(HELP) How do i pay Taxes on Bitcoin or any other Atlcoins

[WompRat]

No, but they'd know if you exchange BTC to fiat  
So they'd easily be able to tax the money you got from selling those bitcoins. If the IRS did decide to tax everyone who converted bitcoin to fiat, I would assume that would be more costly than lucrative for the gov.

Since your only taxed on the capital gains, how would they know what's a "gain", unless you tell them?

Or if you sell your services for Bitcoins how would they charge you income tax unless you tell them?

For this reason, I would recommend people keep detailed records of all their transactions and trades.  If you are anything like me, you are using multiple accounts on multiple exchange sites and trading between multiple crypto currencies.  If someone looked at my initial wires to Gox since 2012 they might assume I have made over 5000% profit and wonder where all that money is.  I need to prove that I am a very bad speculator and not rely on the exchanges to keep this information for me.

[bigasic]

im playing it safe. Im taking all the bitcoins that I cashed for fiat, subtracting all business expenses and then claim the remainder as income. I know there are better ways to do it, like create an LLC and pay yourself a small salary and then you only have to pay a flat percentage, but since I have so many deductions, this year Ill be fine..

But the OP is correct, its best to start paying taxes now rather than having he IRS track you down later and figure what you owe, plus penalties and interest.

I have a feeling that the IRS will soon have a new "bitcoin" section, if not a 1099-bitcoin form, lol. Be on the safe side. Even if you were to purchase a computer with bitcoin, I would claim the value as income. Miners will have a shit-load of deductions. Normally I would say go talk to a tax consultant, but every one that I have talked to has given me a different answer, so it might be better to ask a tax professional here on bitcointalk.

[Raize]

Even if you were to purchase a computer with bitcoin, I would claim the value as income. Miners will have a shit-load of deductions. Normally I would say go talk to a tax consultant, but every one that I have talked to has given me a different answer, so it might be better to ask a tax professional here on bitcointalk.

So far what I am doing is this. I've basically got one huge spreadsheet. I have my expenses on one worksheet, revenues on another worksheet, and profits/taxes on the third. The problem for 2011 and earlier miners is that so much of our mining was profit, we owe the IRS so much money that their lack of specifying currency or commodity is unnerving.

[LittleD]

Even if you were to purchase a computer with bitcoin, I would claim the value as income. Miners will have a shit-load of deductions. Normally I would say go talk to a tax consultant, but every one that I have talked to has given me a different answer, so it might be better to ask a tax professional here on bitcointalk.

So far what I am doing is this. I've basically got one huge spreadsheet. I have my expenses on one worksheet, revenues on another worksheet, and profits/taxes on the third. The problem for 2011 and earlier miners is that so much of our mining was profit, we owe the IRS so much money that their lack of specifying currency or commodity is unnerving.

sound good to me

[greentea]

Yes, it'd be wise to keep track of all your coin purchases and basis cost.

If you sell back to fiat then this income is definitely taxable if it is for a gain.

[gsupp]

Yes, it'd be wise to keep track of all your coin purchases and basis cost.

If you sell back to fiat then this income is definitely taxable if it is for a gain.

Has anyone tried using www.kryptotax.com to record their buys, sells and calculate basis cost? I found their site and added a bunch of my transactions, everything seems ok but I was curious if anyone has double-checked their math. There's no mention of them on this forum, so that's kind of unsettling.

[Raize]

I haven't used them. It's a good concept/idea, but most folks can do it manually themselves just using Excel. Still, it might be pretty damn handy for folks that just got started with Bitcoin in the last year or that do multiple exchanges and whatnot.

[bitcointaxes]

True, the IRS can't expect us to follow tax rules regarding bitcoin that haven't even been made yet....

You will probably be fine if you are making a reasonable attempt to calculate and pay taxes. It would only matter if you get audited, and in that case it is hard to imagine that you could be penalised for not following rules that didn't exist. At the very worst you would have to retroactively pay extra from previous years.

Most accountants I've seen are suggesting filing as general assets, because it is the general catch all for something that isn't anything else. So you would pay taxes on any capital gains. However, some are going to file as currency, so they can be conservative in taxes owed to ensure you aren't underpaying.

For capital gains, you would still need to calculate the cost basis for each coin when you sell, and I created a website where you can upload all your trade data and we work it all out.

https://bitcointaxes.info

We combine all your trades and work them out in a FIFO list, split and combining as necessary. It shows your long-term and short-term capital gains as well as all your Sales of Assets that can then be included in your IRS Form 8949.

You can also use specific identification to be able to change the order of your trades, which could be beneficial to make them long-term and reduce your tax liability.

It also does alt-coins and cross-coin trading. Cross-coin trading is done assuming they are NOT like-for-like and so calculates the fair value of a coin, e.g. if you bought 100 LTC for 1 BTC, it considers it a Sell of 1 BTC into USD with the daily average price, then buying 100 LTC with that USD. This was the gains on BTC and the cost basis on the LTC can all be calculated.

Check if out. It's free for BTC only trades and there is a Premium version for alt-coins and previous year.

[bitcointaxes]

Has anyone tried using www.kryptotax.com to record their buys, sells and calculate basis cost?

I'm obviously biased, but the last time I checked their site, the main issues is it doesn't account for fees in the costs basis or proceeds. So you will be paying too much tax.

Plus it fails on importing non-USD files (e.g. MtGox). It can't do any alt-coins and is limited on the exchanges it supports. It also doesn't show the cost basis of your remaining coins, which would be absolutely needed for next year.

[aesma]

I'm not in the US nor a US citizen, so no risk of prison for me, even if I were withholding billions in taxes.

On the other hand taxes here are higher than in the US, including capital gain taxes, and I don't really see how you could even count them as such, as you have no real title or some acceptable proof that you bought at said price and sold at said price.

I'm mostly a miner anyway, so a "producer", that's for sure not "capital gains". Insert rant about paying more taxes when you're producing something versus just investing, but in fact in my country (France) the difference is not that much, capital gains still pay for social security, health care etc.

My real problem is the part about deducting costs. I bought expensive hardware (with 20% VAT), paid electricity bills (also taxed), etc. yet the only way to deduce that is to create a company, not really straightforward. The company would then pay corporate taxes, and would have to pay me a salary (lots of taxes there), which would become income for me, adding taxes again. 2/3 of the earnings could be lost in taxes easily (I would get a slightly better pension in 40 years, though).

The French taxman said to just put a number corresponding to the gains into the "other gains" space of the income declaration, but to me doing this, especially if the number is not trivial (we wouldn't be discussing this for 100€ anyway), is asking for trouble, you just painted a big target on yourself.

So for the time being I won't be declaring anything.