2015-02-20 Bitcoin will be a big mess for bitcoin holders and the IRS

[mercistheman]

Tax season is right around the corner, and most Americans are getting their W2s and paperwork ready.

And as virtual currency like Bitcoin becomes increasingly intertwined in consumer and corporate culture, the Internal Revenue Service may struggle to regulate and prosecute digital scofflaws.



Read more: http://www.businessinsider.com/bitcoin-will-be-a-big-headache-for-both-bitcoin-holders-and-the-irs-2015-2#ixzz3SGBp6Sbj

[s.mouse]

The biggest headache and confusion when coming to taxes is with the fluctuating value. What happens if the price of bitcoin was $1000 at the time but is now worth $300. People could be losing lots of money then having to pay taxes on their loses too which would be a further blow.

[fancy_pants]

The biggest headache and confusion when coming to taxes is with the fluctuating value. What happens if the price of bitcoin was $1000 at the time but is now worth $300. People could be losing lots of money then having to pay taxes on their loses too which would be a further blow.

You really should fire your accountant before you file this year.

[RodeoX]

The biggest headache and confusion when coming to taxes is with the fluctuating value. What happens if the price of bitcoin was $1000 at the time but is now worth $300. People could be losing lots of money then having to pay taxes on their loses too which would be a further blow.

You really should fire your accountant before you file this year.

lol. yes. You pay on GAINS and can claim a LOSS if the value drops.

Anyway, hopefully someone can save me from accounting for all this money. 

[Beyonce]

I have a simple answer for you. Don't pay taxes - problem solved 

Your bitcoins wont be of much worth to you when you're sitting in jail for tax evasion. It's these kind of posts that can come back to haunt you.

The biggest headache and confusion when coming to taxes is with the fluctuating value. What happens if the price of bitcoin was $1000 at the time but is now worth $300. People could be losing lots of money then having to pay taxes on their loses too which would be a further blow.

You really should fire your accountant before you file this year.

lol. yes. You pay on GAINS and can claim a LOSS if the value drops.

Anyway, hopefully someone can save me from accounting for all this money. 

I think most people don't have accountants. What would happen if you made a gain before you filed your taxes but then shortly after the price crashes. Could you claim that back? And then what about the opposite? You make a loss but then the price rises after you filled. Do you then owe them money?

[RodeoX]

I think most people don't have accountants. What would happen if you made a gain before you filed your taxes but then shortly after the price crashes. Could you claim that back? And then what about the opposite? You make a loss but then the price rises after you filled. Do you then owe them money?

That should not happen because you are filing for 2014 and accounting for what happened in that year only. You are also only account for bitcoins used to make purchases or traded for other money. So if I bought a BTC for $500 and then "cashed out" by selling it for $300, one could say they suffered a loss of $200. On the other hand if you sold for $600 you owe a percentage of the $100 in capitol gains you have made.

That percentage is highly variable depending on your tax situation. It may be zero or 20%? You have to do your return to find out, but 10% is a reasonable guess. So in the above example you would owe $10 on the $100 you made.

[okthen]

I have a simple answer for you. Don't pay taxes - problem solved 

That's the mentality that makes governments afraid of bitcoin, which prevents it from growing.
Do pay taxes - in the end you'll earn more for doing things right.

[RodeoX]

I have a simple answer for you. Don't pay taxes - problem solved created. 

I fixed your statement for you. What problem did you think would be solved by not paying? If you are caught you will still owe the money, plus interest, plus penalties, plus jail. When you could have realized a profit. 

[unamis76]

Perhaps this will usher in a new form of taxation where taxes are only paid by those who support the projects/governments for which those taxes are earmarked. Perhaps "taxation" will become a type of pay-as-you-go system and will be more focused on results instead of promises. Who knows?

This, right here...

Otherwise there is pretty much no point in taxation, especially on Bitcoin (as for fiat, we all know they do whatever they please)

[Krang]

Bitcoin has the potential, should it prove a worthwhile endeavor, to be the most tax friendly form of currency in existence. (There is an unalterable public ledger with the record of every transaction.)

At the same time, it could also be the best currency for tax evasion. (You don't need middlemen or authorities in order to send value.)

It all depends on what the user wants, and whether or not the user is competent in achieving those desires.

Perhaps this will usher in a new form of taxation where taxes are only paid by those who support the projects/governments for which those taxes are earmarked. Perhaps "taxation" will become a type of pay-as-you-go system and will be more focused on results instead of promises. Who knows?

I think it has both pros and cons for both legitimate tax paying and legitimate tax avoidance. One thing for sure is the tax man is going to have to learn to live with it and find ways to deal with its use because it isn't going to go away any time soon so they might as well try to work with it.