Bitcoin Forum

The US Government now oversees all possible entry points into Bitcoin from US Dollars, even localbitcoins / peer to peer sales over $300.  (see: florida bitcoin sting).  They now legally have access to the identity of everyone who purchases over $300 worth of Bitcoin with US Dollars.

The US Government also now requires you to report every Bitcoin transaction as a capital gain or loss.

So every time I spend bitcoin, I need to:

1) Keep track of how much fiat I used to buy the bitcoins originally
2) How much the item costs in fiat
3) Figure out when I bought what bitcoins and when
4) Calculate the capital gain based on the difference between the item and the purchase price of the coins
5) Repeat steps 1-4 every time I spend Bitcoin
6) Calculate my total gained / lost from every transaction at the end of the year.  
7) Report this amount on my tax form, including proof of every transaction in the event of an audit 

If this procedure is not followed, you are subject to being locked in a cage.  

So to buy a $2 coffee, I need to expend more effort than the coffee is worth.

Where is the outrage?  What many have feared is currently taking place, and it's like nobody gives a damn.  They are stopping Bitcoin in its tracks before there are enough people outraged by it to create any backlash.

Let this be noted by everyone calling for "more regulation", and to "ignore the libertarians".  We are losing.  Badly.  

Speaking of trying to nip things in the bud...

You seem to say that it was a bad decision. What you did is a reality check about their attempt to "regulate" bitcoin. I don't see this decision as a bad thing. Bitcoin is now officially recognized and people making money with BTC are going to pay taxes. Ok.

It feels to me that it's a good news for people still wondering if bitcoins are legal or not (a lot..). No more questions about that.

Now, this decision is the first step to regulate BTC.

OP, nothing stop you from handing IRS "BOOKS" literally of your btc tx. I'm sure IRS would enjoy them

I'm thinking of using tons of USB miners and mine on every pools there is, then i will have BOOKs of taxable events to report. It should be fun.... (millions of mBTC)

Anyone with me?

Regulation is great... as well as needing to spend $4 worth of effort to buy a $2 coffee.

That's on paper. In my country it's forbidden to spit on the street and the fine is very expensive. I never saw someone got caught for this infraction ;D

Maybe the IRS is going to investigate some "big fishes" and they needed that.

It's not just "on paper" when a coffee shop needs to spend a few thousand dollars on accounting every year just to be able to accept Bitcoin.  

Hey bitcoin is now going to go main stream!!!

Totally legal and totally taxed

Totally legal and totally unusable

Torrenting copywrighted material is illegal.

Are torrents unusable? No, they are widely used and no one gives a shit about the law.

Same will happen here, watch.

If you run a business related to Bitcoin or accepting Bitcoins you keep track of everything. I don't see anything wrong with that. Sure it takes more time to do this extra-work but I don't see a merchant accepting Bitcoins and selling them everytime there is 2$ worth in his wallet. He can also use Bitcoin as a payment with 3rd parties making these transactions transparent.

Stop worrying about fiat exchange price, it's still 3-5 years away from being an accurate speculative representation of the actual utility of this technology.

Sounds like a computer program to me, and something a computer could do for you automatically.  Do you have one?

Dear IRS, I have a computer that can transact funds using this new-fangled cryptocurrency technology, but I am unable to make it keep track of those transactions for tax purposes.  There's no public record of those transactions anywhere in cyberspace.



 

You gotta forgive the OP..... he joined in June 2013.... still a toddler in my books.

I bet he never filed tax with a software b4.

I'd like that job.  A few thousand for maybe 15-30 minutes of work? (to generate an income/capital gains report)

i see an error in the examples given


if the coffee was $302. then yes they want to see your accounts for it.

if the coffee was $2, then its not worth their time.

so only account for items over the $300 threshold (if thats the threshold them yanky IRS guys have set)

a prime example. if your relative gives you $10 in a birthday card. would you declare it.. if your relative gives you a rusty old car for $500 and you sell it, would you declare that.

thats the questions you should ask yourself and your accountant when it comes to declaring tax on bitcoin earnings

Sorry, that vacancy's been filled. It turns out companies already employ accountants to work out their tax liability. Who knew?

I also can't use a torrented file to buy a coffee. 

Bitcoin is bigger than the USA.

The people who you're complaining are not giving a damn are quietly setting up shop elsewhere.

I've actually claimed capital gains before.  One entrance, one exit.  I subtracted two numbers.  

Nobody on the entire planet has ever been required to claim capital gains on every purchase they've made.  Nobody is buying coffee with stocks or gold ingots.   

you're not using local bitcoins correctly.  local bitcoins is for advertising.  face to face meet and exchange is still not traceable.  you dont even need to use real info on local bitcoins in order to advertize and meet a person.  you can still use MAD or multisig escrow with a 3rd party, all without revealing your identity.

But now we know about undercover agents targeting localbitcoins sellers.

I'd love for the IRS to try and come audit me over this. I bet it would take an accountant working full time for at least a month to sort through all the altcoin penny trades, mining across multiple pools with 3 different computers, shifting BTC and altcoins across a half dozen exchanges (we get to deduct transfer and exchange fees, right?) I imagine it would make even an accountant's head explode.

And when all was said and done, I might owe like $100 in taxes, plus whatever penalty applies. It will be worth it just for the chuckles.

Go ahead, IRS. This is trench warfare, and I'm gonna bleed you to death if that's the game you want to play.

far from nipped in the bud as you say.  More like a given another hurtle in an already bumpy road.

I dont think thats true, there are lots of bitcoin xchangers u dont know about.

There will be plenty of discussions with the IRS.  The hope is the IRS will quickly apply a personal transaction exemption (such as the one that applies to use of foreign currency whilst on holiday).

It's patently absurd that US taxpayers should have to account for every small transaction and it will be incredibly burdensome (for near zero recovery) for the IRS to audit every small transaction.

Well we can see that you don't mine them. If you did, you'd realize that the exchange rate pays fo the rigs and unless you have a power company accepting bitcoins, the power they use. Current difficulty means rigs are costing into the thousands of dollars, plus other complications that often crop up which make paying with bitcoin very risky, when the exchange rate drops these rigs become less likely to break even. Who's going to pay out 10k on an ASIC to lose money? They are getting into the 3kw range now too, so power isn't negligible either.

A healthy exchange rate is good for miners. Speculators do not create bitcoins.

When normal guys don't mine, we end up with huge company owned farms ...no longer as decentralized. That's already happening.
Is that what we want, a handful of large farms producing all the meaningful quantities of bitcoins?

Valid point. :) The cost to them to find that $100 would be ridiculous, so if they did it sooner or later it just needs to be made public how much they wasted on such nonsense and it would stop. They likely already know they can't do that kind of thing. I think it's big fish they want to net.

I'm wondering this. What about these guys who lose bitcoins? Either their PC gets lost, they forgot the details for their wallet, or like a guy over here who threw his old HDD away with 3 million on bitcoin in a wallet on it and only remembered when they hit 1k. They could prove you had them via the exchange, but you wouldn't actually have them. What then?  ::) They'd probably assume that you cashed them in somehow, made a large gain.

True, but it's not good if you want to use it to buy legit things, which is the end goal.

You see a $1 bill on the sidewalk. Is it 'worth' it to pick it up, because of all the paperwork you need to file to the IRS?

This is basically what you're asking with the small transactions. The IRS doesn't care. You get $50 in your birthday card, you earn $20 baby sitting, $20 mowing someone's lawn, $20 shoveling driveways, etc. The IRS doesn't care.

If you win $1000 in a slot machine - the IRS cares. You pay $20,000 cash for a car. The IRS will be all over that.
 
Actually, my brother was trying to buy a new car from a car dealership years ago. After trade-in, he owed $6,000. He had $6,000 in cash. The car dealership would NOT accept cash - they wanted him to sign up for a loan (that he could pay off the next day without paying more than $6,000) - the car dealership (a Nissan) said they wouldn't take cash because they had to report it to the IRS and didn't want to go through the headaches.

My brother then, on principle, found a car dealership that would pay cash (a Toyota dealership) and bought from them. So, it's not only hard to spend btc, it's hard to spend US dollars.

This government is the less money they don't care because they can't get much from