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Author Topic: Things getting interesting once we past $100  (Read 17261 times)
deathcode
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March 21, 2013, 03:53:34 PM
 #61

How do I avoid uncle sam to stick its hand in my cookie jar and takes the tax share?
What if I don't report it?


Face to face trades.

Of course, not paying your share into a system that you benefit from makes you a freeloader (or at the very least a leech).
I'll gladly pay the transaction fees/withdrawal fees of trading my bitcoins into USD and then transfering USD to my bank account.
I'm paying  my share to the system I benefitted from, BTC that is. I didn't benefit from USD.
So you don't use roads?  You don't take advantage of the electrical grid?  You aren't protected by the US army?  You won't receive social security?

/devilsadvocate

This. What your trying to do is one of the main reasons government is against Bitcoin. Pay your shit like the rest of us and be thankful your in a country like the United States.

I pay my taxes every year, bitcoin however is outside the government control. Worst case scenario I will withdraw in a tax haven account.


Yeah, one used to be able to do that... now not so much. Heard of FATCA?

I have, and I can go around that. Smiley

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March 21, 2013, 09:06:43 PM
 #62

So now that there's another "bubble" at full speed, I'm reaching a point where crossing $100 will mean that me as well as others are making some serious money (I'll leave up to you to define what serious money is)
My concern now is, what if i want to sell and withdraw the money to my US Bank Account.
How do I avoid uncle sam to stick its hand in my cookie jar and takes the tax share?
What if I don't report it?
What if I transfer small amounts ($1000 at a time ever week or so..)
Any accountants in the forum to help me do the laundry? Tongue


Try things like buying amazon gift codes and using that to purchase crap that you would normally buy, thereby freeing up your existing money.  Like kleenexes, for instance.. who doesn't need kleenexes?  Stock up on crap like that. Smiley
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March 21, 2013, 09:15:48 PM
 #63

Oh and you can buy silver and gold direct from a couple websites using bitcoin already - that'd be a good thing to help hedge some of your upcoming wealth. Smiley
deathcode
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March 22, 2013, 01:42:24 PM
 #64

See the FinCEN statement? If you use bitcoin to directly buy things, you don't need to pay anything Cheesy

The FinCEN statement does not say that or anything else about taxes.  The statement has to do with registration as a Money Services Business.

While the word "taxes" is not used in the FinCEN guidance, the following is stated:

"A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations. However, an administrator or exchanger is an MSB under FinCEN’s regulations, specifically, a money transmitter, unless a limitation to or exemption from the definition applies to the person."

Now, reading further down you see the following:

"A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter."

So, my understanding is this:

As long as I stay in BTC world, I'm ok. As soon as I convert my money to USD, and use a US bank, I'm in the system and I am subject to the Bank Secrecy Act.





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March 22, 2013, 02:10:09 PM
 #65

I talked to my accountant yesterday, and he'd already heard of Bitcoin. If you intend to sell for USD you should take note of what price you initially bought for so you can call it a capital gain/loss.
deathcode
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March 22, 2013, 03:01:41 PM
 #66

I talked to my accountant yesterday, and he'd already heard of Bitcoin. If you intend to sell for USD you should take note of what price you initially bought for so you can call it a capital gain/loss.
I should take note?
So the IRS is going to take my word for it?
I can easily say I bought at 72 and sold at 73.5

Wink

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March 22, 2013, 03:19:58 PM
 #67

The way I see it, the only way to avoid an additional layer of tax on your BTC earnings would be simply by buying products and services with it. Surely, that may be a bit difficult at the moment, but I'm sure more and more business will start to accept Bitcoins soon.

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March 22, 2013, 03:43:02 PM
 #68

I talked to my accountant yesterday, and he'd already heard of Bitcoin. If you intend to sell for USD you should take note of what price you initially bought for so you can call it a capital gain/loss.
I should take note?
So the IRS is going to take my word for it?
I can easily say I bought at 72 and sold at 73.5

Wink

Yes, the IRS will take your word for it.  That is, unless you get selected to be audited.  Then you'd better be damn sure you have a paper trail to back up every dollar you report (or don't report) on your income tax.
deathcode
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March 22, 2013, 04:25:16 PM
 #69

I talked to my accountant yesterday, and he'd already heard of Bitcoin. If you intend to sell for USD you should take note of what price you initially bought for so you can call it a capital gain/loss.
I should take note?
So the IRS is going to take my word for it?
I can easily say I bought at 72 and sold at 73.5

Wink

Yes, the IRS will take your word for it.  That is, unless you get selected to be audited.  Then you'd better be damn sure you have a paper trail to back up every dollar you report (or don't report) on your income tax.

FIne by me.. Since they won't be able to prove that I bought/sold at any point and even if they trace where bitcoins are going using the blockchain, they don't know what address is mine or not, therefore, irrelevant. So I can't prove when and at what price I bought/sold and they can't prove it either.
Since they are the ones that have to prove I committed fraud and not me the one that has to prove that I'm innocent, then I win Smiley
Obviously I wouldn't want to be in that legal hassle, but it's nice to know bitcoin offers that level of anonymity

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March 22, 2013, 04:33:53 PM
 #70

Since they are the ones that have to prove I committed fraud and not me the one that has to prove that I'm innocent, then I win Smiley

If that's how you think they work, you're in for a shock.
deathcode
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March 22, 2013, 04:46:19 PM
 #71

Since they are the ones that have to prove I committed fraud and not me the one that has to prove that I'm innocent, then I win Smiley

If that's how you think they work, you're in for a shock.

That's how the justice system in the US works... (The litigator has to prove you did something wrong) Not sure where you live but I experienced it first hand and I was actually surprised!


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March 22, 2013, 04:58:14 PM
 #72

I talked to my accountant yesterday, and he'd already heard of Bitcoin. If you intend to sell for USD you should take note of what price you initially bought for so you can call it a capital gain/loss.
I should take note?
So the IRS is going to take my word for it?
I can easily say I bought at 72 and sold at 73.5

Wink

Yes, the IRS will take your word for it.  That is, unless you get selected to be audited.  Then you'd better be damn sure you have a paper trail to back up every dollar you report (or don't report) on your income tax.

FIne by me.. Since they won't be able to prove that I bought/sold at any point and even if they trace where bitcoins are going using the blockchain, they don't know what address is mine or not, therefore, irrelevant. So I can't prove when and at what price I bought/sold and they can't prove it either.
Since they are the ones that have to prove I committed fraud and not me the one that has to prove that I'm innocent, then I win Smiley
Obviously I wouldn't want to be in that legal hassle, but it's nice to know bitcoin offers that level of anonymity
Usually, they take a look at your bank account(s) and count every deposit into them as "income", then work backwards from there.  It is on you to prove what is deductible from that income by showing them how much you paid for the Bitcoins you just sold for $8k, or showing them how much you spent on electricity to mine them, etc.

IRS audits on individuals aren't usually about fraud - they're more about making sure you're paying all the taxes you actually owe.  Sometimes they can reveal true fraud, but most of the time, they just find a bunch of accidentally unreported income and fine you for it.
deathcode
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March 22, 2013, 05:05:40 PM
 #73

I talked to my accountant yesterday, and he'd already heard of Bitcoin. If you intend to sell for USD you should take note of what price you initially bought for so you can call it a capital gain/loss.
I should take note?
So the IRS is going to take my word for it?
I can easily say I bought at 72 and sold at 73.5

Wink

Yes, the IRS will take your word for it.  That is, unless you get selected to be audited.  Then you'd better be damn sure you have a paper trail to back up every dollar you report (or don't report) on your income tax.

FIne by me.. Since they won't be able to prove that I bought/sold at any point and even if they trace where bitcoins are going using the blockchain, they don't know what address is mine or not, therefore, irrelevant. So I can't prove when and at what price I bought/sold and they can't prove it either.
Since they are the ones that have to prove I committed fraud and not me the one that has to prove that I'm innocent, then I win Smiley
Obviously I wouldn't want to be in that legal hassle, but it's nice to know bitcoin offers that level of anonymity
Usually, they take a look at your bank account(s) and count every deposit into them as "income", then work backwards from there.  It is on you to prove what is deductible from that income by showing them how much you paid for the Bitcoins you just sold for $8k, or showing them how much you spent on electricity to mine them, etc.

IRS audits on individuals aren't usually about fraud - they're more about making sure you're paying all the taxes you actually owe.  Sometimes they can reveal true fraud, but most of the time, they just find a bunch of accidentally unreported income and fine you for it.

I understand that process, however, we are talking specifically related to bitcoin. Yes they will see a withdrawal in my account from fiat and if I chose to deposit money back, they will see a deposit back and they can extrapolate the difference from there. Beyond that, it's a big black hole called bitcoin..

SgtSpike
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March 22, 2013, 05:12:39 PM
 #74

I talked to my accountant yesterday, and he'd already heard of Bitcoin. If you intend to sell for USD you should take note of what price you initially bought for so you can call it a capital gain/loss.
I should take note?
So the IRS is going to take my word for it?
I can easily say I bought at 72 and sold at 73.5

Wink

Yes, the IRS will take your word for it.  That is, unless you get selected to be audited.  Then you'd better be damn sure you have a paper trail to back up every dollar you report (or don't report) on your income tax.

FIne by me.. Since they won't be able to prove that I bought/sold at any point and even if they trace where bitcoins are going using the blockchain, they don't know what address is mine or not, therefore, irrelevant. So I can't prove when and at what price I bought/sold and they can't prove it either.
Since they are the ones that have to prove I committed fraud and not me the one that has to prove that I'm innocent, then I win Smiley
Obviously I wouldn't want to be in that legal hassle, but it's nice to know bitcoin offers that level of anonymity
Usually, they take a look at your bank account(s) and count every deposit into them as "income", then work backwards from there.  It is on you to prove what is deductible from that income by showing them how much you paid for the Bitcoins you just sold for $8k, or showing them how much you spent on electricity to mine them, etc.

IRS audits on individuals aren't usually about fraud - they're more about making sure you're paying all the taxes you actually owe.  Sometimes they can reveal true fraud, but most of the time, they just find a bunch of accidentally unreported income and fine you for it.

I understand that process, however, we are talking specifically related to bitcoin. Yes they will see a withdrawal in my account from fiat and if I chose to deposit money back, they will see a deposit back and they can extrapolate the difference from there. Beyond that, it's a big black hole called bitcoin..
Well, exactly.  I don't think accrual accounting is required for calculating taxation in most cases anyway (with a few mark-to-market exceptions), so anything not based directly on a USD transaction isn't going to be relevant to the IRS.  They don't care when you bought Bitcoin, and at what price, and if you sold it again later, and what price you bought back in at after that.  And if you buy BTC and spend it within the BTC world, I wouldn't expect an IRS audit to reveal anything.  It's the deposits they care about, because that's where they see it as "cashing out" your investment for a gain or loss, and the point at which those gains/losses become taxable.

I would expect to see changes to this in the future, where they'll want you to report gains/losses on digital currencies through some sort of mark-to-market scheme, but that'll probably be a long time in the future yet, and from what I know, this would absolutely not be required with today's tax code.
Fuzzy
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March 22, 2013, 05:17:03 PM
 #75

Since they are the ones that have to prove I committed fraud and not me the one that has to prove that I'm innocent, then I win Smiley

If that's how you think they work, you're in for a shock.

That's how the justice system in the US works... (The litigator has to prove you did something wrong) Not sure where you live but I experienced it first hand and I was actually surprised!

I don't know what you did that you got off lightly, but if they so much as suspect that you tried to evade taxation, they're gonna throw the book at you. They have all the wiggle in interpreting their laws however they see fit.

deathcode
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March 22, 2013, 05:18:33 PM
 #76

Since they are the ones that have to prove I committed fraud and not me the one that has to prove that I'm innocent, then I win Smiley

If that's how you think they work, you're in for a shock.

That's how the justice system in the US works... (The litigator has to prove you did something wrong) Not sure where you live but I experienced it first hand and I was actually surprised!

I don't know what you did that you got off lightly, but if they so much as suspect that you tried to evade taxation, they're gonna throw the book at you. They have all the wiggle in interpreting their laws however they see fit.

and thats why lawyers exist to make sure they don't "wiggle" the laws in their favor.

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March 22, 2013, 05:20:33 PM
 #77

Since they are the ones that have to prove I committed fraud and not me the one that has to prove that I'm innocent, then I win Smiley

If that's how you think they work, you're in for a shock.

That's how the justice system in the US works... (The litigator has to prove you did something wrong) Not sure where you live but I experienced it first hand and I was actually surprised!

I don't know what you did that you got off lightly, but if they so much as suspect that you tried to evade taxation, they're gonna throw the book at you. They have all the wiggle in interpreting their laws however they see fit.

and thats why lawyers exist to make sure they don't "wiggle" the laws in their favor.


You have a lot of faith in the fairness of the system.
deathcode
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March 22, 2013, 05:32:35 PM
 #78

Since they are the ones that have to prove I committed fraud and not me the one that has to prove that I'm innocent, then I win Smiley

If that's how you think they work, you're in for a shock.

That's how the justice system in the US works... (The litigator has to prove you did something wrong) Not sure where you live but I experienced it first hand and I was actually surprised!

I don't know what you did that you got off lightly, but if they so much as suspect that you tried to evade taxation, they're gonna throw the book at you. They have all the wiggle in interpreting their laws however they see fit.
and thats why lawyers exist to make sure they don't "wiggle" the laws in their favor.
You have a lot of faith in the fairness of the system.
Knowing the law if your best defense. Also, I'm due to other information I can't disclose, I'm not subject to the full extend of the laws in the US. So I always have a plan B, not that I will need it anytime soon, or at all...
but ultimately, I have an option.

Fuzzy
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March 22, 2013, 07:31:14 PM
 #79

[...] I'm not subject to the full extend of the laws in the US [...]

That's great for you, but not really fair to the people who look at your methodology and think they can do the same with immunity.  Undecided
deathcode
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March 22, 2013, 08:05:39 PM
 #80

[...] I'm not subject to the full extend of the laws in the US [...]

That's great for you, but not really fair to the people who look at your methodology and think they can do the same with immunity.  Undecided

Again, I'm not planning on getting to that point. Also, bitcoin won't be regulated. Just tell torrents, mp3s, and other systems that change the way we consume media and how those systems have destroyed industries that were abusing their power. Namely, the USPS, the music labels, movie renting companies and or theaters.... government is next... people are sick and fucking tired of the government's ineptitude....
I see bitcoin as a huge threat to governments, because governments don't care about mp3, they don't care about torrents, but wait until the people is able to control their own money and you'll see!

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