Bitcoin Forum

The end of the year has come and with it, tax time is imminent.

My issue is that I've realized enough capital gains this year so that the amount I have gained in Bitcoin surpasses the amount of fiat capital I have to make equivalent payment to the IRS for these gains.

I am now forced to sell some Bitcoin to meet my tax payments.

However, I'm a Hawaii resident and exchanges are restricted from operating in Hawaii and servicing Hawaii clientele. (https://www.coindesk.com/coinbase-just-stopped-serving-bitcoin-hawaii/)

So Coinbase closed my account back in February when the law was passed.

And cex.io claims Hawaii residents are not being serviced until further notice.

I have a Kraken account, but haven't been able to find a bank that will let me open an account to link to Kraken.  (Tried linking my Hawaii bank accounts and neither are eligible).

Any advice is appreciated.

TLDR: I need to cash out a six-figure sum to pay my Bitcoin capital gains taxes.  Bitcoin spiked from $1000->$11000 this year and unfortunately I don't have enough USD/cash to pay capital gains on Bitcoin.  Can't find a method to cash out that's not severely limited to less than $2000/month.  My accountant is also stumped and doesn't know what to do.  He does say if I don't find a solution the IRS doesn't care and will just penalize me until I can pay.(Upl

Six figures is quite a large amount for this, but you could certainly try doing bank transfers on LocalBitcoins. 

There's a good market for Hawaii on there because of the lack of other exchanges that are available.

I think you can get international wire transfers to Hawaii from Bitstamp as well.

 Where's all the fiat you received when you cashed out your coin?

Hey, I'm no expert, but I'm pretty sure U.S. tax code makes it so you don't have to pay the taxes on your capital gains until you liquidate your holdings.
I don't think you have to pay taxes on the increase in your bitcoin assets until you get them exchanged to fiat.

Do not take this as advice I'm just saying you should look into it :P

Be careful with the IRS, they are trying to regulate bitcoin as much as they can, just look at all the requirements that they asked coinbase about their users, they are sick.

Last summer i went to Miami, and i sold about $2,000 worth of bitcoins to a guy via localbitcoins, have you tried selling your bitcoins in there by p2p? It is very easy to use.

But yes, $100,000 are a huge amount of money, and if you sell them out just for cash, you can raise flags and maybe someone can think that you are a money launderer, or just a dr*g seller.

Are you sure you know what you are going to pay?

You say you have to pay "capital gains" but according to the reports I've read till now bitcoin are treated like assets so you pay capital gains only on the sale price.

If you already have to pay capital gains it means you have already sold coins so... did you blow all that money already?

I think this man is right, there is no "gain" on your capital until you actually have your fiat in hand and available to use. Otherwise they would have to be tracking every investment and there would always be sell-offs which would negatively impact regular stock markets. But don't take my speculation as fact, since I have no idea about US tax law.

As for what you can do, you're probably pretty limited. I think this might also be a reason why capital gains are not taxed until liquidated, because you can't always sell something to pay your taxes. I do believe this would also make sense for a house; if the value goes up you're not paying tax on the gain in value every year until you sell it, right? It's just a tax on the realized value.

I recommend you find anyone familiar in Europe. There is no problem with the conclusion on the Bank card. It verifies your card at the exchange and sell bitcoins will make you a regular Bank transfer. Only you will need to contact the person you trust. Not to be left without any money. If a large amount is too much temptation.

You are really in a big mess but I don't understand the arbitrariness of the law over there because capital gains will only arise when you sell the goods and not just by keeping. What if the value drops immediately you pay the tax at a high value that means you would have been over charged as a result of that.

The issue is this, since you don't have the real money, what do IRS seem to want to claim now? Cashing out a million USD is a whole lot of money. But there are two options you should consider based on which one suits you but depositing a six figures into your account would create additional problem

1. Try using a peer to peer site where you could get an individual willing to sell for either cash in your locality or pay it into your bank account.

2. Find a trust worthy individual who can help you cash out, then send the money to you just like sending money overseas.

Unfortunately that wasn't what pushed me over the edge this year.  The Bitcoin Cash and Bitcoin Gold received this year is what did me in.
My accountant confirms I need to report those hard forks, and the gains realized from just those alone will push me into a tax bill of at least $100,000.

Edit: To clarify, just receiving the hardforked coin is enough to create a taxable event.  Even though I haven't traded either out to fiat or another coin.

Yeah, in this case you are going to have to pay taxes for sure.
The only alternative I've seen looks to be Bitstamp, who (at least according to Reddit) works for Hawaii.
If that doesn't work localbitcoins...or go and try to make a deal with the guys running those two ATMs down there, but you;re goign to have to break it in smaller fractions.

 How difficult would it be to temporarily become a resident of a state that the Bitcoin exchanges deal with?

This has crossed my mind.  Renting out a house in a bitcoin-friendly state and paying utilities (maybe internet + electric + water) and letting it sit as a sort of headquarters for my bitcoin activity.

Or finding a trustworthy friend who lives in another state and putting my name on their utilities.  Then flying over and opening a local bank account.

I hate to be dishonest but this seems like a lot less of a headache than jumping through hoops / potentially be out of luck in my situation.

Once I have a local bank account opened in that state, and have proof of address, I should be good without needing to verify further down the line.

But this is a longterm play, whereas with tax season I have until April 1st to secure payment.  ???

Localbitcoins would be your best bet for cashing out such big amount, but if you receive payment in your bank, you'll of course have to pay the taxes.
I know some people actually do deal with cash only, so maybe you can look for one in your area, and receive your cash amount, they may charge higher fees or give you less rate, but you'll get the money in cash, so that will be a plus for you.

 You're in a tough situation.  In this case, you're being screwed by an impractical regulatory policy which paints you into a corner and forces you use some ingenuity -  it doesn't necessarily have to be dishonest but as they say, 'the devil's in the details'.  Best of luck!