WARNING: Not a lawyer, accountant or CPA. I've just done a lot of research on this.
And it turns out the every day user should only report on transactions over $600
Wondering how the initial burst of news articles missed that quite critical point?
They missed it because that is false. What I'm about to say is highly simplified because there are exceptions. You have it backwards: OTHER people have to report YOU to the IRS when THEY send you more than $600 (of anything) in a given tax year. YOU still have to report everything regardless.
I have no issue with paying tax and welcome the acknowledgement that the IRS has now given the asset class. I do have issues with some aspects of the IRS rules.
1)An individual is not allowed to deduct expenses incurred in crating the property. If they want you to pay on creation then a deduction of expenses should be allowed.
Where did you hear that? If you aren't mining as part of a business, then there are two ways you can deduct the expenses:
1) If your mining activities are at the level where the IRS classifies it as a business rather than a hobby, then you can deduct it as a self-employment expense.
2) If your mining activities are classified as a hobby, you can deduct the expenses up to the amount of mining income you've made by itemizing on your return.
Thank you for you comments, they are very helpful in trying to understand how to file with the IRS.
The IRS Notice 2014-21 states in section 3. scope:
"No inference should be drawn with respect to virtual currencies not
described in this notice. "
Does this mean you may not use any std TAX rules when declaring virtual currencies and only use those described in the notice? If this is the case how are you able to deduct expenses as an individual not engaged in a business?
If you mine 1btc at $500 you pay tax on receipt of the minded virtual currency, if you hold the 1btc and the price drops to $400. How do you claim this loss as an individual not evolved in a business?
