Will taxes be imposed on Bitcoin?

[Robinson66]

Because a major feature of Bitcoin is: anonymity.

If I use BTC to make a purchase, do I need to pay taxes to the IRS? If BTC is anonymous, how does the IRS know?

Similarly, if I buy cryptocurrency on the cash app and transfer it to my personal wallet, will this be considered a sale of my coins? How will the tax bureau track all this?

Provided that tax is required in the trade of cryptocurrency, do I still need to pay the tax when I'm losing money in the market?

[NeuroticFish]

Because a major feature of Bitcoin is: anonymity.

For the 100th time, Bitcoin is not anonymous. Bitcoin is pseudo-anonymous.
While in theory nobody knows if a certain address is yours, everybody can see all the transactions made with that address.

If I use BTC to make a purchase, do I need to pay taxes to the IRS? If BTC is anonymous, how does the IRS know?

Similarly, if I buy cryptocurrency on the cash app and transfer it to my personal wallet, will this be considered a sale of my coins? How will the tax bureau track all this?

If you gave your details for one of the transactions your address is involved into, IRS can link that address (and related transactions) to your person.

Provided that tax is required in the trade of cryptocurrency, do I still need to pay the tax when I'm losing money in the market?

Afaik no, but this depends from country to country and I don't know exactly how it is in US.

[Poker Player]

Apart from what NeuroticFish has answered, which I think has answered well what you asked, I would like to clarify that Bitcoin taxes are already imposed in the vast majority of countries in the world if not all. So it is not a question of whether they will be imposed. What you have to do is to find out the legal regulation of the country where you live and act accordingly.

[RapTarX]

Provided that tax is required in the trade of cryptocurrency, do I still need to pay the tax when I'm losing money in the market?

Tax is paid when you have capital gain. If you are losing money and/or if you didn’t sell your bitcoin, I guess you don’t need to pay taxes. Depending on countries, there may be some different rules but more or less this is the same.
If you don't share your address, no one may know that you are holding the BTC but at some point, you must be selling that and will be subjected to pay tax.

[o_e_l_e_o]

If I use BTC to make a purchase, do I need to pay taxes to the IRS?

Any time you dispose of bitcoin, be that selling, exchanging, using to buy something, trading for goods or services, or even swapping for an altcoin, then that is a taxable event in the eyes of the IRS.

If BTC is anonymous, how does the IRS know?

If the coins you are spending are not linked to your real life identity, and you are purchasing something anonymously without handing over any personally identifying information to the merchant, then they don't. However, most people's coins come from exchanges where they have completed KYC, and we know that centralized exchanges cooperate with the IRS and hand over details of their users. We also know the IRS hire blockchain analysis companies to track transactions and deanonymize bitcoin addresses. Or maybe the merchant will hand over details of your purchase to the IRS, along with the name and delivery address you gave them.

Similarly, if I buy cryptocurrency on the cash app and transfer it to my personal wallet, will this be considered a sale of my coins? How will the tax bureau track all this?

No. Transferring coins you own between different wallets you own is not taxable. They could track this with the personal details you used to sign up to Cash App.

Provided that tax is required in the trade of cryptocurrency, do I still need to pay the tax when I'm losing money in the market?

You can declare your losses to offset up to $3,000 of capital gains tax per year.

[cheezcarls]

I think we can't avoid this if our respective governments are imposing taxes on Bitcoin and other cryptocurrencies. For me, I think they're just gonna charge us tax later on when we convert our cryptos to fiat.

Here in the Philippines, the Bureau of Internal Revenue is planning to draft a tax for the "digital" economy. For me, I think we have no choice but to comply if we want crypto to stay and being regulated and not getting an outright ban like China did.

[20kevin20]

Just because Bitcoin provides a certain level of privacy (although I wish was much stronger) doesn't mean authorities don't know about you and your addresses/txs. An authority which is keen enough on finding more about your digital history might easily find out about your crypto past if you don't take the right steps at the right time.

Also, not declaring those gains means you know and agreed to the possible legal consequences. When you declare your transactions, there is nothing to fear if you declare everything correctly. If you're unsure about your past, get in touch with an expert or it might actually be better not to declare anything at all than declaring an uncertain financial history.

[Welsh]

Depends on the country, and the way that you acquired the Bitcoin, but you'll either be liable to pay income tax on your earnings or capital gain tax. Either way, the majority of countries are already requiring tax to be paid on cryptocurrencies, even lesser known newer ones, as they come under cryptocurrencies/tokens.

I understand why you may have missed this though since tax in general is confusing, but more so when cryptocurrencies are involved. I can't recommend it enough, but if you are ever in doubt you should contact an accountant, and get their advise on anything involving tax.

[dkbit98]

There are already taxes for Bitcoin in most of the world depending on country of residency, but some of them in South America or Africa still don't have any laws regarding Bitcoin.
In some countries you pay tax for Bitcoin only when you convert it to fiat, and others have much more strict laws with capital gains, so better check your regulations for more details.

[suzanne5223]

Because a major feature of Bitcoin is: anonymity.

No, the major feature of Bitcoin is decentralization and liberation that is the reason why alot of crypto community believe in Bitcoin till and that's also the reason the government was unable to shut it down or ban it. However, Bitcoin is not anonymous product and coins like Monero, Grin etc are the coin with anonymity feature.

If I use BTC to make a purchase, do I need to pay taxes to the IRS? If BTC is anonymous, how does the IRS know?

It depends on the crypto tax law implemented by the government of your country but I believe the tax ought to be charged by the store you purchase from.

Similarly, if I buy cryptocurrency on the cash app and transfer it to my personal wallet, will this be considered a sale of my coins? How will the tax bureau track all this?

Provided that tax is required in the trade of cryptocurrency, do I still need to pay the tax when I'm losing money in the market?

I'm not a legal practitioner but you need to fully understand crypto tax law very well but crypto tax are using pay for capital gain not buying

[Levero]

The issue of Bitcoin taxation depends on the different rules set by the country and government.
Bitcoin taxation shows that Bitcoin is being recognized by more countries, and it also defaults to the legality of Bitcoin transactions. Tax payment helps to improve the image of Bitcoin in the public, and to show that it can be used for legitimate purposes such as taxation.

[Darker45]

Every time you purchase something from a registered shop, store, site, or whatever, whether with your Bitcoin or your fiat, you are already paying taxes. So you don't have to pay a separate tax to the IRS anymore. When you eat in a restaurant, have a cup of coffee in a coffee shop, get a massage, watch a movie, and so on, your payment is already heavily padded with layers of taxes.

Outside the use of Bitcoin as a currency, there are also corresponding taxes when you do conversion or selling of Bitcoin. Capital gains tax would apply to that. How much, it depends on where you are from or whether you are actually gaining.

How the IRS would track whether you are faithfully declaring your Bitcoin holdings or not is beyond our knowledge. But you are asked to declare it.

[cryptoaddictchie]

Technically yes on some country but like majority answer nswered here. Its not purely anonimous since its nature of soing transactions are cna be seen and observed.

Regarding tax, its not yet majority implemented so, either you will pay tax or not will depend on your country. But if you are just buying goods or paying services then its already included on the sales payment.

[defi-Dany]

https://bitcoinmagazine.com/culture/need-to-know-bitcoin-and-taxes
It is worth noting that if an investor sells bitcoin at a loss and the price is lower than the purchase price, the investor is entitled to claim a tax cut, thereby lowering the total tax. At the moment, investors can understate their income by up to $3,000 a year because of investment losses, and if they lose more than $3,000, the losses can be pushed into the future to offset future taxes.


There are pros and cons to paying a bitcoin tax, and while paying a tax is a lot less profitable, paying a bitcoin tax also means being accepted by the public, which is a good thing when you look at the growth of bitcoin.

[TheNineClub]

So, just to add my couple of cents in this one. Currently, depending on your country, you are paying taxes only if you are cashing out on your investment. So, if you buy BTC for fiat you don't pay, if you buy anything inside the crypto ecosystem, you don't pay because (and this is how it works in my cuntry) you don't pay taxes on investments like this, you pay tax on anything you want to get out to FIAT from those investments. However, if we see more government regulations, how's to say how things will work.

[o_e_l_e_o]

Every time you purchase something from a registered shop, store, site, or whatever, whether with your Bitcoin or your fiat, you are already paying taxes. So you don't have to pay a separate tax to the IRS anymore.

That's not correct. Whenever you purchase anything with bitcoin, the IRS treats that as you selling bitcoin for fiat. You are expected to work out the fair market price of your bitcoin at the time of the trade, and declare a capital gain (or loss) on any difference between that price and your cost basis. It doesn't matter how many other taxes you have already been hit with. It doesn't matter if you already paid tax on the USD you earned to buy the bitcoin in the first place, and you are paying sales tax on the goods, and the merchant is paying business tax, and all the rest of it. See Question 8 on this page: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

How the IRS would track whether you are faithfully declaring your Bitcoin holdings or not is beyond our knowledge. But you are asked to declare it.

Pretty easy given most people use centralized exchanges which report to the government. Let's say you buy 0.1 bitcoin on Coinbase and withdraw to your own wallet. Coinbase then tell the IRS that you are holding 0.1 bitcoin, what address you are holding it on, and how much you paid for it. At that point, you can mix or coinjoin your coins to obfuscate what you are doing with them, but the IRS still know you bought 0.1 BTC at a price of $xx,xxx.

[Kimberl2020]

Bitcoin is taxed as proof of approval, a disguised acknowledgment of the legal existence of cryptocurrencies.

[Taskford]

Because a major feature of Bitcoin is: anonymity.

If I use BTC to make a purchase, do I need to pay taxes to the IRS? If BTC is anonymous, how does the IRS know?

Similarly, if I buy cryptocurrency on the cash app and transfer it to my personal wallet, will this be considered a sale of my coins? How will the tax bureau track all this?

Provided that tax is required in the trade of cryptocurrency, do I still need to pay the tax when I'm losing money in the market?

Well all is possible in world since this will only depends on adoption. If government will see that there are so many people using bitcoin on their country for sure a law will be created and bitcoin users will be sued to pay their taxes towards using this. Remember that before influencer on youtube didn't have a tax and now they need to pay taxes to the government since they see how big the profits gotten by those people so its not impossible if the same case will happen to bitcoin.

We don't know how the taxes executed so maybe lets wait for the time if this scenario will happen.

[jrrsparkles]

So, just to add my couple of cents in this one. Currently, depending on your country, you are paying taxes only if you are cashing out on your investment. So, if you buy BTC for fiat you don't pay, if you buy anything inside the crypto ecosystem, you don't pay because (and this is how it works in my cuntry) you don't pay taxes on investments like this, you pay tax on anything you want to get out to FIAT from those investments. However, if we see more government regulations, how's to say how things will work.

In US the situation is not the same, if you are buying something with bitcoin then it will also be considered as a trade or if you buy any crypto with bitcoin then it will also be considered as a trade and in US all the exchanges are regulated and report the user activities to IRS so they know about every traders but users have to track and report about their capital gains and other taxes like how they are doing it for a business, if you failed to do it then you will be considered as evading the tax and also have to accept the penalty as well.

[Cindella]

The taxation of Bitcoin indicates the national government's recognition of the legality of Bitcoin and its recognition of Bitcoin.

When capital gains are made through Bitcoin, taxes are required.