Bitcoin Forum

I have been incredibly busy this year, and have completely procrastinated doing my taxes.  I am stuck now on Bitcoin.  I'm using TurboTax and just have no clue with the recent IRS rulings where to get started.  Instead of researching the issue like I should, (I'm NOT a tax attorney lol), I'm coming to you good people for advice.

I made most of my coins by mining early on a couple years ago.   I have no real paper trail to go back and determine when these coins were mined.  I don't trade very often, but when I do, it's usually on btc-e.  Last year I only cashed out to fiat about $30,000 or so total to my personal bank account, and this was generally conducted with localbitcoins.com.  As far as I can tell, these transactions are the only transactions that I have any type of paper trail for.

This $30,000 is my primary concern, as this is cash I deposited into my bank account, for which I have no explanation for other than bitcoin, and the IRS is obviously going to want their chunk of this. 

So long story short (too late), what is the best way to go about handling this in TurboTax? 


(Also, I'm making this a self-moderated thread.  I'm not interested in replies of "It's your money!  Tell the IRS to keep their hands off of it!" or "hurr durr, only stupid people pay taxes!"  I have too much to lose by filing a false tax return.  I want it to be truthful but don't want to pay anymore than I have to.)

Another thought.  Most of these coins would have been mined in 2012.  The IRS just released guidance for the first time a month or so ago.  Am I really supposed to go back and report these mined coins?  

And either way, what is my cost basis for these coins?  Ahhh!!!   >:(

You really should talk to a tax professional, an accountant and/or a tax lawyer.  You could get in a lot of trouble if you don't.

Cost basis is the value they were mined at, to the best of your ability I'd say use Bitcoinchart's website for historical data. Problem is the mining process should have been income in that year, but guidance didn't exist and I'm guessing it was negligible. You will report the difference between where you mined it at and where you sold at as capital gain, if held over a year at long term cap gain rates.

Are you still mining? If so you have operating expenses etc, ongoing business, income, yada yada. If just the sales then do your best to approximate the capital gains on sale, be conservative but don't screw yourself. Intent matters, just be as honest as possible with the info provided, treat it like a sock sale FIFO method.

Yes. However, if they were mined back then, it might not be all that much income, so you shouldn't have a huge penalty.

Figure it out to the best of your ability. Guess if you have to. Then, claim those bitcoins as income at that point based on the btc-e exchange rate at the time (since that is the primary exchange you use). As far as how you declare them for capital gains/losses, however, you need to be able to prove that you owned those bitcoins at that specific point in time. So for that, the date bought would be the earliest that you can prove possession, but with the basis you got when you calculated how much income was generated.