppose to report/pay when filing your taxes.  If not you do run the risk of getting caught and being audited.

No one likes to pay taxes but you probably should even if you feel like its a small amount and the IRS would never notice, the last thing you want is to be audited, being audited can literally destroy your life and cause so many headaches.  Better to just pay your taxes on any money you make from selling bitcoins.

I lost all my Bitcoins in an unfortunate boating accident.

IRS proof ;)

I forgot the password, haxor took them, hard drive failure, brain wallet explosion when you kicked my door in, dog ate my paper wallet ... endless lulz to be had with that one.

I had them in my brainwallet and forgot  ???


I'd love to fund the IRS heroes, I feel terrible about this... :-*

Freedom is not free.  Your freedom is paid for with money and the blood of patriots.

Do you need to pay tax if you bought some wow gold?

That's propaganda speak.

Nobody wants to believe that the founding of their nation is based on a stupid war based on naked financial interest and tinfoil religious conspiracy theory.

That is probably not necessary. I am not a tax expert, but this guy has some good things to say (https://www.youtube.com/watch?v=fEJA4-8WiWU&t=6m40s). I believe he knows what he is talking about. The tax rates for certain lifestyles are very different.

Not a lawyer, but I don't think you need to report capital gains until they're realized (ie, you cash out.)

Personally, I'm reporting that income should I incur some, because my, um, "respect" for the IRS outweighs my greed.

Besides, capital gains is taxed at a way lower rate than money I actually had to work for.  (Which is a doorway to a very off-topic discussion I'll leave closed.)

You only report realized USD profits.  If you sell off your bitcoins, subtract what you spent for them.  If you don't sell your bitcoins, you are fine.  It's the same rules as gold coins.

I'm not a lawyer, but this is my understanding and what my financial advisor thinks. 

Wait... So if I keep my BTC that I bought at say $4 and don't cash it into fiat it is not liable to CGT since it is not actually 'money'?

If that is the case, I can just buy items with BTC and sell them for fiat on fleabay?

That's the truth!  You have to pay the government, and then you need to help fund numerous organizations to help protect you from them!

Yea everyone would pay taxes if they made it as simple as a flat tax on every item for sale and got rid of the rest. You shouldn't have to buy any programs or hire anyone just to pay your taxes. It would force the government to reduce it's size too.

the US tax law is absurd, really. it would be so much easier to make everyone pay a flat sales tax. dump all the loopholes for corps and fat cats. 12-15% on everything, no exceptions except for perhaps good and medicine.

I think a good way to start to fix it would be to allow everyone to deduct the time and money it takes to attempt to comply with their absurd tyranny.  That would clean it up real fast.

Just spent two very late nights trying to comply with this crap...should be done by this weekend.  I get more angry every year having to waste my time, and then be forced to "donate" to an organization that increasingly tramples and destroys individual rights... which is the opposite of what government should do.

I feel dirty and abused doing taxes  >:(

I asked my accountant this:

"If my bitcoins increased in value how do i account for it."

You know what her reply was?  After asking WTF is a bitcoin?  Her answer was perhaps the most simple I have ever heard.

"The same way you would account for any coin increasing in value,  bit, gold or silver."

I explained bitcoin to my accountant yesterday...he was very interested. I told him to wait a couple weeks before he looks into it more, otherwise he will get sucked in and be late getting taxes in for all his clients.

He told us to count all our sales as a regular income, and then later when we cash out to deal with capitol gains at that point.

;D ;D ;D ;D ;D ;D

Everyone keeps talking about cashing out...I don't get it!

The only time you owe the IRS a dime is when you make money...meaning US DOLLARS!!!

If the whole idea of BTC is to create a new currency that's free market...why "cash out"? As soon as everyone cashes out, the government gains and BTC loses!

While the whole BTC theory and concept is great...the "cash out" mindset is what will ultimately keep it from ever succeeding. People just can't think outside of Dollars...at least not here in America!

If you are planning to cash out, and you have a good amount of BTC...it might be a good idea to look into setting up a business for selling off your BTC. You'll give away a whole lot less US Dollars if you can write off all of the expenses for getting and selling the BTC.

I'm no CPA and surely no lawyer, but even a simple minded moron like me knows that it's a bad idea to "cash out" millions of dollars in product for your own personal gain.

Of course, a simple minded moron like me also understands that it's not a good idea to "cash out" a growing currency for a dying one.  ;)

You're still going to have to report the income you make on ebay.

No matter how you try to get around it...when you exchange BTC for gain of USD you will have taxes to pay. Other than some kind of illegal, money laundering scam there's just no way around paying taxes on the gains in your investments.

It's going to be hilarious when all the "get rich quick" BTC buyers are sitting in Federal prison for trying to get around paying the government with stupid (and Felonious) schemes

While I have never "cashed out" bitcoin into USDs, I have bought lots of things with btc.  When things are bought with btc, the IRS thugs consider that "cashing out" even though they never touched USDs.

Also if some of those btc purchases are business expenses they can be used to lower your tax liability.

Talking to an CPA about hypothetical "cash outs" is not going to keep btc from succeeding, but allow you to stay in business another day to accumulate a little more btc.

Ya....that's what I was trying to warn. Buying "stuff" with BTC and then selling that "stuff" for USD is exactly the same as "cashing out" in the eyes of the IRS.

For BTC to succeed people will have to get out of the "cashing out" thinking. It has to become a currency that can stand on it's own and that's impossible as long as people still think in USD...and they will always think in USD.

BTC can never be what many of these folks think it will be. No matter what it's spent on, everything has value in USD that can be measured by the Government.

Anything you legally buy has a paper trail that ultimately leads back to you. The only way to avoid the tax man is by spending BTC on items "under the radar"...illegal merchandise!

My point is...either plan to pay the taxes on your BTC, become an outlaw, or go to prison...those are the only options!

Some outlaws pay taxes and stay out of jail.  ;)

Stocks and currency are not the same. If you bought $100 of Euros and it appreciated and was worth $200 and then you spend them, you would owe no tax. As you as you consider bitcoins to be a foreign currency, you are ok.

Just buy gold with it directly.

pay your taxes and laugh in your friends face all the way to the fucking bank

if he is laughing at your fortune he is obviously jealous and therefore is not your friend

It is only a profit if you convert it to your local currency. This is the same theory as if you were to buy a stock share. I on the other hand have to pay taxes on every sale I make with my business. On a personal level you should only have to pay taxes if you cash out. Of course you should pay your taxes although, it is not a big deal as it is only capital gains tax and you only pay on the profit.

Only poor people pay tax. Just look at those saving accounts in tax heaven country, 30 trillion USD, almost double the US government debt, I don't even understand where is the corresponding debt of those savings  ??? ???

Bah, just hold your coins until you have millions of dollars worth in FIAT.. Cash out and don't pay a dime.
Leave as fast as fast can be for a nice tax haven country on a private plane with a few suitcases of whatever currency you fancy....

Just follow the tax laws of the country you are operating in; the "tax evasion" question is about income, not about Bitcoin.

there is an exemption for gains under $200, but otherwise this is an incorrect, ignorant statement. if you want to learn about this area of tax law, see

http://www.fenwick.com/FenwickDocuments/Outline-Taxation-of-Foreign-Currency-Transactions-and-Translation.pdf

for a start.

the united states tax code does not treat dollars as special. if you earn three gold coins for services rendered, you owe tax on the market value of the three gold coins at the time you received them. if you hold them and they then appreciate whilst you hold them, and you spend them on silver, you owe tax on the profit (the difference in value between the time you received them and the time you spent them on something else). this is true of any property, although different kinds of property can lead to different tax rates depending on the circumstances.

i have firsthand knowledge that at least one prominent bitcoiner has been reported to the united states IRS for tax year 2012 using their 'Form 3949-A'. i will personally be paying in excess of US $160,000 of bitcoin-related taxes for the 2013 tax year.

What about if you cash them out in a country that has little or no capital gains tax and then transfer the money to your bank account in the country you live in?

Is that viable?  Would you have to be a citizen of the other country or something like that?

Or would you just end up getting flagged as a money launderer?

If you transferred over 10k you may be taxed and perhaps have to pay import fees. I think it would be more expensive.

Some 'outlaws' don't pay taxes AND stay out of jail. Oh, look, its the British Virgin Islands....

So, are we allowed to copy what these people did?:

http://www.irishtimes.com/business/economy/world/anonymous-wealth-revealed-after-data-leak-1.1348735

That's about 32 trillion they have socked away. Equals out to over $4000 dollars for all of us if it was divided up.

If you have made alot it might be worth moving to a country without capital tax for a few years  ;)

Sadly in the US unless you renounce your citizenship (and to do that requires you gain citizenship in another country first) and pay an "exit tax" simply moving to another country doesn't erase any tax liability.

Still people shouldn't get tax advice from the internet.

If it is a small sum honestly the IRS has bigger fish to fry.  The IRS audits less than 0.5% of tax returns for people making less than $250,000 per year.  They aren't going to spend the manpower to track down some guy who had a $300 capital gain on some Bitcoins a couple years ago.

If you have a significant amount of wealth you are already use to dealing with the IRS (they concentrate on the "top") and likely already have professional tax support.  If you suddenly find yourself in this latter category and don't have professional support ... get it. 

For US citizens, keep in mind that if you live in a foreign country for a full calendar year, earned income up to $80K is exempt from US taxes.  Assumptively because you're being taxed by that country.  Just sayin'.

For US citizens, keep in mind that if you leave the country with all your assets and never come back for any reason the ability of the IRS to impose penalties on you can be reduced to negligible levels. Just sayin'.

Some of us are not americans/US residents so the IRS is the last of our worries :)

This makes no sense. Why carry suitcases of paper money across the border when you can carry it as bitcoins in your brain wallet?

throwing away you U.S. passport might help.

1788 people did it last year, a record high.