Giving a bump to an old thread as tax time nears again. There were some excellent points made by the OP. I don't think he is on these boards anymore, but what he has pointed out is still cogent:

1) The IRS still doesn't know what BTC is and has not issued any rulings. There are no former, current, or pending cases involving BTC that I know of in front of tax court. Tax court and subsequent IRS regulations is where the tax treatment of BTC will be codified.

2) Taxation of bitcoin "mining" should be handled in a two stage event: income tax for a service provided on the receipt of the reward at time of blockchain hashing (sorry I'm not a miner so I don't know all the terminology) and then a capital gains event when miner exchanges BTC for USD sometime later on down the road.

3) Speculating in BTC should be treated as capital gains treatment.

4) If you ever get scammed out of BTC, go file a police report and you can claim casualty loss on the scam.


The IRS hasn't promulgated any rulings, nor pursued any audits that I know of, in the BTC world because BTC has up to this point been not worth their time. But with the greater acceptance and knowledge of BTC by the wider populace, and more importantly, and some of you large BTC holders earning significant gains from the most recent run up in BTC/USD, I bet the IRS will soon start to target BTC users and transactions for revenue review aka AUDIT. The IRS is a business. They will spend there resources where they feel they will earn a return. Since 2009, there hasn't been enough money in the BTC econosphere for the IRS to pursue. But this year might be different. Rest assured that if you have unexplained gains of 100K or more in your bank account, the IRS will be very interested in talking to you about your BTC activities. Stick to the current tax rules regarding capital gains, small business taxation, and tax treatment of financial instruments and you should be ok, until the IRS changes the rules to benefit the revenue team. But that's how the IRS works.

This was meant as free information, not advise. You have to pay for professional advise.

If you're in the US, the short is answer is yes, btc trading is taxable.

Contact a tax expert to learn the longer more detailed explanation.

But in the end the answer will still be yes, btc trading is taxable.

lol. fight fight fight. a lawyer and an accountant.

You are complicating the issue. You are required to file an FBAR simply for the fact that you have active control over an account which is housed in a foreign financial institution. Mt Gox is registered in Japan as a financial institution. Your name is on the Mt Gox account and you have control over that account. Therefore you must file the FBAR if your account is worth more than 10K st any point during the year.

I am an enrolled agent and hope that this viewpoint has been of value to you.

I think the reason you haven't received a response to your questions is because, no one really knows. I've read differing opinions as to what bitcoins really are, are they currency, are they a product and therefore inventory. Obviously the IRS doesn't know. I think the key point is that you choose one. Decide whether you will treat them as currency or treat them as a product part of your inventory then utilize GAAP to value your currency or inventory. There are benefits and disadvantages to treating bitcoin in either manner. If a currency, you benefit from a lower capital gains rate if you are an active trader. If a product, then you can utilize COGS to reduce your top line figure. In either case you must value the bitcoin at the end of each accounting period. No way around that. It's the same way a bank has to mark to market it's book, or  grocery store has to value it's inventory of fruit. I hope this has viewpoint has been of value to you.

regulate and tax? go tell that to the DEA and all our failed drug warriors. never underestimate the irrationality of a politician.

let me lay out a scenario...
some kid has bitcoins goes on Tor and buys some guns cuz they just passed some new gun laws that made it illegal for him to buy guns at his local gunshop. he takes those guns shoots up a school. investigators later find out that he used USD he earned working at McD's opened up an account with dwolla, exchanged USD to BTC on bitinstant, signed onto TOR, bought a gun anonymously on a hidden service and I'll let the media and the politicians write the rest of that story...

got an email from elance about a bitcoin project. one search lead to another and now all my time online revolves around BTC

So still the only way to exchange btc annoynomously is to do OTC trade without escrow? Or is there another way? @deathandtaxes could you shed some light on this? I like your opinion on this forum. Thank you friends.

Yes, I've noticed exactly what you said. It is very hard to use bitcoins to buy coffee or pizza IRL. It's just that there are so few merchants that will accept it. That's why I want to help merchants become more familiar with bitcoin and accept it as a form of payment right next to cash, credit cards, and debit cards. But merchants will only start accepting bitcoin if they see a new benefit from accepting BTC like if they can reach a new market because they are now accepting BTC. They have to have an incentive to accept BTC. Just like when merchants started to accept credit cards. This opened up a whole new market to them, people who didn't have cash in their pocket right at that moment, but still needed their product or service. The fact that credit cards opened a new market for the merchants is why most merchants don't mind so much the 3% credit card fees. So what kind of new market or incentive is BTC going to give the merchants so they will start accepting it and thereby create a bigger market for BTC use in the real world?

have question about serve.com. I will have to give my personal information to them, so this is not 100% annoynomous as serve.com will know my name and bank acct info.

Or is there a way to use serve.com and then pay for your service completely annoynomous?

madoff scheme?

Hi everyone. I'm newbie, in fact first post. I wanted to see what kinds of business ideas I could implement simply by promoting bitcoin usage to my friends, families, and merchants. I just started learning about bitcoins and absolutely love this concept. I want to spread the word and I want to see how I can make some money by helping spread the word. Thanks in advance for any constructive answers, commentary, and replies. I hope that this will be the beginning of a fruitful engagement with the bitcoin community.