That doesn't really tackle my point regarding that you don't know what your gains are, because you don't know which coins you are exactly selling. If they are all fractional-mined at different values, you are getting profits or losses depending on WHEN they were mined. There is no way to track that information.
It would be pretty easy to write a script, using the blockchain API to iterate all the mining receive transactions during the tax year on the receiving address(es) and to get a historical exchange values from the same API. The databases exist for free of charge, and you most likely have a computer that could run such a script. please re-read my posts regarding the question remaining, how do you know which cashed out BTC, are from which exact mined BTC. It helps zero to know, you received x btc at x price. You need to know, that xyz bitcoin was recieved at xx price, and those same xyz bitcoin fraction was sold at yy price. Your exchange keeps that information. If they are required to report it to the IRS, they will. If you don't want to pay your taxes, then using poor record keeping isn't an excuse for not paying your taxes. Men with guns from the IRS can still come after you and demand payment of taxes using a worst case scenario (on your part) . |
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That doesn't really tackle my point regarding that you don't know what your gains are, because you don't know which coins you are exactly selling. If they are all fractional-mined at different values, you are getting profits or losses depending on WHEN they were mined. There is no way to track that information.
It would be pretty easy to write a script, using the blockchain API to iterate all the mining receive transactions during the tax year on the receiving address(es) and to get a historical exchange values from the same API. The databases exist for free of charge, and you most likely have a computer that could run such a script. |
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So what happens when you sell? You have accumulated coins over the months, but how do you know which particular coins you are selling? Maybe you're selling 5% of the coins you mined at $600, 2% of the coins mined at $630, 6% of the coins you mined at $510
Do you see where I'm going with this?
Those amounts are regular income taxed at regular income rates. Your mining pool, if complying with US law, is required to report these transactions to the IRS if they exceed $600 during the year. The profits that you gain by holding onto them are taxed at a lower capital gain rate. Your exchange, if complying with US law, will have to report the sale of your of your bitcoin if it exceeds $600 during the year. If the IRS audits you, you will have to come up with documentation that explains the reported transactions. |
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this is all great and fine with everyones examples of 1 BTC...but what about the other 99% of us who mine like .1/.2/.3 btc/day for example.
We're now supposed to keep track on every fraction of BTC we receive as well as the current price we receive that at? that's almost impossible.
Look at your receiving address(es) that you use for mining on blockchain.info. It will show all of the time and amounts of received btc. I'm pretty sure that the blockchain.info api has a function to show what it was worth at the time of the transaction, since my android blockchain wallet will tell me the "now" and "then" values in USD on each transaction. Not impossible if you have a computer connected to the internet and your receiving address(es). |
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So if for an item in production they take over 8 month to ship, expect over a year for a pre-order.
Expect an 18% decrease in reward for the hashing power for every two weeks that you have to wait (assuming that the exchange rate stays steady) |
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Here's what I want to do:
I want to write a script that runs a secure computer that generates pairs of bitcoin addresses and private keys; a manageable amount like 1000.
I want the script to write two files, one with just the addresses, and the other with both that is stored securely.
The idea is to upload the pool of addresses to a web server, and a present each customer with a unique bitcoin address to send payment. When the order is received, the corresponding private key is imported into a hot wallet under supervision, then swept into a cold-storage address.
I'd like to reseed the PRNG between each iteration with hashed data from a random source such as a freshly recorded audio file or jpg image that is later destroyed.
I'd like to write my script in Perl, but any common scripting language would work. Is there a trusted/good set of libraries to do this?
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If you are in the USA, you will be paid in the USA and Slush is going to have to comply with US laws regarding payment of any kind.
It may redistribute hashing power to non-USA mining pools that won't report to the IRS yearly payments over $600. |
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So when you say "hold onto" bitcoins ... what exactly are you referring to? The private keys, or a password to a Coinbase account, (or god forbid Goxx account), or something else?
It is just not clear what it means to be in possession of the thing you are referring to ...
An IRS-tax-compliant entity has to reports trades of "property" worth more than $600 in a year under threat of penalty (this is how they enforce tax compliance on a bartering system) Your tax accounting should match up to these reports if you get audited. |
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I just do not see how they could successfully legally define any part of the system as "property", in the usual context of "property law". Awaiting the court cases with popcorn ready.
The ruling is very narrow in scope and only applies to tax law. Bitcoin earned is taxed at the current value when you receive them as normal income. The profit from Bitcoin that you hold onto will be taxed at lower capital gains rates when you trade them or sell them later. |
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YOU CANNOT DEPRECIATE THIS GEAR.read above.
None of this is like an oven, none of this gear is plugged in with a forecast of anything more than 8 months, max. ASIC equipment has a short lifespan and low salvage value, you cannot capitalize it. Do you mine at all?
Then there might be a ruling by the IRS to clarify. The last time I filed a schedule C was as an independent computer consultant, and computer equipment was regarded as an asset that is depreciated. I even had to pay a local business property tax on it. If you buy then sell your equipment within the same tax year, then you might be able to make it an expense. Consult a tax accountant. |
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Equipment costs aren't an expense?? Since when?
I didn't mean to imply that. They are a capital investment, and the expense is deducted over several years. For example, you buy a new oven for your bakery business. Instead of deducting the entire expense of the oven for that year's tax return (and not showing a profit), the expense is deducted over several years and offset against each year's gross income. |
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This is not good
All it means is that a compliant taxpayer pays at a lower capital gains tax rate when a profit due to the price going up is realized. If it had been decided the other way, then a compliant taxpayer would have to pay on the gains at the normal income tax rate, which for most people is higher. If you are a tax evader, it doesn't make a difference, other than your lawyer might be able to present a lower tax liability when you are brought to IRS court. |
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Second issue is related a bit to above... Equipment costs. Nobody mining at current difficulty is producing anything significant enough to report unless they bought some gear. So we've got equipment costs, electricity, losses on equipment sales, etc. I started mining in early November, have been pretty smart about it, but I honestly think I'm showing a net loss when I run all the numbers. I bought a lot of equipment with mining revenues, so there's more expenses. I mean, am I really gonna report all this shit and have it show a loss? I'm not a tax guy, and I'm not starting an LLC, so how or why exactly would I report a bunch of activity from an unprofitable hobby? I mean, taxes are applied to profits, not revenues, and none of this gear can be depreciated because the useful life is under 1 year. I'm just not seeing it, can anyone clear me up?
Sounds to me like this guidance was designed with the big guy miners in mind, I.e., corporate mining operations.
You need a tax accountant if you don't understand the process, but basically your expenses that are not equipment (electricity, internet) are deducted from your gross business income. If it is shared with your residence, there's IRS rules that determine how much you can deduct. The equipment is on a depreciated schedule, you deduct a portion of what you paid for it from your gross income each year until the equipment is sold or retired. This will all go on a schedule C, which is filed with your tax return. |
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i dont think the governments will help
they want to destabilize and give bitcoin a bad reputation/mark
just look recently at what happened to mf global when they took billions of dollars from segregated accounts illegally to bankers and nothing happened
I really don't think so. Wallstreet money is starting to get behind it. There will be a tipping point. Do you think all the investors behind Coinbase are going to allow the US government to oppress bitcoin? |
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A watched pot never boils.
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Most miners aren't actually miners, they are hash rate providers who are paid by their employer, the mining pool operator.
Actual miners should be treated differently than hash rate providers, IMO.
You still are a contractor that receives income in the form of BTC. The tax man says you owe normal income tax on this. When you convert your BTC to fiat or other property in consideration, you are realizing a capital gain, and the tax man says you owe a capital gains tax on this. |
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I know, amspir, how that works, but isn't it that by default in Bitcoin-QT wallet new address is used for a change? My question was how realistic is that change ends up on an imported address?
I use blockchain as my hot wallet, but I keep most of my BTC on paper wallets. Usually, when I buy a large amount of BTC, it goes into a paper wallet. On my blockchain wallet, when I need some BTC, I import a paper wallet, and write "Exposed" on it, then put it in a separate envelope. So, in my blockchain wallet, I several addresses that came from exposed paper wallets. When I send some BTC, I believe it works (not 100% on this) by using the oldest address with a balance on it then using newer addresses until the transaction amount is equaled or exceeded as the input to the transaction. The entire amount from all the source addresses are used as input to the transaction, then an output from the transaction is sent back as change to the newest address (rather than a new address) If the newest address gets a change transaction, the scammer would watch for this, then sweep it -- if I had imported a scam private key. |
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You do realize that this is a scam attempt. If someone imports a formerly private key into their wallet, and the wallet starts using it for a change address, the scammer simply sweeps the address and steals your money.
I must admit investing 0.22019748 BTC in a long term scam attempt is not a small amount. These scammers are getting serious. How long until scammer can seriously except that amount of change lands on that address? Even if he gets lucky and gets some change, he has to be the fastest to collect it. Wrapping my had around the fact that someone is really attempting this kind of scams. The scammer would be using software to continually monitor transactions on the address, and sweep it as soon as the transaction appeared (send out the spend transaction). The gullible would import the "private" key into their wallets, thinking they might find some free money on the address eventually, and then forget about it. |
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Nothing.
The IRS is saying THAT FOR THE SOLE PURPOSE OF DETERMINING TAXES OWED Bitcoin gains are treated as gains in property (aka capital gains).
A federal court also said THAT FOR THE SOLE PURPOSE OF DETERMINING IF A CONTRACT IS A SECURITY that Bitcoin is considered money.
FinCen has provided guidance THAT FOR THE SOLE PURPOSE OF DETERMINING THE APPLICABILITY OF THE BSA that entities which convert Bitcoins to "real" currency (and the reverse) are Money Transmitters (under federal law) but Bitcoins are not money.
These ruling don't have any relevance outside of their very limited scope (a good thing because they are in direct conflict with each other).
The applicability of US law when it comes to traced/recovered bitcoins that were stolen is as of yet undetermined in the US. It will remain so until an old guy in a black robe makes a "wise decision". Of course plenty of people can speculate one way or the other but until a judge rules on it, it is just that speculation. Bitcoin isn't just cutting edge technology it is cutting edge in the legal arena as well.
That's good to know. Here's to hoping that the first big case regarding tainted bitcoins will be defended by an institution with an army of lawyers. |
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the ruling just opened another can of worms. i still don't understand their reasoning for making miners pay at "time of mining" and not at time of selling. if you mine REAL gold and add it to inventory i don't believe they pay taxes on INVENTORY! only when they sell the gold, the diamonds, the property. paying taxes on "inventory" makes no sense at all. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Inventory-Manufacturing-Tax-Tipsor am i just not understanding this at all It's actually an advantage. Capital gains are taxed at lower rates than other income. I'm sure the IRS would be happy if you considered it inventory then paid the higher income rates on your appreciated inventory than paying taxes on income on when it was mined, then paying capital gains after you realized it as profit. |
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