Bitcoin Forum

How exactly does it work if you trade/mine a large amount of Bitcoins, and you get profits of thousands of USD. What do you tell the IRS?

http://en.wikipedia.org/wiki/Capital_gains

You don't.

You keep what you have earned through your own virtues. You owe them nothing for your labor.

Even if you mine and convert it all straight to USD, it still counts as cap gains?

Just pay your damn taxes you DO NOT want the IRS riding your ass and auditing you every 4 weeks.

Another terrible thread... Can we move this to the "Redundant" section?

Heh, but if you are mining through tor and bought your hardware anonymously as well, can they really hold you to anything?

capital gains don't apply to mined coins since there is no gain like trading a stock.  it's a hazy area.

For mining bitcoins the value at the time you first got them minus cost would probably be considered normal income. Any increase in value between acquiring them and selling them would be capital gains. I have no training in the tax code but that is what I have picked up reading these forums.

Well there's a distinction between what you could do and what you should do legally. Yes, you probably could get away without reporting profits generated from mining, but if you were found out, it could be bad, especially if it's a significant chunk of change. The size of your operation also might determine your risk. Just as millions of people might sell a thing or two on ebay or craigslist and not report the proceeds as income, they legally should, though the IRS really focuses most of its resources on recovering the most in unpaid taxes. Yes, if you do anything that generates a profit, technically you should report it. If you do run a mining operation that's quite significant in terms of profits, you might consider registering with your state as a sole proprietor or S-Corp. It would allow you to deduct the cost of your rigs from your taxable income. I'm not a tax professional.

I think this. 

Especially if so many detractors don't want to recognize bitcoin as being legit.

Covered here:
 - http://en.bitcoin.it/wiki/Tax_compliance

cash out in cards and not cash.  problem solved

If you keep your income as bitcoins, how many US dollars of income do you have?

0.

What's the tax rate on zero dollars?

0 dollars.

+1

I'll side with mr. Atlas. *Tips hat*

http://www.youtube.com/watch?v=G1-_k6mKSxk