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Author Topic: Has anyone sold BTC won here in sig campaigns? how does tax work?  (Read 425 times)
jimmy55
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January 04, 2018, 04:16:22 PM
 #21

If you have a source of income you can probably just sell small amounts over time and it would not raise any red flags.  If you have nothing to hide and declare the income, if it's a larger amount, but it's not like bitcoin is illegal.  you just declare and pay taxes and the IRS won't care.

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January 04, 2018, 07:30:57 PM
 #22

Yes they will care and it's only going to get worse. Any money without a dubious origin is at risk of being confiscated so you better be able to prove you obtained it legally.

Do you want me to cash out for you? I really think you're over egging this somewhat. All the proof anyone needs is on this forum and in their wallet's history. That's just as much proof as a house sale or car sale and considerably more than getting several grand for cleaning some old lady's drains.

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January 04, 2018, 10:44:15 PM
 #23

Mintpal dies out of nowhere and now you don't have your account anymore. How do you prove the origin? and if you can't prove the origin, you are fucked.

You can prove the origin of your coins, though. Let's say you have some signature campaign earnings as the OP indicates. Those transactions and the threads that describe them are archived. You can sign an message from your receiving address. Mintpal's wallets are (or can be) identified. You can show the transaction from your campaign receiving address to Mintpal, and you can show a withdrawal from Mintpal (on the blockchain) to an address you control.

Segwit's scripting complicates this, but this wasn't an issue in the days of Mintpal. Tongue

Similarly, if you wired money to an exchange to buy BTC, you can show bank records that reflect that. And you can show withdrawals on the blockchain that reflect your BTC holdings from that transaction.

As with other IRS investigations, they would need to prove that you received income that went unreported. The only way that your trading records can be disproven is by direct coordination with an exchange. If an exchange did not enforce KYC, this becomes difficult. I think that blockchain records reflecting the coins under your control during the relevant times are more than enough to show good faith effort. I think this is especially true in the case of exchanges that disappeared.

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January 04, 2018, 11:41:21 PM
 #24

Not less weird at all, it's very weird to them, and precisely because it's traceable, you must prove it, if you can't prove it, then how are you supposed to sell?

Again, suppose that I sent coins into Mintpal, traded 1 BTC for LTC, and sold this LTC when it went up for a profit of 4 BTC, I end up with 5 BTC, then I deposit this 5 BTC back into my wallet.

Mintpal dies out of nowhere and now you don't have your account anymore. How do you prove the origin? and if you can't prove the origin, you are fucked. This is why im scared to sell BTC. Yes you may be able to solve it with signature campaigns (and im still worried that I should have been paying taxes because it would be considered a wage in exchange of a work and not an investment). They may decide to tax you with an extra for all the months that you didn't pay taxes on what is considered a wage when they realize you had a lot of payments (because once they have your bitcointalk account, they can trace all of your payments ever here, not just what you are reporting).



You have chosen the wrong example.

You said that you have sent coins to Mintpal, 4 of them
So , here we have the starting point.
Then you traded on Mintpal and you withdraw 5 BTC.

Really don't see the problem here.
In case your country has laws for this in place you're going to have to pay for the profit you have made from trading.
It will help us a lot if we discussed with clear numbers and location of the activity (your country).

PS.
This may be ok if you are just dealing with small amount of sales, but let's say in 10 years 1 BTC is worth $1,000,000
How do you cash out $1,000,000 or any other amount near that? you can't do it through localbitcoins, you would need a million different merchants to cash out that much money.
Don't worry, in this case you could afford the best lawyers out there so you could probably get away with murder, not just taxa evasion.

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January 05, 2018, 11:02:34 AM
 #25

In this case, you can't show the profits as capital gains. You received the coins as salary. So when you sell your coins for fiat, you are required to pay the income tax rather than the capital gains tax. But it is a bit complex. I am not sure whether the tax calculation will be based on the exchange rate at the time of the sale, or the one at the time when you received the coins as salary.

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January 05, 2018, 12:43:41 PM
 #26

In this case, you can't show the profits as capital gains. You received the coins as salary. So when you sell your coins for fiat, you are required to pay the income tax rather than the capital gains tax. But it is a bit complex. I am not sure whether the tax calculation will be based on the exchange rate at the time of the sale, or the one at the time when you received the coins as salary.

You will be taxed on income tax and on capital gains. Following the above example:

You have chosen the wrong example.

You said that you have sent coins to Mintpal, 4 of them
So , here we have the starting point.
Then you traded on Mintpal and you withdraw 5 BTC.

You would be taxed on 4 bitcoins as income tax (if you earned them on signature campaigns) and on the other 1 as capital gain. At least that's what would happen in my country. It doesn't matter if you traded them or simply the value of bitcoin in terms of fiat grew and when you sold them the value in fiat was higher than when you earned them in signature campaigns.

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January 05, 2018, 03:42:29 PM
 #27

Mintpal dies out of nowhere and now you don't have your account anymore. How do you prove the origin? and if you can't prove the origin, you are fucked.

You can prove the origin of your coins, though. Let's say you have some signature campaign earnings as the OP indicates. Those transactions and the threads that describe them are archived. You can sign an message from your receiving address. Mintpal's wallets are (or can be) identified. You can show the transaction from your campaign receiving address to Mintpal, and you can show a withdrawal from Mintpal (on the blockchain) to an address you control.

Segwit's scripting complicates this, but this wasn't an issue in the days of Mintpal. Tongue

Similarly, if you wired money to an exchange to buy BTC, you can show bank records that reflect that. And you can show withdrawals on the blockchain that reflect your BTC holdings from that transaction.


Can you explain how do I prove that:

1) I sent my coins to a Mintpal deposit
2) I withdrew the coisn to a Mintpal deposit

If mintpal doesn't exist?

Exchanges create deposit and withdraw amounts for each individual account and the exchange is dead, im not sure how this could be proved. All that there is is some transactions in the blockchain which would be anything.

As with other IRS investigations, they would need to prove that you received income that went unreported. The only way that your trading records can be disproven is by direct coordination with an exchange. If an exchange did not enforce KYC, this becomes difficult. I think that blockchain records reflecting the coins under your control during the relevant times are more than enough to show good faith effort. I think this is especially true in the case of exchanges that disappeared.

About unreported income... if you receive an income here in exchange of working in signature campaigns, as soon as you give them one address, they could link it to an account, the look for every address ever that you used with your account and they could see how much money total you've made with your account, and then accuse you of not having reported that income when you sell a part or all of it. So im not sure how this could work out.
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January 05, 2018, 10:46:07 PM
 #28

Every month I sell my Bitcoin that I get from signature campaigns. Till now I haven't faced any problem. But from this month onwards I heard that the government is going to be very strict towards cryptousers. In my country last month government raided all the important exchanges and collected the details of all bank accounts involved in trading. But I don't think government will take any action against them because it's not possible for them to register case against lakhs of crypto users.

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January 05, 2018, 11:05:47 PM
 #29

Can you explain how do I prove that:

1) I sent my coins to a Mintpal deposit
2) I withdrew the coisn to a Mintpal deposit

If mintpal doesn't exist?

If you deposited and withdrew BTC from Mintpal, those transactions are permanently recorded on the blockchain. It doesn't matter what transactions took place on Mintpal's internal database.

You sent BTC from Address A (which you can prove control of). You received a higher amount of BTC at Address B (which you can prove control of). The difference is your BTC profit, but what matters for taxes is the USD profit. Each trade on Mintpal is taxable, and the net of those gains determines your taxes due.

The fact that Mintpal no longer exists just makes it harder to disprove the records you provide for your Mintpal trades. That's why any good faith effort to pay taxes on the gains made between Address A and Address B is probably good enough. You made 4 BTC profit, which had a USD equivalent when you bought back BTC. That's your taxable gains.

About unreported income... if you receive an income here in exchange of working in signature campaigns, as soon as you give them one address, they could link it to an account, the look for every address ever that you used with your account and they could see how much money total you've made with your account, and then accuse you of not having reported that income when you sell a part or all of it. So im not sure how this could work out.

How can they definitively link addresses together? Personally, I am extremely careful about linking wallet addresses together, even if it means paying higher fees to consolidate outputs.

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January 06, 2018, 11:08:41 AM
 #30

In this particular case a lot depends on a country because each of them has the totally diverse limitations that should be learned thoroughly and taken into consderation so to avoid any possible issues in the future.
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January 06, 2018, 02:32:11 PM
 #31

In this case, you are going to need to explain the origin of your coins, and im not sure how I would explain I made some BTC posting in some internet forum, this may not be convincing to them even if it's the truth.

-snip-
People deposit millions in banks from selling art made out of their own sperm and turds.

yeah some posts on this forum are no different in terms of quality or value  Grin
I have never heard about banks asking about the origin of your coins
unless you go over a certain threshold or they come from tainted or flagged sources
if you are totally afraid to use banks,sell for WU,Paypal or any other electronic currency
sell here or at localbitcoins
get yourself a bitcoin debit card and fund it with bitcoins and cash out at any ATM
your options are limitless

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January 06, 2018, 06:13:19 PM
 #32

If you deposited and withdrew BTC from Mintpal, those transactions are permanently recorded on the blockchain. It doesn't matter what transactions took place on Mintpal's internal database.

You sent BTC from Address A (which you can prove control of). You received a higher amount of BTC at Address B (which you can prove control of). The difference is your BTC profit, but what matters for taxes is the USD profit. Each trade on Mintpal is taxable, and the net of those gains determines your taxes due.

The fact that Mintpal no longer exists just makes it harder to disprove the records you provide for your Mintpal trades. That's why any good faith effort to pay taxes on the gains made between Address A and Address B is probably good enough. You made 4 BTC profit, which had a USD equivalent when you bought back BTC. That's your taxable gains.

When you cash out an amount of any relevancy, you must prove the origin. There is no real way to prove that the addresses where you deposited and withdrew from, are from Mintpal or from a drug dealer or anything else, because Mintpal doesn't exist, so there's no way to link them properly into the exchange, unless you can prove me otherwise, because all we got is some addresses on the blockchain now, without the context of the website. I don't know about the US, but in other countries you MUST prove the origin is not ilicit, and if they don't like the evidence, you risk losing your money because they would confiscate it or tax it to ridiculous levels.

So again, you send 1 BTC to Mintpal.

You make 4 BTC from trading it against some altcoin.

You send back your BTC to your wallet.

You end up with 5 BTC.

Now prove these addresses belong to Mintpal. And no, you can't prove ownership of the deposit address, because you don't control the private keys of a deposit address of an exchange, so you can't sign them.


How can they definitively link addresses together? Personally, I am extremely careful about linking wallet addresses together, even if it means paying higher fees to consolidate outputs.

Well, if you are going to sell years worth of signature campaign earnings, they will ask where it came from and they will see the address is linked to your account where you posted at with a simple google search, then they could browse your posting history and track all of your receiving addresses for the signature campaigns.



In this case, you are going to need to explain the origin of your coins, and im not sure how I would explain I made some BTC posting in some internet forum, this may not be convincing to them even if it's the truth.

-snip-
People deposit millions in banks from selling art made out of their own sperm and turds.

yeah some posts on this forum are no different in terms of quality or value  Grin
I have never heard about banks asking about the origin of your coins
unless you go over a certain threshold or they come from tainted or flagged sources
if you are totally afraid to use banks,sell for WU,Paypal or any other electronic currency
sell here or at localbitcoins
get yourself a bitcoin debit card and fund it with bitcoins and cash out at any ATM
your options are limitless


They are not limitless, they are very limited, if the goal is to buy some real state. You basically have to be 100% transparent, pay all taxes, and be able to proof 100% that the gains are licit.
darkangel11
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January 06, 2018, 07:13:54 PM
 #33

In the future I would like to buy some property with my BTC once it's worth a lot. Even small amounts made on signature campaigns in here could be worth a lot and may I want to diversify into real state in say 5 years or so.


Real state, meaning that cryptocurrency is unreal to you, or were you trying to write real estate?

I was wondering how would this be done? Im scared because we get daily news of any bank account that has to do with Bitcoin being frozen. I wouldn't like to be treated a criminal when I obtained my Bitcoin posting here... any help?

This is completely false and made up. Name me a at least 3 worldwide bank branches that target cryptocurrency users and block their accounts. And I'm not talking here about a single case because from time to time people get some transfers denied and it's not crypto related. I'm talking about specific, crypto related cases. Naming 3 should be easy if, like you've said, any account can be frozen.
I can claim that at any given time you can get an electric surge that will end up burning down your computer with all your precious sig campaign money and it will have as much substance as your claim about banks targeting bitcoiners.
Samarkand
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January 06, 2018, 08:33:44 PM
 #34

... Name me a at least 3 worldwide bank branches that target cryptocurrency users and block their accounts. And I'm not talking here about a single case because from time to time people get some transfers denied and it's not crypto related. I'm talking about specific, crypto related cases. Naming 3 should be easy if, like you've said, any account can be frozen.
...

The question was not directed to me, but I´ll give it a try. I admit that the following banks
are not active worldwide, but they are also not operating in a tiny 3rd world country and instead
are the 4 biggest banks in Australia:

-National Australia Bank
-ANZ
-the Commonwealth Bank of Australia
-Westpac Banking Corporation

Quote
Adding to the pressures on bitcoin early this morning, the Sydney Morning
Herald reported that bitcoin users across Australia are reporting that their accounts
have been abruptly frozen by the country’s “Big Four” banks. And while the banks
have remained largely tight-lipped about the closures, many angry account-holders
are jumping to conclusions and blaming the banks for punishing them because of their involvement with bitcoin.

https://www.zerohedge.com/news/2017-12-30/australian-banks-reportedly-freeze-accounts-bitcoin-users

I´m still waiting for a clarification of the mentioned banks in a new article, but this
is still a pretty shocking development for Australian Bitcoin users if the 4 biggest
banks in their country close accounts that deal with cryptocurrency.

I´m not based in Australia myself, but I also had problems with my bank that simply
refuses to process wires that originate from Bitcoin exchanges.


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Transparent.






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squatter
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January 06, 2018, 10:33:47 PM
 #35

If you deposited and withdrew BTC from Mintpal, those transactions are permanently recorded on the blockchain. It doesn't matter what transactions took place on Mintpal's internal database.

You sent BTC from Address A (which you can prove control of). You received a higher amount of BTC at Address B (which you can prove control of). The difference is your BTC profit, but what matters for taxes is the USD profit. Each trade on Mintpal is taxable, and the net of those gains determines your taxes due.

The fact that Mintpal no longer exists just makes it harder to disprove the records you provide for your Mintpal trades. That's why any good faith effort to pay taxes on the gains made between Address A and Address B is probably good enough. You made 4 BTC profit, which had a USD equivalent when you bought back BTC. That's your taxable gains.

When you cash out an amount of any relevancy, you must prove the origin. There is no real way to prove that the addresses where you deposited and withdrew from, are from Mintpal or from a drug dealer or anything else, because Mintpal doesn't exist, so there's no way to link them properly into the exchange, unless you can prove me otherwise, because all we got is some addresses on the blockchain now, without the context of the website. I don't know about the US, but in other countries you MUST prove the origin is not ilicit, and if they don't like the evidence, you risk losing your money because they would confiscate it or tax it to ridiculous levels.

So again, you send 1 BTC to Mintpal.

You make 4 BTC from trading it against some altcoin.

You send back your BTC to your wallet.

You end up with 5 BTC.

Now prove these addresses belong to Mintpal. And no, you can't prove ownership of the deposit address, because you don't control the private keys of a deposit address of an exchange, so you can't sign them.

But you can show the origin. It's right there on the blockchain. Even if Mintpal is gone, why can't you claim the coins are from Mintpal? Why can't you claim trading records based on that? Tax authorities are interested in taxable income. You're paying that, yes? By paying taxes on cryptocurrency trading income from a defunct non-KYC exchange, you are going far beyond what most people are doing.

You may not be able to prove that the addresses belong to Mintpal, but if they truly did, I wouldn't worry about it. It can be easily determined by blockchain analysis companies (or possibly even Walletexplorer) that they did. You can sign a message from the address that you sent 1 BTC from. You can sign an address that held 5 BTC withdrawn from them.

How can they definitively link addresses together? Personally, I am extremely careful about linking wallet addresses together, even if it means paying higher fees to consolidate outputs.

Well, if you are going to sell years worth of signature campaign earnings, they will ask where it came from and they will see the address is linked to your account where you posted at with a simple google search, then they could browse your posting history and track all of your receiving addresses for the signature campaigns.

That's why you should probably report income that is easily trackable. This makes it very important to avoid linking wallet addresses together. You should consider how you spend UTXOs and how that links your BTC holdings together on the public ledger.



darkangel11
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January 08, 2018, 08:28:31 PM
 #36


The question was not directed to me, but I´ll give it a try. I admit that the following banks
are not active worldwide, but they are also not operating in a tiny 3rd world country and instead
are the 4 biggest banks in Australia:

-National Australia Bank
-ANZ
-the Commonwealth Bank of Australia
-Westpac Banking Corporation

Quote
Adding to the pressures on bitcoin early this morning, the Sydney Morning
Herald reported that bitcoin users across Australia are reporting that their accounts
have been abruptly frozen by the country’s “Big Four” banks. And while the banks
have remained largely tight-lipped about the closures, many angry account-holders
are jumping to conclusions and blaming the banks for punishing them because of their involvement with bitcoin.

https://www.zerohedge.com/news/2017-12-30/australian-banks-reportedly-freeze-accounts-bitcoin-users

I´m still waiting for a clarification of the mentioned banks in a new article, but this
is still a pretty shocking development for Australian Bitcoin users if the 4 biggest
banks in their country close accounts that deal with cryptocurrency.

I´m not based in Australia myself, but I also had problems with my bank that simply
refuses to process wires that originate from Bitcoin exchanges.


That's interesting. I didn't know that people in Australia are having these problems.  I'm located in the EU and have been using a number of international banks since I got into cryptocurrencies and haven't experienced any difficulties. Much appreciated, I'll know which banks to avoid if I ever have to move out of here.

On the side, National Australia Bank is working closely with Goldman Sachs. GS was well known for their anti bitcoin stance but has recently switched sides and started a crypto trading desk. It's possible that they'll influence their partners.
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January 10, 2018, 03:44:07 AM
 #37

In this case, you are going to need to explain the origin of your coins, and im not sure how I would explain I made some BTC posting in some internet forum, this may not be convincing to them even if it's the truth.

I think the IRS really just cares that people are making a good faith effort to pay their taxes. It seems like signature campaigns would fall under regular "wages/salaries/tips" or "other income" and taxed at the standard tax rate for the cost basis, and capital gains for any gains from holding.

Being someone who makes a career out of advising clients on US tax and compliance matter, the IRS is aware of a lot of these payment arrangements and is making plans to ramp up compliance.  One article I had read reported a contract that Chainalysis won in a public bid with the IRS to begin analyzing cryptocurrency non-compliance.  As always with the government, technology lags far behind.  But not reporting income accurately and paying tax is unlawful.  "Intentional disregard" for tax laws is criminal.

As for BTC won in sig campaigns, it would be Ordinary income.  Depending on other factors (time involved, activity, etc.) it may qualify as business or hobby income, both of which you could use related expenses (computers, subscriptions, office space, etc.) to offset income.  Business income could have sufficient expenses to claim a tax loss, but net business income more than $500 is subject to an additional 15.3% self-employment tax.  However, with proper planning, a lot of the potential headaches in compliance can be avoided.  In fact, if this is regular, substantial income, there can be a lot of great tax planning opportunities to tax advantage of.
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January 10, 2018, 06:11:28 AM
 #38

As of now, the regulations towards Bitcoin is still not properly established here in my country which is why when having Bitcoins exchanged for cash, it is not taxed yet. I have not heard a situation where someone who sells their Bitcoin for cash has been taxed. I guess the bank only gets curious when the amount exchanged is more than hundred thousands, but with withdrawing from time to time in ample ampunt, it seems that there are no problems encountered.
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January 10, 2018, 02:59:43 PM
 #39

Well it can be taxed 2 times first if you are earning it via signature campaign you will be taxed by income tax. Now if you are holding it in your wallet and its price grew you will now be taxed with your capital gains. Tax is really complicated much more if your money is growing with it. As if you are earning a considerable amount of money in a signature campaign you must always find out the dollar value equivalent of your earning and immediately cashing it out in Fiat currency in order for you to limit your taxes to only income tax but the problem here will be you won't be participating the growth of your Bitcoin.

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January 10, 2018, 03:27:08 PM
 #40

Real state, meaning that cryptocurrency is unreal to you, or were you trying to write real estate?


Yes obviously I meant real estate.

This is completely false and made up. Name me a at least 3 worldwide bank branches that target cryptocurrency users and block their accounts. And I'm not talking here about a single case because from time to time people get some transfers denied and it's not crypto related. I'm talking about specific, crypto related cases. Naming 3 should be easy if, like you've said, any account can be frozen.
I can claim that at any given time you can get an electric surge that will end up burning down your computer with all your precious sig campaign money and it will have as much substance as your claim about banks targeting bitcoiners.

Chase, Bank of America, CIBC... has frozen a lot of transactions.

Of course you can get irrelevant amounts, but try to get $800,000 in your account to buy a house and then see what happens.

Im not here to talk about what I have, I could be a multimillionaire or have 100 bucks, that's irrelevant. The point here is, when you try to put bitcoin into your account, and this bitcoin is not as easy to prove when and where it was bought (for example, buying it in Coinbase is easy, but money earned in exchange of a service like a sig campaign, a business where you accept BTC and never declared anything, a mining operation...) you will need to explain very clear every satoshi. This is what the thread is about. Now name 3 people that sold more than $500,000 worth of bitcoin, the bitcoin being obtained by offering a service and never having declared anything, or undeclared mining gains, etc, and explain how it went from them. Anyone that thinks it's as easy as selling it and just paying capital gains and that's all is a delusional idiot.

PS: The people that participated in early sig campaigns have made more than 100 BTC posting, that's more than 1 million bucks right now so stop treating it as a joke, so for these that started at the begining in around 2012 or so, they have a fortune doing that, so they better know how how report every single satoshi and the consequences of not having declared it in time when they attempt to buy real estate with it. The banks are not cooperating with bitcoiners, they will try to get as much money from them as possible if the origin of the money is not clear or there are mistakes (which is very easy that that will happen since you are supposed to present every single transaction and trade ever which is insane). This is what the thread is about.
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