Bitcoin Taxes USA

[thecodebear]

So how is every one handling taxes?

I have some questions.

Is it legitimate to consider all coin-to-coin trades as like-kind exchanges for 2017 and therefore not taxable? It seems even tax professionals have no idea as I see articles saying yes and articles saying no.

Also, using FIFO accounting, does this apply to coins across addresses? Like say I have 10 Bitcoin in Coinbase, but earlier in the year I sent 1 BTC to an exchange and have been trading with that a lot (total volume of trades being far above 10 BTC). Does FIFO apply across accounts? So when I trade that 1 BTC the first time my sell price after the trade minus my original buy on Coinbase for my first Bitcoin would give me my profit...but then the next time I trade that 1 BTC + profits, for tax purposes do I count the original value of that trade as the second Bitcoin I bought on Coinbase earlier in the year (FIFO operating at the person-level instead of the account-level) or do I just use the value of the BTC that I'm trading at the time I make the trade as the initial value of the trade, since the BTC in my Coinbase account and my exchange account are clearly separate Bitcoins.

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[RamesesLabs]

Most major economists on television and news outlets are saying Bitcoin is worthless. I'm going to use that "expert" analysis to do my accounting for trading Bitcoin. I don't see how they could tax your trades as the value of the coins fluctuate so rapidly. I think they are only talking about cashing out Bitcoin into fiat currency, but I'm no accounting expert. I will just play dumb as I don't plan on converting any of my holdings into cash this year.

[trolliban]

Most major economists on television and news outlets are saying Bitcoin is worthless. I'm going to use that "expert" analysis to do my accounting for trading Bitcoin. I don't see how they could tax your trades as the value of the coins fluctuate so rapidly. I think they are only talking about cashing out Bitcoin into fiat currency, but I'm no accounting expert. I will just play dumb as I don't plan on converting any of my holdings into cash this year.

Bitcoins are 'worthless' based on the economic models they studied on the university, blockchain monetization is a real concept. In regards of taxing definitely is a difficult task and will add a complete new layer to currency trading... Also, how would taxing affect miners?

[thecodebear]

Alright guys but back to the actual question at hand.

I'm assuming I can keep coins in different accounts separate for tax purposes, otherwise I'd be absolutely killed come tax time as none of my long term holding would count as long term. I don't think it would make any sense to apply taxes across accounts as clearly coins are different when they are in different accounts.


Not sure about like-kind exchanges though. Including coin-to-coin exchanges will probably save me a thousand dollar or so since I lost a bunch of bitcoin on trades this Fall and only made up a little bit of it towards the end of the year. So those would offset some of my profits I took from selling BCH when coinbase released it. But tracking the many hundreds of trades (and likely thousands if I have to include each sub-trade of each trade since sometimes a trade will actually be exchanged using multiple partial trades) and figuring out the USD price of BTC and ETH every time I bought or sold them for altcoins would be a monumental task and I would probably just have to guess the price in USD for all those trades as exchanges don't record that.

[RamesesLabs]

I don't think you're going to have much to worry about this year, as it takes a lot of SEC oversight inside the different trading platforms when your trading stocks electronically. I don't think any of the exchanges were prepared or spending as much capital as they should in tracking records for taxes. Some exchanges don't even list the prices of the coins in fiat pricing either, adding even more difficulty to the equation of figuring fiat currency value at the time of trade. When BTC shoots up the altcoins go down in price very quickly sometimes. It's going to be a tricky situation, the only fair way to tax it would be in BTC, but I doubt the federal governments are going to run full Bitcoin Core nodes to accept tax payments, and I don't think the Bitcoin network could even handle that much volume in its current state, lol. They really just need to put a sales tax on it at the Coinbase level when you buy digital currency with fiat currency. It will take a few years before they really enforce it and/or issue some clear guidance on the matter I think. The whole announcement that the federal government would tax it is simply appeasement measures to the bankers sweating the competition coming in the payments market.

[pixel8or]

As of 2018, "Like kind" has been defined as being real property. Digital currency is not real property. So, every trade between different coins is now a taxable event.

Not sure if you can get away with that for 2017.

https://www.youtube.com/watch?v=zo3qXtphV8Y

For mining, everything I've found says coins come into your possession as soon as they are credited to your account, including pools. How you would actually keep track of that, I have no idea.

[Saimabutterfly]

What is wrong in paying taxes for our earnings? If we all pay taxes for our profits it will benefit our countries. Is not it?

[RamesesLabs]

What is wrong in paying taxes for our earnings? If we all pay taxes for our profits it will benefit our countries. Is not it?

The governments is over bloated and waste a ton of money on wars, bank bailouts, bribes, payoffs, etc. The whole cryptocurrency movement started as a way to eliminate third parties like banks and governments. The federal government went take a delicate approach to this situation, as they know what Bitcoin and cryptocurrency is all about. They have a huge role in ushering in these new form of payments, as it will be the death blow to many financial institutions. They also have pressure from the banks to try to pull the plug on the whole use of cryptocurrencies as well, resulting in zero tax revenue for them. I really don't think enforcement is going to be all that strict in 2017.

[thecodebear]

What is wrong in paying taxes for our earnings? If we all pay taxes for our profits it will benefit our countries. Is not it?

Who said anything about not paying the taxes? I'm asking about how to comply with the law, as at least in the USA it is very unclear how to comply with tax law when it comes to cryptocurrencies. Even professional tax accountants aren't sure, so really its just a guessing game.

[HabBear]

What is wrong in paying taxes for our earnings? If we all pay taxes for our profits it will benefit our countries. Is not it?

Who said anything about not paying the taxes? I'm asking about how to comply with the law, as at least in the USA it is very unclear how to comply with tax law when it comes to cryptocurrencies. Even professional tax accountants aren't sure, so really its just a guessing game.

I think you're complicating things.

Focus first on the obvious things you'd get taxed on. Distributions out of a coin to USD. Purchases using Bitcoin representing a taxable event. Focus on paying taxes on the gains for those transactions and keep track of your losses so you can use them to offset your gains. Rely on the word of the IRS, they're ones making the rules. Stick to the rules literally and be vigilant of changes year over year.

Bitcoins are 'worthless' based on the economic models they studied on the university, blockchain monetization is a real concept.

Blockchain monetization is called "Bitcoin".

[HighCommander]

https://www.irs.gov/newsroom/irs-virtual-currency-guidance

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

[HabBear]

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

This is a good link! IRS refers to cryptocurrencies as "Convertible Virtual Currency", which must align with their term for other means of exchange.

Their thoughts on the tax treatment for coin mining:

Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer
resources to validate Bitcoin transactions and maintain the public Bitcoin
transaction ledger) realize gross income upon receipt of the virtual currency
resulting from those activities?

A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value
of the virtual currency as of the date of receipt is includible in gross income. See
Publication 525, Taxable and Nontaxable Income, for more information on taxable
income.

Q-9: Is an individual who “mines” virtual currency as a trade or business subject
to self-employment tax on the income derived from those activities?

A-9: If a taxpayer’s “mining” of virtual currency constitutes a trade or business, and the
“mining” activity is not undertaken by the taxpayer as an employee, the net earnings
from self-employment (generally, gross income derived from carrying on a trade or
business less allowable deductions) resulting from those activities constitute selfemployment
income and are subject to the self-employment tax. See Chapter 10 of
Publication 334, Tax Guide for Small Business, for more information on selfemployment
tax and Publication 535, Business Expenses, for more information on
determining whether expenses are from a business activity carried on to make a profit.

[Lexiatel]

I was told that what you invest is a cost to your 'business'. So if you invest, say 1,000 (buying btc with it), you 'lost' that money until you make that back.

I don't believe you owe any taxes on actually btc. Government considers it virtual property, and it's only worth something once you sell it to fiat (you're not yet taxed by just having it like you are with personal property such as your house and car).

I'm no tax expert, but if I'm sure even when you reinvest all your profits back, it still counts as a cost (loss) if you did not come out ahead at all (and electronically, it wouldn't look like you did).

It was suggested to me to buy bitcoin with all profits and original principal income at the end of the year. This will show no cash profit, then sell after the year turn. I'm not sure if this could be legit though.

But yeah, I think you just pay taxes on the fiat you 'earned'. I read the link that coinbase gave. That's what I made out of the law.

[IckyYak22871]

Treating crypto tokens as stocks shares or commodities is retarded, because they are not. Unlike other assets, a digital token has really no value unless it is exchanged for something which has well defined value, like USD, or a car, or a cup of coffee. This is how all these crypto assets should be taxed: at the moment when you exchange them for fiat, goods or services. Taxing every crypto transaction is pain in the ass and this will never work for technical reasons. Making pain in the ass laws will not bring more money into treasury. Laws should be easy to follow.

[Lexiatel]

I found this helpful (since even the IRS claims that coin trading is self-employment).

https://turbotax.intuit.com/tax-tips/self-employment-taxes/top-tax-write-offs-for-the-self-employed/L7xdDG7JL

So don't forget the costs of your phone, electric and Internet bills when calculating your taxes-- those are all costs to the business, of which you could not coin trade if you didn't have.

Coinbase also applies transaction and conversion fees, which is also a cost to your business.

[rezius]

So how is every one handling taxes?

I have some questions.

Is it legitimate to consider all coin-to-coin trades as like-kind exchanges for 2017 and therefore not taxable? It seems even tax professionals have no idea as I see articles saying yes and articles saying no.

Also, using FIFO accounting, does this apply to coins across addresses? Like say I have 10 Bitcoin in Coinbase, but earlier in the year I sent 1 BTC to an exchange and have been trading with that a lot (total volume of trades being far above 10 BTC). Does FIFO apply across accounts? So when I trade that 1 BTC the first time my sell price after the trade minus my original buy on Coinbase for my first Bitcoin would give me my profit...but then the next time I trade that 1 BTC + profits, for tax purposes do I count the original value of that trade as the second Bitcoin I bought on Coinbase earlier in the year (FIFO operating at the person-level instead of the account-level) or do I just use the value of the BTC that I'm trading at the time I make the trade as the initial value of the trade, since the BTC in my Coinbase account and my exchange account are clearly separate Bitcoins.

For 2017 Tax Year and previous years, I would treat all trades between crypto as like of kind exchanges , so no tax due until cashing out to fiat.

In 2018 Tax year and beyond, I would move all trading to a Non-US Exchange and do normal trading there ,
only bringing crypto into and out of US exchanges when I needed to Cash out or send money to the overseas exchanges to keep it simple.

US Tax Law states no US citizen has to pay tax on earnings overseas less than $90,000.
So do the bulk of your trading overseas so you don't get unnecessary taxed.
Trade earning less than $90,000 and you owe uncle sam Nothing.

Tax mongers, really don't seem to comprehend Crypto is Global , get mistreated in one country move it to another.
If you do really well, you can always move to another country and cash out there.

And if you really like the other countries and decide to emigrate, you can always give up your US Citizenship so the asshats can't tax you anymore.


╥Aztek

Is this really true? I'm a U.S. citizen. Let's say I earned 80k from a long term hold on Kucoin, a Chinese exchange. I would owe no taxes to the U.S. government? What if I transferred it all to Coinbase to withdraw into my bank, would I still not owe any taxes?

[ggbtctalk000]

amount of gain probably matter: if you gain is 1000$ chances are you are probably not even in the radar. But make several million or billion, the uncle sam is running after you like a bloodthirsty bloodhound.

[Bustart]

I was told that what you invest is a cost to your 'business'. So if you invest, say 1,000 (buying btc with it), you 'lost' that money until you make that back.

I don't believe you owe any taxes on actually btc. Government considers it virtual property, and it's only worth something once you sell it to fiat (you're not yet taxed by just having it like you are with personal property such as your house and car).

I'm no tax expert, but if I'm sure even when you reinvest all your profits back, it still counts as a cost (loss) if you did not come out ahead at all (and electronically, it wouldn't look like you did).

It was suggested to me to buy bitcoin with all profits and original principal income at the end of the year. This will show no cash profit, then sell after the year turn. I'm not sure if this could be legit though.

But yeah, I think you just pay taxes on the fiat you 'earned'. I read the link that coinbase gave. That's what I made out of the law.

I think that in bitcoin wallet sites like coinsbase was already imposing bigger taxes due to the tax of the website, as its originated in the US. The government virtual property as legit and the protections of its privacy is a great advantages for every people who've been doing legit transactions of the website wallet. Paying taxes from earned fiat isn't a problem, as long as there's a reliable source of income through the trading sites and bitcoin jobs or any mining operations.

[Lexiatel]

I was told that what you invest is a cost to your 'business'. So if you invest, say 1,000 (buying btc with it), you 'lost' that money until you make that back.

I don't believe you owe any taxes on actually btc. Government considers it virtual property, and it's only worth something once you sell it to fiat (you're not yet taxed by just having it like you are with personal property such as your house and car).

I'm no tax expert, but if I'm sure even when you reinvest all your profits back, it still counts as a cost (loss) if you did not come out ahead at all (and electronically, it wouldn't look like you did).

It was suggested to me to buy bitcoin with all profits and original principal income at the end of the year. This will show no cash profit, then sell after the year turn. I'm not sure if this could be legit though.

But yeah, I think you just pay taxes on the fiat you 'earned'. I read the link that coinbase gave. That's what I made out of the law.

I think that in bitcoin wallet sites like coinsbase was already imposing bigger taxes due to the tax of the website, as its originated in the US. The government virtual property as legit and the protections of its privacy is a great advantages for every people who've been doing legit transactions of the website wallet. Paying taxes from earned fiat isn't a problem, as long as there's a reliable source of income through the trading sites and bitcoin jobs or any mining operations.

I'm with you there, but most people who have made a decent income cringe when tax time comes around, because if you have very little expenses, the dollar amount t that you have to pay will quiver your bum cheeks.

[A Feeder]

The government of US are too naive. What gives them the right to tax a currency that is not decentralized? Also people earning coins work hard for it and they consume time and electricity. Both of which are already taxed by the government itself. I think these taxes must only be applied to investors of the cryptocurrency market.