IRS Releases Tax Rules on BTC

[aztecminer]

it is considered computer hardware .. if you buy a video card you do not depreciate this. you write it off as computer hardware. asics are not pc's though, they are like video cards, they are hardware. you write them off the first year as an expense. u do not depreciate a video card ok. if you buy a pc you have a choice. you can depreciate it over several years or write it off in the first year you bought it.

I'm not going to argue that, but a modern mining rig is like a small special purpose PC.  It connects to the network, is administered via a web interface and otherwise is not a peripheral to another PC. 

A. For all new purchases of computer equipment, you can deduct up to $105,000 of the actual purchase price, under what’s called Section 179 of the IRS code, which has to do with equipment depreciation – as long as all of the equipment is purchased by December 31. This is for any business of any size.

http://www.startupnation.com/articles/small-business-tax-advice-computer-deductions/

[aztecminer]

u guys have until april 15th to apply for a business license so you can make your tax write offs next year. do it today. it is easy to do. get it done. now i have done my part to help you guys.

[worldtreasurefinders]

Maybe we all need to take a deep breath... Slush's pool isn't exactly Morgan Stanley. Not expecting a 1099DIV, just sayin.

Slush is also not in the US (even if you are).

If you are in the USA, you will be paid in the USA and Slush is going to have to comply with US laws regarding payment of any kind.

Not my opinion; fact.

My $.02.

Not necessarily. If you mine on slush's pool and have the proceeds sent to an offshore wallet administered by a non-US 3rd party, the IRS has no jurisdiction there.

[LostDutchman]

Maybe we all need to take a deep breath... Slush's pool isn't exactly Morgan Stanley. Not expecting a 1099DIV, just sayin.

Slush is also not in the US (even if you are).

If you are in the USA, you will be paid in the USA and Slush is going to have to comply with US laws regarding payment of any kind.

Not my opinion; fact.

My $.02.

Not necessarily. If you mine on slush's pool and have the proceeds sent to an offshore wallet administered by a non-US 3rd party, the IRS has no jurisdiction there.

Depends on where the wallet or bank account is located.

Familiar with what the IRS did to the anonymity of Swiss banking?

My $.02.

[amspir]

Not necessarily. If you mine on slush's pool and have the proceeds sent to an offshore wallet administered by a non-US 3rd party, the IRS has no jurisdiction there.

If your talking as a means to legally avoid income tax, no.  The USA tax man lays claim to tax all income generated by US citizens, no matter where they live or work. Such a scheme may work by hiding it in same kind of tax avoidance structure that defers income until you pay a lower tax rate during retirement, or if you plan to later renounce citizenship and live somewhere else.

Keep in mind that the US government and the IRS bullied Swiss Banks into breaking their own banking secrecy laws, where it is a felony for a banker to disclose information about customer to a third party.

[sykal]

Since they are looking at capital GAINS to tax...if you sell your BTC as SOON as you mine them....don't you effectively never owe the IRS a dime?

[amspir]

Since they are looking at capital GAINS to tax...if you sell your BTC as SOON as you mine them....don't you effectively never owe the IRS a dime?

Not on capital gains.  You still owe tax on net earned income (value of BTC reward - mining expenses).

[johnyj]

On further thoughts, I think it means it is almost tax free

Because there is no way to properly charge a tax if bitcoin is moved to another country and exchanged there

[aztecminer]

Since they are looking at capital GAINS to tax...if you sell your BTC as SOON as you mine them....don't you effectively never owe the IRS a dime?

Not on capital gains.  You still owe tax on net earned income (value of BTC reward - mining expenses).

thought bitcoin wasnt a currency ?? sounds like its a currency to me ?? otherwise why not tax it when it is turned into fiat like any other 'investment' ?? it sounds like they don't like people mining ... and anything the govy doesnt like u to do is a good enough reason to be doing it. they don't like us hoarding gold and silver either. if i find a gold nugget in my backyard do i pay taxes on it when it is still a gold nugget or do i pay taxes on it when i turn it into fiat ?? i dont really know the answer to that question . taxing bitcoin mining sounds like a govy scheme to me.

[crocko]

I found something:  https://www.youtube.com/watch?v=fvqkQvOWgeo

[amspir]

Since they are looking at capital GAINS to tax...if you sell your BTC as SOON as you mine them....don't you effectively never owe the IRS a dime?

Not on capital gains.  You still owe tax on net earned income (value of BTC reward - mining expenses).

thought bitcoin wasnt a currency ?? sounds like its a currency to me ?? otherwise why not tax it when it is turned into fiat like any other 'investment' ?? it sounds like they don't like people mining ... and anything the govy doesnt like u to do is a good enough reason to be doing it. they don't like us hoarding gold and silver either. if i find a gold nugget in my backyard do i pay taxes on it when it is still a gold nugget or do i pay taxes on it when i turn it into fiat ?? i dont really know the answer to that question . taxing bitcoin mining sounds like a govy scheme to me.

Wow, this is frustrating.  If you want to be legally compliant in paying your taxes, you pay regular income tax on what you make from mining, then pay a lower rate on capital gains made from the price going up.  The IRS ruling did miners that intend to legally pay their taxes a favor.   If you wanted to pay (higher) regular income tax rates on when realize a profit after selling your mined bitcoins within the same tax year, I'm sure the IRS is not going to complain.

If you find gold in your yard, you are legally required to pay a tax.  I just read an article about a guy that found 20 million USD worth of gold coins on his property, and was required to pay regular income tax on the find, after he lost his court case against the IRS.

If you plan to evade paying your taxes, that is between you, your god, and the IRS.

[aztecminer]

Since they are looking at capital GAINS to tax...if you sell your BTC as SOON as you mine them....don't you effectively never owe the IRS a dime?

Not on capital gains.  You still owe tax on net earned income (value of BTC reward - mining expenses).

thought bitcoin wasnt a currency ?? sounds like its a currency to me ?? otherwise why not tax it when it is turned into fiat like any other 'investment' ?? it sounds like they don't like people mining ... and anything the govy doesnt like u to do is a good enough reason to be doing it. they don't like us hoarding gold and silver either. if i find a gold nugget in my backyard do i pay taxes on it when it is still a gold nugget or do i pay taxes on it when i turn it into fiat ?? i dont really know the answer to that question . taxing bitcoin mining sounds like a govy scheme to me.

Wow, this is frustrating.  If you want to be legally compliant in paying your taxes, you pay regular income tax on what you make from mining, then pay a lower rate on capital gains made from the price going up.  The IRS ruling did miners that intend to legally pay their taxes a favor.   If you wanted to pay (higher) regular income tax rates on when realize a profit after selling your mined bitcoins within the same tax year, I'm sure the IRS is not going to complain.

If you find gold in your yard, you are legally required to pay a tax.  I just read an article about a guy that found 20 million USD worth of gold coins on his property, and was required to pay regular income tax on the find, after he lost his court case against the IRS.

If you plan to evade paying your taxes, that is between you, your god, and the IRS.

evading paying taxes would be a dumb thing to do. i can think of much better plans than that. i am just questioning this because i am not really a tax guru. i only know about taxes based upon my own experiences thus far. i dont have experience in paying taxes on bitcoins. so everytime we get a bitcoin payout from our pool we need to go look up it's value on bitcoin charts at the that time to figure out its worth. its going to be an accounting nigtemare. we should not do auto payouts now of .01 bitcoins or whatever and instead we should do only manual payouts now based upon when bitcoin takes a dip ?? obviosly they don't know much about bitcoin mining. well anyways soooooo they did us a favor ?? what a relief . i was really worrying over that.

i assume the guy with the gold in his backyard would have to pay taxes on it.. i am just not sure when he pays the tax. if i found a gold nugget in my backyard i wouldnt say anything about it until i went to turn it into fiat.

[smooth]

so everytime we get a bitcoin payout from our pool we need to go look up it's value on bitcoin charts at the that time to figure out its worth. its going to be an accounting nigtemare.

It is not an "accounting nightmare" it is a simple program, sort of like this one which already exists one day after the IRS ruling.

https://bitcointaxes.info/

No doubt people can and will create more such programs. These are not even hard programs, they would work fine on an 80s vintage PC.

[aztecminer]

so everytime we get a bitcoin payout from our pool we need to go look up it's value on bitcoin charts at the that time to figure out its worth. its going to be an accounting nigtemare.

It is not an "accounting nightmare" it is a simple program, sort of like this one which already exists one day after the IRS ruling.

https://bitcointaxes.info/

No doubt people can and will create more such programs. These are not even hard programs, they would work fine on an 80s vintage PC.

darn i shoulda already known about this how forgetful of me ..

[nhminer]

From a little different angle:

What if I was mining an alt-coin before it was on an exchange, so at the time of mining, the value was $0.
Once it reached an exchange, I was no longer mining, but sold my alt-coin for btc.  
As far as I can tell, from this ruling, there has been no taxable event.

Even if I continue to trade btc for other alts as well as alt for alt, or alt for btc via something like cryptsy, there is no taxable or reportable event. I thinks this is what is known as a "like kind exchange." Like kind exchanges do not trigger realization, and therefore are tax-free.

However, when I cash out, my taxable income would be capital gains.  
Long or short term depending on when I first started mining the alt-coin.

Does anyone see any flaws in this reasoning?

[J_Dubbs]

I'm still thinking it's going to show a big loss for most people and thus increase chances of an audit. Anyone mining with a pool showing any revenue that's beating electricity costs is mining with semi-new ASIC stuff, and the costs associated with that equipment probably will not exceed the mining revenue, thus a net loss. I dunno, I guess it's more a 2014 issue, I started in November and don't have a heck of a lot of 2013 mining activity, but 2014 might end up looking crazy. I get it, this is what we are supposed to do, but when the equipment cannot be capitalized it operates at a break-even, in fact that's basically how the equipment is priced, and when BTC is trending down the short-term activity results in a loss. Those of us mining are speculating that the price will go up long-term, but to have a running tally each year the operating costs are unlikely to be profitable. I just really have hesitation towards opening Pandora's Box over something small and then getting audited. Nothing to hide, just seems like excessive work to report a loss and increase audit risk.

[J_Dubbs]

one more thing, related to my post above...

If I do my spreadsheet and there is a loss or a gain of less than $600 does any of the activity need to be reported? Back when I was freelancing I seem to remember if you have under $600(?) in income that you don't need to report it. It's been a while since I ran into that. In this case I'm thinking net, if net income is under a certain amount aren't you not obligated to report it?

Either way, I'll make all my spreadsheets and will have that for cost-basis at the very least, but my 2013 activity was only pushing 20gh/s for 2 months, not a hell of a lot there...

Edit: If this is the case, then I believe it was under $600 in revenues, I'll need to look into it. Anyways, if that's true then I only need to worry about 2014.

[ZiG]

From a little different angle:

What if I was mining an alt-coin before it was on an exchange, so at the time of mining, the value was $0.
Once it reached an exchange, I was no longer mining, but sold my alt-coin for btc.  
As far as I can tell, from this ruling, there has been no taxable event.

Even if I continue to trade btc for other alts as well as alt for alt, or alt for btc via something like cryptsy, there is no taxable or reportable event. I thinks this is what is known as a "like kind exchange." Like kind exchanges do not trigger realization, and therefore are tax-free.

However, when I cash out, my taxable income would be capital gains.  
Long or short term depending on when I first started mining the alt-coin.

Does anyone see any flaws in this reasoning?

IRS...

[Halofire]

What if someone mined direct to exchanges? No way to prove what's been mined.

[amspir]

What if someone mined direct to exchanges? No way to prove what's been mined.

Probably not, but you probably would need to explain the source of the bitcoins when you cash out your mining revenue through a bank.    Filing a tax return and deducting your mining expenses might be preferable to the IRS making the assumption that you are a cyber drug dealer and having you pay the tax on the entire amount.