Bitcoin Forum

So how is every one handling taxes?

I have some questions.

Is it legitimate to consider all coin-to-coin trades as like-kind exchanges for 2017 and therefore not taxable? It seems even tax professionals have no idea as I see articles saying yes and articles saying no.

Also, using FIFO accounting, does this apply to coins across addresses? Like say I have 10 Bitcoin in Coinbase, but earlier in the year I sent 1 BTC to an exchange and have been trading with that a lot (total volume of trades being far above 10 BTC). Does FIFO apply across accounts? So when I trade that 1 BTC the first time my sell price after the trade minus my original buy on Coinbase for my first Bitcoin would give me my profit...but then the next time I trade that 1 BTC + profits, for tax purposes do I count the original value of that trade as the second Bitcoin I bought on Coinbase earlier in the year (FIFO operating at the person-level instead of the account-level) or do I just use the value of the BTC that I'm trading at the time I make the trade as the initial value of the trade, since the BTC in my Coinbase account and my exchange account are clearly separate Bitcoins.

Most major economists on television and news outlets are saying Bitcoin is worthless. I'm going to use that "expert" analysis to do my accounting for trading Bitcoin. I don't see how they could tax your trades as the value of the coins fluctuate so rapidly. I think they are only talking about cashing out Bitcoin into fiat currency, but I'm no accounting expert. I will just play dumb as I don't plan on converting any of my holdings into cash this year.

Bitcoins are 'worthless' based on the economic models they studied on the university, blockchain monetization is a real concept. In regards of taxing definitely is a difficult task and will add a complete new layer to currency trading... Also, how would taxing affect miners?

Alright guys but back to the actual question at hand.

I'm assuming I can keep coins in different accounts separate for tax purposes, otherwise I'd be absolutely killed come tax time as none of my long term holding would count as long term. I don't think it would make any sense to apply taxes across accounts as clearly coins are different when they are in different accounts.


Not sure about like-kind exchanges though. Including coin-to-coin exchanges will probably save me a thousand dollar or so since I lost a bunch of bitcoin on trades this Fall and only made up a little bit of it towards the end of the year. So those would offset some of my profits I took from selling BCH when coinbase released it. But tracking the many hundreds of trades (and likely thousands if I have to include each sub-trade of each trade since sometimes a trade will actually be exchanged using multiple partial trades) and figuring out the USD price of BTC and ETH every time I bought or sold them for altcoins would be a monumental task and I would probably just have to guess the price in USD for all those trades as exchanges don't record that.

I don't think you're going to have much to worry about this year, as it takes a lot of SEC oversight inside the different trading platforms when your trading stocks electronically. I don't think any of the exchanges were prepared or spending as much capital as they should in tracking records for taxes. Some exchanges don't even list the prices of the coins in fiat pricing either, adding even more difficulty to the equation of figuring fiat currency value at the time of trade. When BTC shoots up the altcoins go down in price very quickly sometimes. It's going to be a tricky situation, the only fair way to tax it would be in BTC, but I doubt the federal governments are going to run full Bitcoin Core nodes to accept tax payments, and I don't think the Bitcoin network could even handle that much volume in its current state, lol. They really just need to put a sales tax on it at the Coinbase level when you buy digital currency with fiat currency. It will take a few years before they really enforce it and/or issue some clear guidance on the matter I think. The whole announcement that the federal government would tax it is simply appeasement measures to the bankers sweating the competition coming in the payments market.

As of 2018, "Like kind" has been defined as being real property. Digital currency is not real property. So, every trade between different coins is now a taxable event.

Not sure if you can get away with that for 2017.

https://www.youtube.com/watch?v=zo3qXtphV8Y

For mining, everything I've found says coins come into your possession as soon as they are credited to your account, including pools. How you would actually keep track of that, I have no idea.

What is wrong in paying taxes for our earnings? If we all pay taxes for our profits it will benefit our countries. Is not it?

The governments is over bloated and waste a ton of money on wars, bank bailouts, bribes, payoffs, etc. The whole cryptocurrency movement started as a way to eliminate third parties like banks and governments. The federal government went take a delicate approach to this situation, as they know what Bitcoin and cryptocurrency is all about. They have a huge role in ushering in these new form of payments, as it will be the death blow to many financial institutions. They also have pressure from the banks to try to pull the plug on the whole use of cryptocurrencies as well, resulting in zero tax revenue for them. I really don't think enforcement is going to be all that strict in 2017.

Who said anything about not paying the taxes? I'm asking about how to comply with the law, as at least in the USA it is very unclear how to comply with tax law when it comes to cryptocurrencies. Even professional tax accountants aren't sure, so really its just a guessing game.

I think you're complicating things.

Focus first on the obvious things you'd get taxed on. Distributions out of a coin to USD. Purchases using Bitcoin representing a taxable event. Focus on paying taxes on the gains for those transactions and keep track of your losses so you can use them to offset your gains. Rely on the word of the IRS, they're ones making the rules. Stick to the rules literally and be vigilant of changes year over year.

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Blockchain monetization is called "Bitcoin".

https://www.irs.gov/newsroom/irs-virtual-currency-guidance

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

This is a good link! IRS refers to cryptocurrencies as "Convertible Virtual Currency", which must align with their term for other means of exchange.

Their thoughts on the tax treatment for coin mining:

Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer
resources to validate Bitcoin transactions and maintain the public Bitcoin
transaction ledger) realize gross income upon receipt of the virtual currency
resulting from those activities?

A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value
of the virtual currency as of the date of receipt is includible in gross income. See
Publication 525, Taxable and Nontaxable Income, for more information on taxable
income.

Q-9: Is an individual who “mines” virtual currency as a trade or business subject
to self-employment tax on the income derived from those activities?

A-9: If a taxpayer’s “mining” of virtual currency constitutes a trade or business, and the
“mining” activity is not undertaken by the taxpayer as an employee, the net earnings
from self-employment (generally, gross income derived from carrying on a trade or
business less allowable deductions) resulting from those activities constitute selfemployment
income and are subject to the self-employment tax. See Chapter 10 of
Publication 334, Tax Guide for Small Business, for more information on selfemployment
tax and Publication 535, Business Expenses, for more information on
determining whether expenses are from a business activity carried on to make a profit.

I was told that what you invest is a cost to your 'business'. So if you invest, say 1,000 (buying btc with it), you 'lost' that money until you make that back.

I don't believe you owe any taxes on actually btc. Government considers it virtual property, and it's only worth something once you sell it to fiat (you're not yet taxed by just having it like you are with personal property such as your house and car).

I'm no tax expert, but if I'm sure even when you reinvest all your profits back, it still counts as a cost (loss) if you did not come out ahead at all (and electronically, it wouldn't look like you did).

It was suggested to me to buy bitcoin with all profits and original principal income at the end of the year. This will show no cash profit, then sell after the year turn. I'm not sure if this could be legit though.

But yeah, I think you just pay taxes on the fiat you 'earned'. I read the link that coinbase gave. That's what I made out of the law.

Treating crypto tokens as stocks shares or commodities is retarded, because they are not. Unlike other assets, a digital token has really no value unless it is exchanged for something which has well defined value, like USD, or a car, or a cup of coffee. This is how all these crypto assets should be taxed: at the moment when you exchange them for fiat, goods or services. Taxing every crypto transaction is pain in the ass and this will never work for technical reasons. Making pain in the ass laws will not bring more money into treasury. Laws should be easy to follow.

I found this helpful (since even the IRS claims that coin trading is self-employment).

https://turbotax.intuit.com/tax-tips/self-employment-taxes/top-tax-write-offs-for-the-self-employed/L7xdDG7JL

So don't forget the costs of your phone, electric and Internet bills when calculating your taxes-- those are all costs to the business, of which you could not coin trade if you didn't have.

Coinbase also applies transaction and conversion fees, which is also a cost to your business.

Is this really true? I'm a U.S. citizen. Let's say I earned 80k from a long term hold on Kucoin, a Chinese exchange. I would owe no taxes to the U.S. government? What if I transferred it all to Coinbase to withdraw into my bank, would I still not owe any taxes?

amount of gain probably matter: if you gain is 1000$ chances are you are probably not even in the radar. But make several million or billion, the uncle sam is running after you like a bloodthirsty bloodhound.

I think that in bitcoin wallet sites like coinsbase was already imposing bigger taxes due to the tax of the website, as its originated in the US. The government virtual property as legit and the protections of its privacy is a great advantages for every people who've been doing legit transactions of the website wallet. Paying taxes from earned fiat isn't a problem, as long as there's a reliable source of income through the trading sites and bitcoin jobs or any mining operations.

I'm with you there, but most people who have made a decent income cringe when tax time comes around, because if you have very little expenses, the dollar amount t that you have to pay will quiver your bum cheeks.

The government of US are too naive. What gives them the right to tax a currency that is not decentralized? Also people earning coins work hard for it and they consume time and electricity. Both of which are already taxed by the government itself. I think these taxes must only be applied to investors of the cryptocurrency market.

As a resident  of more than six months a year, can you have a $90k of INCOME ( from working ) tax free,

but you got FATCA, which means you must declare to CHICAGO every-year about every BANK in the world or exchange the you have your wealth as a USA citizen, failure to fail yearly FATCA reports means that they can have IRS make claim of 200% of your Wealth as taxable by IRS, which means should  you have any bank or property in USA then its goes to LIEN and you lose all

Nobody on earth who is a USA citizen escapes UNCLE-SAM, USA is only country on earth that does this to its citizens,

These days no country on earth will open a bank-account to a USA citizen, just a pain in the ass.

The current price to give up your USA citizenship is now astronomic so that game is OVER, no exit but death :)

The USA is owned by ISRAEL, since they killed JFK in 1963, the USA is citizen is a tax-cow to be taxed, and grazed.

Nobody gave Israel the right, they have the right cuz GOY are cattle to raped, robbed, and sheered, BEEN this way forever.

They created FATCA, effective since 2009, all off-shore accounts including BTC exchanges must be reported yearly, failure to report means that U owe IRS up to 300% of account balance, which means they seize all your wealth in USA, and upon return to USA they put u in prison.

If you live in USA, and they catch you ( because you have something mailed to your house from abroad ), then they can take everything you own, for failure to report the offshore accounts

**

COINBASE is owned by IRS-USA, if you live in USA, u may as well just play the game by their rules, otherwise they will castrate u, and you will be caught, IRS has more agents working abroad looking for these accounts, than they have agents on USA soil, even china&russia has IRS field offices all over the country looking for USA citizens under the radar,

To escape, means you go to a 3rd world country, and bank off the grid, far from any city, my finding is that IRS field agents rarely venture more than 50 km from the home office, as say in china, they don't have armed swat teams to come with them

they say that because when you find any chat pumping 1000% in one year you must say it is bubble. all old models and analysis say that.
The part that was ignored is that the price is based on technology that may solve many problems in the world and therefore a lot of profits may be achieved.
we cant say it is bubble because of that
people on tv talk about numbers more than we do

Tax laws are unclear at best and generally set up so they can be manipulated to be enforced in any way governments see fit at any time they like. You would assume that taxes would come into play when Bitcoin is exchanged for fiat but you can bet government is trying to find ways to overtax you anyway they can.

Here is the official IRS guidelines for filing taxes on cryptocurrencies.
 
https://www.irs.gov/pub/irs-drop/n-14-21.pdf

Here is how Coinbase is interpreting the law to generate their reports. While they aren't providing tax advice, or nor am I, I think we are getting taxed like this:

1.)Taxed on withdrawals from Coinbase to wallets.
2.)Taxed on fiat currency withdrawals from Coinbase, minus your original withdrawal in cryptocurrency at the recorded market price at the time of withdrawal. no 1099's unless your over $20,000 as a business user or GDAX user with more than 200 transactions.

Here is the link to Coinbase's methodology for generating reports.

https://support.coinbase.com/customer/portal/articles/1496488

Here is the method for computing the capital gains taxes on trading.

https://www.irs.gov/pub/irs-pdf/p544.pdf

I think we are given a little flexibility this year in whether or not we consider the currencies assets or not. Unlike stocks, bonds, securities, we can use digital currency to purchase goods in which we are taxed on the fiat currency rate on personal income. So there is a big grey area there, however Congress already has multiple bills have already been drafted by members of Congress to protect digital currencies from over taxation in an effort to develop the blockchain technology behind the coins. So all in all, if you pay a fair percentage on earnings I think you'll be fine on your income taxes.

Taxed on sending coins off coinbase to other addresses is obviously crazy and makes no sense. Definitely not going to worry about that.

Here is the typical difficulties I can see:

scenario 1:
you buy btc 0.5 amount at 15k$ which is 7.5k$
Through shufflling and shapeshifting, once converted back to BTC now you BTC has grown to 1 BTC at 15k$ with no change in market price of BTC itself.

Now you sell your 1 BTC  back at 15k$

Here are the problem with this:
1. How do one know if 1 BTC sold back is really originated from 0.5 you purchased earlier? or was it mined? it is hard to say because you have been shufflng.
2. Okay assume entire 1 BTC  is originated from the previous purchase of 0.5 BTC but in case it is not, then it will be also head-scratcher.
3. Assuming your sale of  1 BTC is originated from 0.5 BTC earlier, is your gain? 7.5k$? That sucks because BTC price at the purchase and sell was same and there is no way, you could have made 7.5k$ then.

The above is just one of many thousands of different possible scenarios.

If I send Bitcoin from the USA to India, do I have to pay capital gain tax on it?

https://turbotax.intuit.com/tax-tips/tax-payments/tax-tips-for-bitcoin-and-virtual-currency/L1ZOgU00q
You can check this link, is give some information of it

Countires misuse tax money and wasted a lot of resources into things that are unnecessary. In my country people on benefits earn more money than a normal worker which is very wrong. So I am very against paying more taxes than i am already paying.

I believe that those exchanges was undergone at taxes already before they start to operate their business because they were under in the banks contract and some of them required a personal identification of a user so the bank will know who they are dealing with.

Isn't everyone going to basically record it incorrectly since you cannot do it accurately due to no set price on altcoins?  Which altcoin price are you suppose to use?  The one on bittrex?

The other thing is what about when you sell altcoin for btc.  How do you know the exact btc price then if you sell it?

To exclude foreign income, you'd have to be living abroad - and likely paying income tax to a foreign country.

However... if you had 80K of crypto gain, maybe the right thing to do is spend 7 months kicking back on the beach in Phuket?


It doesn't matter where you bought a capital good, your purchase price is your basis.

So here's the things I want to get some consensus on for US taxes:


1. Can you use like-kind exchange to not be taxed for crypto-to-crypto trades? If so, do you still have to report those as like-kind exchange on some tax form? Or do you just not report them at all?

2. Can we choose any method of accounting we want, as long as we stay consistent? FIFO, LIFO, etc.

3. And can we do tax accounting per address, so that you can keep your long term coins separate and untaxed in their own wallet address while trading and getting taxed on short term profits on an exchange?

By my opinion this "experts" thin that bitcoin is worthless because it is not very well regulated by legislation, and they do not really understand the nature of crypto currencies. I think that bit coin and any other alt coins constitute a future of the economics.

I wonder why there is no clear distinction like in other countries for tax. Like in india tax on capital gains is flat 15%.

Not any more due to the recent tax bill. Like kind now only applies to "real property", i.e. real estate.


Probably.


I don't see why not. This is how stock trading works - if you can identify the specific block of stock being traded, then gains/losses are specific to that block.

    Government that has from the onset told its citizens to stay away from cryptocurrency calling it SCAM are the
    ones taxing its citizens from profits generated from cryptocurrency related investment and business.

Thanks! Though for #1 I am referring to taxes for 2017, the new tax bill doesn't apply to those. I probably will just assume I have to pay taxes on all coin-to-coin trades just to be safe.

What are Taxable Events!

It’s likely that all cryptocurrency transactions will be treated as a taxable event; some being treated as income and others being treated as a capital gain or loss.
This can include:

* **Trading Cryptocurrency:**** **Buying and selling cryptocurrency can generate a capital gain or loss. Fortunately, losses can be used to offset gains.
* **Coin/Token Exchanges:**** **Exchanging between cryptocurrencies. For example, purchasing Ripple for Bitcoin would be considered a taxable event.
* **Selling Bitcoin for Fiat:** When converting cryptocurrency back into fiat (USD or other sovereign currency) this is treated as a taxable event generating a capital gain/loss.
* **Receiving Cryptocurrency (as a payment):** If a cryptocurrency is received in exchange for a product or service or a salary/wage (it is treated as ordinary income) the value of the transaction is calculated at the fair market at the time of receipt.
* **Air drops:**** **Treated as ordinary income based on the value of cryptocurrency on the day of the airdrop. Also, at time of exchange there will be a capital gain taxable event.
* **Exchanging Bitcoin for something of value:** This is a taxable event and may generate a capital gain or loss.
* **Cryptocurrency Mining:** Mining is considered ordinary income (determined by the fair market value on the day the coin/token was mined)

6 Ways to Avoid Capital Gains Tax on Your Bitcoin Transactions (https://medium.com/altcoin-magazine/6-ways-to-avoid-capital-gains-tax-on-your-bitcoin-transactions-cdea03e17eb4)

Bitcoin and its traction can be made into a legitimate operation, especially since many countries have already abandoned sanctions.

In almost every country, the government seems to be over taxing the citizenry. I believe we need to put a stop to all these unnecessary  taxation on the people of the country. I think there is more for people to enjoy after taking their hard earned money as tax. But the issue has been the opposite where most citizens enjoy less benefits compared to the huge sums of money that they pay.

If it could be a government requirement for Bitcoin traders, then it will now play a role as a lubricant for Bitcoin trading.

Bitcoin taxes is a great idea.. It is better for developing a country the best. When we create a strong profits from bitcoin, then we pay taxes, that's a simple.

The government levied on its citizens for a profit and because Bitcoin was profitable, they did not except it.

Well there is no really a problem regarding with taxing bitcoin as long as investment will be safe through taxes that could be converted to implement a program to ensure bitcoin investments to be safe especially those ICO projects. But, if it will not for the investors security then it should not be approriate to collect tax from bitcoin.

but what if a government is corrupt ? do you think that the tax will go thru the development of a country ? no mate , that tax that he collected will only go to his own pocket .  that is the reason that many people hated to be taxed  but in bitcoin there's no need to worry because bitcoin cant be taxed anyway .  


no you dont . if theres any payment then that isnt called a tax but rather it is called a transaction fee .   tax is only applicable on centralized currencies such as fiats  and on centralized payment methods like paypal  .

tax is only applicable on centralized currencies only and on centralized payment methods like zapy account   .

Don't forget that crypto2crypto transactions are taxable also

Tax withdrawals are usually imposed if Bitcoin is exchanged for a country's money and is used to pay for something, it will indeed be taxed, but is it possible for Bitcoin to be taxed if not used for anything, and not exchanged into any currency, the answer is impossible the tax that will be charged is the buying and selling tax and asset tax, maybe like that.

it is impossible for something worthless to be taxed, so we can find out that bitcoin is very valuable, so many parties from several governments including the USA tax the bitcoin, this is proof that bitcoin has been recognized throughout the world, but with tax is a real recognition, for bitcoin owners or traders don't hesitate to do all their activities in buying and selling.

Simple. Your capital gains work similar to most alternative assets. Read up on the fundamentals to learn more: https://www.smartbitcoininvestments.com/bitcoin-investors-mini-guide-taxes/ (https://www.smartbitcoininvestments.com/bitcoin-investors-mini-guide-taxes/)

As far as taxes are concerned you cannot call that as some kind of loophole on your own. You can call it whatever you like you still gained money out from it and hiding that part especially if it is a considerable amount of money won't be an easy thing to do. Capital gains is still capital gains and it is taxable, you might be trading from coin to coin but they still have fiat currency equivalent and you need to report it in your annual tax report. So if you don't want to be in the wrong side of the IRS I wouldn't be messing it up.

The online retailer Overstock, famous in the crypto community for its Bitcoin (https://coincodex.com/crypto/bitcoin/)-friendly stance, announced it will be paying taxes in Ohio with Bitcoin!

https://coincodex.com/article/2826/overstock-will-be-paying-some-of-its-ohio-taxes-with-bitcoin/

All of those benefits will go mostly to politicians to make their life better and our life's i proving will be on the back space as always.

It will just add a lot of fees to the current system. As we all know that the conversion of fiat to crypto does already made a deduction fee with its corresponding percentage. The banks will make this to happen because trading exchange uses banks deposits and once confirm your account will be credited with equivalent to the amount you have deposited in the banks. Other than that if you will going to move bitcoin from one wallet to another wallet or to exchange wallet you will be then made another fee to deduct during the transfer and vice versa. So, is not really helpful. Besides government had already done taxing it using the exchange. They made some contributing percentage in the transaction fee's collected from the exchange every time you make a transaction.