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Author Topic: Paying myself in Bitcoins?  (Read 8199 times)
casascius
Mike Caldwell
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The Casascius 1oz 10BTC Silver Round (w/ Gold B)


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December 28, 2010, 02:07:17 AM
 #21

Actually you can't go to prison for not paying your taxes (in the US at least). There are no longer debtors' prisons. You can go to prison for not filing accurate tax forms, but not for failing to pay. The IRS may take away your income and possessions, you may be forced out on the street, but you will not go to prison.

I would prefer to keep my income and possessions.  it's cold outside.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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December 28, 2010, 02:10:45 AM
 #22

If you have profits related to bitcoins and declare it remember to use their own system against them.

Claim all electricity,hardware,depreciation and anything else as a deduction against your earnings.

take that mr tax man and smoke it lol.
casascius
Mike Caldwell
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December 28, 2010, 02:52:13 AM
 #23

If you have profits related to bitcoins and declare it remember to use their own system against them.

Claim all electricity,hardware,depreciation and anything else as a deduction against your earnings.

take that mr tax man and smoke it lol.


I would have thought that's what the tax man is expecting as a legitimate part of business, not as a fast one pulled over their eyes... even they agree "profit" is income minus expenses.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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December 28, 2010, 03:50:04 AM
 #24

Caveat: I'm not an accountant, and changed my major before there was any chance anyone would confuse me for one.

1. How will this work for taxes?
http://www.irs.gov/businesses/small/article/0,,id=130524,00.html
You must immediately translate into dollars all items of income, expense, etc. (including taxes), that you receive, pay, or accrue in a foreign currency and that will affect computation of your income taxl


6. What else should I be worried about/planning for if I do this?

FUBAR FBAR
http://games.slashdot.org/comments.pl?sid=1170749&cid=27286155
http://www.irs.gov/businesses/small/article/0,,id=210244,00.html

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December 28, 2010, 04:18:39 AM
 #25

If you have profits related to bitcoins and declare it remember to use their own system against them.

Claim all electricity,hardware,depreciation and anything else as a deduction against your earnings.

take that mr tax man and smoke it lol.


I would have thought that's what the tax man is expecting as a legitimate part of business, not as a fast one pulled over their eyes... even they agree "profit" is income minus expenses.

Im just saying...its worth noting the things people might miss.
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December 28, 2010, 04:25:49 AM
 #26

I think the idea of employers paying salaries and wages solely in Bitcoins would run employers afoul of the law.  It would probably be just as difficult as paying employees in gold.

This was an interesting story:
http://gata.org/node/7696

Jurors heard how the payroll system operated. When workers at Kahre's six businesses and more than 30 companies that were payroll clients went to pick up their pay, each received a tube containing coins.

Kahre had claimed he tried to legally avoid taxes by creating a cash payroll system that disbursed gold and silver coins, on the theory that recipients could go by the coins' face value for tax purposes.

Certified public account Wayne Paul, brother of Texas congressman Ron Paul, testified that Congress created a dual monetary system when it authorized the gold and silver coins that currently circulate.


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December 28, 2010, 04:37:20 AM
 #27

Just thought of this one too ... so let's say you use a dual GPU box at work for your big data / number crunching day job.  During the evenings you have it mine Bitcoin.  Of course the cost of the electricity might be something requiring reimbursement or handled as compensation, but what about the generated coin?

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December 28, 2010, 04:42:55 AM
 #28

Why are you guys so obsessed with paying taxes in the first place ? Smiley
Because we don't want to end up in prison?
Actually you can't go to prison for not paying your taxes (in the US at least). There are no longer debtors' prisons. You can go to prison for not filing accurate tax forms, but not for failing to pay. The IRS may take away your income and possessions, you may be forced out on the street, but you will not go to prison.

Bullshit semantics.

I dare you to try it.

I know a guy, been a few years with no filing, still free. I'll keep you updated.

This isn't something that anyone can just do though. Usually people file because they get money back for doing it. 

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December 28, 2010, 04:45:05 AM
 #29

I think the idea of employers paying salaries and wages solely in Bitcoins would run employers afoul of the law.  It would probably be just as difficult as paying employees in gold.

This was an interesting story:
http://gata.org/node/7696

Jurors heard how the payroll system operated. When workers at Kahre's six businesses and more than 30 companies that were payroll clients went to pick up their pay, each received a tube containing coins.

Kahre had claimed he tried to legally avoid taxes by creating a cash payroll system that disbursed gold and silver coins, on the theory that recipients could go by the coins' face value for tax purposes.

Certified public account Wayne Paul, brother of Texas congressman Ron Paul, testified that Congress created a dual monetary system when it authorized the gold and silver coins that currently circulate.

I wonder how he managed to pay them minimum wage Smiley

Probably used a combination of paper and metal.

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December 28, 2010, 04:52:41 AM
 #30


I wonder how he managed to pay them minimum wage Smiley

Probably used a combination of paper and metal.

Kahre did not withhold taxes, because he classified all the workers as independent contractors, who are responsible for doing their own taxes.

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December 28, 2010, 06:16:25 AM
 #31

What if you were paid at the start of the year and the value changed significantly at tax time? These douchebags would assess the higher value wouldnt they?

Or would it be the value at the time you received it? How would they assess the increase in  value and how would they even know the value unless you tell them yourself?

No, it wouldn't happen like that. Your income would be assessed on the value of the item at the time you received it and you would pay tax on that amount. When the time came for you to liquidate the asset if there had been a change in it's value you would then be taxed on the increased amount, or could most likely claim the loss against other income if the value had decreased. Basically you aren't charged tax on the change in value of an asset until you realize that gain.

For example say you get paid partly in cash and partly in X shares of company stock. When you first get paid the shares are worth $10 each and you would pay tax on that $10 the same as your regular income. Later you decide to sell those shares that are now worth $15. Come tax time you would have to declare the $5 as additional income and pay the appropriate tax on that amount.

Please note that this is a gross oversimplification but I think you get the idea. Tax rates for different types of income vary and I don't know that a BTC would get treated in the same way that a stock of a company would. More like an investment in gold I guess. At the same time a capital gain is a capital gain so it might not matter at all.

But then BTC is a currency not an asset as such so it's more like you got paid partially in USD and partially in EUR for how it should be treated. Technically I think you would still have to declare any gains/losses you realized come conversion time if you moved one portion of your paycheck into the other currency. If you just left them alone you would definitely never pay tax on increases/decreases in market rates.

So yeah, consult your accountant and your tax attorney before you do anything. All my tax law studies were in Canada and every jurisdiction is different in the details, but the principles above should hold true for the most part.

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December 28, 2010, 08:41:43 AM
 #32

It would be really nice if an employer find a way to pay people in BTC.

But I guess it isn't that simple... for example, what about minimum wage laws? Don't they force you to pay a minimum amount in the official currency?
In Brazil, there are laws that forbids the employer from decreasing the nominal value of a salary. Isn't the same for the US? Fixing the the salary in BTC and paying with USD would be really risky in such case, as you wouldn't be allowed to decrease the USD amount.

Maybe the easiest way is to have an official, minimum wage salary in USD, and all the rest paid as "variant complement" in BTC... but even that might bring the unions on you...

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December 28, 2010, 12:20:46 PM
 #33

...while still keeping our businesses real and legitimate
Your business is legitimate if you have real customers who receive value from your business that is worth at least as much to them as what they pay for it.

Your business is legal if you operate it according to the applicable laws.

A business can be both legitimate and legal, but it's important to appreciate the distinction.
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December 28, 2010, 12:34:24 PM
 #34

Deflationist currency + "don't reduce wages below contractual value" = /thread Smiley

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December 28, 2010, 02:22:34 PM
 #35

Should I ever need to fill Bitcoin equivalents in my tax declaration I'll use the exchange rate at the beginning of the year, since I expect value to increase over time ^^

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January 15, 2011, 12:21:07 PM
 #36

I just think of the enormous amount of paperwork this is going to create. How do I even begin to separate personal bitcoins from business bitcoins?


Its not like theres any accounting software that would make it easier!







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January 15, 2011, 12:35:45 PM
 #37

Its not like theres any accounting software that would make it easier!
It's not like there's bug-free accounts functionality available in stock client  Grin

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January 15, 2011, 12:51:34 PM
 #38

I strongly suggest that those with tax questions consult a tax professional.  They make their money off of getting you out of paying taxes, and they get paid a chunk of what you save in taxes.

If you are conducting enough business in bitcoins that if it were dollars you'd go to jail for not paying taxes, go down to H&R block, or your local tax professional, and ask them.  They don't generally charge for a consultation.

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January 15, 2011, 01:22:15 PM
 #39

Its not like theres any accounting software that would make it easier!
It's not like there's bug-free accounts functionality available in stock client  Grin

lol

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January 15, 2011, 04:28:03 PM
 #40

How do I even begin to separate personal bitcoins from business bitcoins?

Separate wallets?

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