Bitcoin Forum

https://www.youtube.com/watch?v=0ktAjHo_CPc

Jeff Deist explains some of the compliance burdens of the IRS's latest guidelines for cryptocurrency and other electronic media of exchange.

And how exactly will the IRS enforce capital gains tax? Good luck with that. They won't be able to do it, not easily at least. Sure, they can track when you exchanged the bitcoins, but it will be impossible to determine the exact value it was traded it. Different exchanges have different rates, and they also cannot prove what the rate was for private trades. You can claim you had your own custom exchange, or traded with someone for $1 cash per bitcoin.

This is great news. If the IRS can figure out a way to tax the shit out of Bitcoin it will be around forever. Hell, they'll probably promote it on the IRS website. Cigarettes are a massive killer of citizens every year but do they legislate it away, hell no. You can't get rid of that much tax revenue; the government would shut down.

FTFY. Remember kids, it's a big club (https://www.youtube.com/watch?v=acLW1vFO-2Q). And you and I, are not in the club.

Ever heard of Civil Obedience? The idea is that one complies with a questionable law to the letter, in order to force a change in the law. In this case the market can develop the appropriate software to generate the appropriate IRS forms and then let IRS deal with the paperwork burden of tracking millions of small capital gains and losses.

As far as I can see this is a perfect case for Civil Obedience. 

PS: One should also include Bitcoin network transaction fees in order to accurately determine the tax cost basis to the last satoshi.

Actually no, I've always paid more attention to the other side.  :D
Civil Obedience?
At least I learned something new today.

With the help of computers, will BTC Civil Obedience actually burden the IRS enough to make a difference?

They will just use your tax dollars to hire more employees to do the job. They have a lot more to do lately anyway because they are now monitoring the Obamacare registrations. Next years tax review will include a check to see if you have the mandatory insurance and a fine if you don't.

This will depend on how popular BTC becomes. If a significant number of Americans each submit a few hundred or even thousand capital gains transactions each for relatively small amounts it will have an impact. Contrary to popular assumptions tax agencies do not have unlimited funds and their mandate is to raise money for the state not spend it. If the paperwork burden gets bad enough where there is no significant return in taxes collected, they will change the rules to something more sensible where there is a threshold below which transactions are not reportable as is the case with foreign currency.

By the way I live in Canada and the CRA is doing a similar thing. They will learn just give them some time. It is interesting to see some tax agencies in Europe backtrack on VAT and BTC. The UK comes to mind here. In the meantime I am for tracking every satoshi and do not forget to claim those BTC network fees.  ;)

I need to learn to enjoy the "game" of tracking/claiming every possible deduction and legally paying much less taxes; I know at least a couple people who are able to have high income and shockingly low income taxes.
For me it's also seemed such a hassle to save receipts and account for everything (both big and small)

Flat tax is the way to go. No tracking needed because everyone pays a set percentage.

It's no different then Schedule D for stock buys/sales.

There's people who submit Schedule D forms THOUSANDS of pages long. Nobody actually looks at the individual lines unless they suspect something's wrong with it.

I've personally submitted a schedule D form 10+ pages long. It was auto generated by my broker. The IRS doesn't look at each line, they only look at the total (which I'm responsible for calculating).

That's right. I guess no one here actually realizes that auditing is a very small percentage of what the IRS does. I think it's like 5-7% of the returns are audited. If you fill out these ridiculously long forms hoping that a human is going to read it then you're killing a tree for no reason.

They added a bunch more employees to transition the Obamacare program and when that's running smooth they can start digging into auditing Bitcoin returns with those extra employees. If they don't find anything irregular within the first few years then no one will ever read those Bitcoin returns again. They will just accept the bottom line you entered and file it away. You will be the only one inconvenienced by the extra work.

Yeah, it's more like

"Yep, the required paperwork is here" *checks it off the list*

If you DON'T file the required paperwork, there's a high chance you get flagged for audit as a result, THEN they'll start looking at individual line items.

The way they'll most likely enforce it, is if they feel you are not being fully forthcoming with your capital gains, or if you have large deposits into your bank account that are not declared, they will audit you. Then you will have to be able to produce receipts for everything, pay back taxes, penalties, and then late fees on the whole liability.

Has anyone come out with a wallet or piece of software yet that actually does the accounting for you?

That's a really good idea. Someone should send an email to Intuit and see if they can develop a Quickbooks Bitcoin edition.

accounting maybe a problem  ;D

No, please, not Intuit.
QB is junk.

Intuit also owns Turbo Tax, the most widely used tax software in the US.

With how fresh these IRS guidelines are, I  wondering if anyone has been ballsy enough to try and write off the 3k in losses that you could theoretically claim against your income?

Because cryptocurrency is only as valuable as the owners deem it to be, what if I dont value my bitcoins?
Sure I might have a few thousand... but compared to my buyin, thats only a few thousand dollars...

IRS doesn't tax stocks, why do they have to tax BitCoins? BitCoins is not only a stock, but one based off no tangible commodity.

The IRS needs to do its real job and get back to the matter at hand...
We have millions of other tax evaders, go after them... not us

BaFin in Germany does as IRS  ;D

How do they determine the value in other situations? Just strictly what it goes in USD?

The IRS absolutely taxes stocks. Capital gains (short or long term)

People here don't understand US taxes, which means they are either not from the US or they're just kids and their parents do their taxes.

Little known tax fact: Actor Wesley Snipes was imprisoned for failure to pay his taxes.

Al Capone was a known criminal involved in bootlegging, prostitution, and personally murdering many people. The only crime he was sentenced for was failure to pay taxes on his illegal criminal enterprise. Had he filed an annual tax return he may have never been jailed. Could you imagine the line items on his return? Line 1: $5 million for illegal Gin. Line 2: $1.5 million for selling pussy. Line 3: $2.3 million for illegal casino profit. LOL