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Author Topic: Bitcoin arbitrage and taxes  (Read 2519 times)
ardana123
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November 05, 2013, 02:03:52 PM
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Since April i've been doing arbitrage with sums of around 20000 euro on diverse exchanges. This is money i earned from my job. I intend to keep the profits in bitcoin.

Now arbitrage involves transferring these sums to the starting exchange, then the bitcoins to the exchange with the higher price and finally transferring the FIAT currency back to my bank account to be able to repeat the process. Now since april i've been receiving steady deposits from various exchanges. Will the tax service look at these deposits as income since they are from third parties like mt.gox or bitstamp? Because that would be a problem since that's money i earned from my job and was already taxed. How do i prove that? All the exchanges keep logs but i doubt i could just send these to the tax service...

Does the tax service actually make a sum of all the deposits you had during the year? Because then i would have a problem since that would be far more money than i actually have in reality since i did all that arbitrage.
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November 05, 2013, 02:48:31 PM
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Does the tax service actually make a sum of all the deposits you had during the year?
Yes, but they also sum all the withdrawals you had during the year. If they notice that you're sending about the same amount of money to several exchanges as you receive from them, they're going to pay more attention to the difference than the total. And since that difference should about the same as the profit you've declared, they're not likely to trouble you.

How do i prove that? All the exchanges keep logs but i doubt i could just send these to the tax service...
Why would you doubt that? If you do happen to get audited, the exchange logs are exactly what the tax service will ask for (and remember, they can request the same logs from the exchanges themselves, just to keep you honest).

Will pretend to do unverifiable things (while actually eating an enchilada-style burrito) for bitcoins: 1K6d1EviQKX3SVKjPYmJGyWBb1avbmCFM4
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November 08, 2013, 12:22:47 AM
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Will the tax service look at these deposits as income?

Since when does the tax service get copies of your bank statements?

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November 08, 2013, 04:33:57 AM
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Since when does the tax service get copies of your bank statements?
Since always. Where'd you get the idea that they don't?

Will pretend to do unverifiable things (while actually eating an enchilada-style burrito) for bitcoins: 1K6d1EviQKX3SVKjPYmJGyWBb1avbmCFM4
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November 08, 2013, 03:49:24 PM
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Since when does the tax service get copies of your bank statements?
Since always. Where'd you get the idea that they don't?

Yikes! Where do you live? At least in the US, the tax service isn't sent such private information. At least not until you are audited. The government has no business combing through everyones bank statements without cause.

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November 21, 2013, 02:24:20 AM
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In the USA banks and other financial institutions are require to send in a 1099 or similiar to the IRS every year. You then are required to also submit a copy of this 1099, which the IRS then matches up against the other 1099 that the financial institution submitted. If these figures don't match, it could be reason for further investigation.

Most bitcoin exchanges on the other hand do not offer 1099's or anything of that nature, so you're suppose to create your own at the end of the year when you pay US taxes.


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