I will be starting a thread challenging the IRS to declare what I owe them in bitcoin capital gains. I want to prove to everyone that they don't have a clue.
Really? I think anyone that's familiar with including gains/losses on their tax return would find it pretty easy; and for anyone thats never done capital gains/losses would find it about the same difficulty as manually entering your 1099-D. I had to enter values from a 1-K from an LLC this year, now that was rough.
If you haven't kept records or have 1000's of trades and never looked at how much you've gained/lost then it might be cumbersome.
I haven't looked over the specifics of mining and how that applies though.
Have you asked anyone for help?
I think there are a ton of unanswered question with this ruling. For example, what if I buy one BTC at Coinbase this month for $500, move the coins to a wallet next month when they are worth $600, and finally move them back coinbase next year to sell them, when would I pay tax on them? To follow the blockchain as some people suggest, I'd be paying the tax every time I moved them. But that is crazy. If I buy a $5,000 Soyer painting, and I find out it's now worth 10k, I don't pay a tax on that gain because I moved it to a more secure room.
It doesn't really matter until the coins are converted back into cash.
In the scenario you describe I'm assuming you purchased them 1/1/2014 for $500, then a year later sell them for (lets say) $900. If you are: single and not head of household and earn <$36k, single head of household and earn <$48k, married and earn <$72k then your liability in each case is zero. Now if your over those but under $400k your liability on that $400 profit would be $40. It really doesn't matter how much its worth when its moved around or just sits in a wallet, for tax purposes those are unrealized gains and have no liability. It's once you sell it for USD that matters. So you'd pay the tax on your 2015 tax return, if you are rich enough (and hey maybe you are mr. $5000-paintings-in-secure-rooms ;P)
All that aside, in most cases not reporting bitcoin profits doesn't really matter since the IRS doesn't have alot of resources you really only have to worry about claiming bitcoin earnings if you are making serious money off it, any good accountant will tell you the same thing.
