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Author Topic: IRS says mining is "income" (40% tax) instead of cap. gains (20% tax)  (Read 3897 times)
jjdub7
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May 10, 2014, 10:30:38 PM
 #1

Ergo, they can go fuck themselves.  True, the new regulations issued only apply if the BTC is sold into USD.  But as far as tracking the high frequency exchange and securities trading, especially with Dark Wallet and whatever else starts coming out now...all I have to say is "...good luck"

(hopefully Liam Neeson doesn't work for the IRS)





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DeathAndTaxes
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May 10, 2014, 10:41:45 PM
 #2

Where did you get 40% and 20% from?

What is your marginal income tax rate?
What is your long term capital gain rate?
What is your short term capital gain rate?
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May 10, 2014, 11:28:54 PM
 #3

I`ll say IRS go fuk yourself.

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May 10, 2014, 11:43:16 PM
 #4

Yes Since income tax is based on your AMOUNT OF INCOME where the hell did you get the 40% tax rate from? That would only apply to people making $406k+ a year selling BTC Anyway and how about a link to where ever you are getting this info from instead of just spreading baseless fear and attempting to induce market instability
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May 11, 2014, 09:31:06 PM
 #5

It makes sense to me that mining results in income rather than capital gains. Miners do work and get paid for that work.

Anyway, most miners will be able to declare a loss by depreciating their equipment, which will lower their taxes at the "40%" rate.

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May 12, 2014, 01:11:30 AM
 #6

Yup very much so I would more agree with BTC being income instead of capital gains but OP needs to look up tax brakets either he's an idiot that regurgitates misinformation from the reaches of the web or a jaded rich bastard that's never paid under the 40% bracket either way I am not a fan
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May 12, 2014, 06:59:16 AM
 #7

That doesn't make any sense. For example, if some guy is spending $20,000 on mining rigs and electricity, and getting $8,000 worth of coins in return, should he pay $3,200 in taxes? No way. IRS has gone insane.

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Kluge
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May 12, 2014, 07:15:19 AM
 #8

Hey, guys. Amerifag reporting.

For most, "income" is the most flexible (and game-able) tax category. For example, as income, it counts toward the EITC, meaning that a low-income and even middle-income (and especially no-income) person mining likely is not only owing nothing in taxes, but can receive $thousands each year in tax "refunds." This may or may not be relatively harmful to larger players, but they can work that out with their tax attorneys.

Don't mix your coins someone said isn't legal
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May 12, 2014, 02:51:53 PM
 #9

That doesn't make any sense. For example, if some guy is spending $20,000 on mining rigs and electricity, and getting $8,000 worth of coins in return, should he pay $3,200 in taxes? No way. IRS has gone insane.

No someone having $20,000 in cost and $8,000 in revenue has a NEGATIVE $12,000 in income and therefore would not only have no taxes would reduce the taxes on up to $12,000 worth of other income.  Where does your $3,200 come from?
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May 12, 2014, 03:28:46 PM
 #10

That doesn't make any sense. For example, if some guy is spending $20,000 on mining rigs and electricity, and getting $8,000 worth of coins in return, should he pay $3,200 in taxes? No way. IRS has gone insane.

No someone having $20,000 in cost and $8,000 in revenue has a NEGATIVE $12,000 in income and therefore would not only have no taxes would reduce the taxes on up to $12,000 worth of other income.  Where does your $3,200 come from?

40% of 8000, this is crazy, those thiefs want to rob us even more than those scammer in altcoin section, i'll just mine and dump to friend, go fuck yourself IRS, good luck traking me
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May 12, 2014, 03:30:59 PM
 #11

The $8,000 isn't income.  You don't owe taxes on gross revenue, you owe taxes on income.  In the example the miner has no income, he has a loss and thus no taxes are owed, not only are no taxes owed if the miner has other non mining income his loss from mining would offset that income.  

Even if the miner did have $8,000 in income (income = revenue - expenses) it wouldn't be $3,200 in taxes.

Assumming he had no other income and was single it would be:

$8,000 - $6,100 (standard deduction) = $1,900 * 10% = $190 in taxes.

http://www.bankrate.com/finance/taxes/tax-brackets.aspx

How about people who don't understand the absolute basics of taxes, leave the taxes to their accountant or tax professional before they freak out?
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May 13, 2014, 05:43:41 AM
 #12

Where did you get 40% and 20% from?

What is your marginal income tax rate?
What is your long term capital gain rate?
What is your short term capital gain rate?

I used those two for illustrative purposes, as everyone's income tax rate differs - but yes, you will be paying that 40% marginal rate if you're mining enough. 

My point isn't the exact rate, its how did a bunch of sloppy bureaucrats make the distinction between what should be taxed at the income rate vs. the short/long term capital gains rate?  If their only historical precedent is gold, then they deeply misunderstand the nature of today's bitcoin mining game and the required capital gains outlays therein.





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May 13, 2014, 05:56:06 AM
 #13

My point...is that buying mining equipment (or bonds, or any asset whose output is tied to the difficulty) is functionally the equivalent of buying bitcoin futures, is it not?  And yes, the 40% rate will read as an exaggeration to most people, but keep in mind that the people building out the actual economic infrastructure that will boost the value of bitcoin in the long run will have to pay that 40% marginal rate (I pay in the ~35% bracket, and I have a day job, but thanks).

Mining is the engine that drives the network - I'm just saying that its stupid of the IRS to pull a move like this because it will drive mining operations overseas where both tax rates and electricity costs are lower.  Not the smartest move when real wealth is being created within your borders that could be used to fill the abyssal (sans natural gas) spending deficit that's bleeding away all of our future social security checks (read: gambling stipends).





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.CHALLENGES ON SMART CONTRACTS.
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jjdub7
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May 13, 2014, 06:36:39 AM
 #14

Yes Since income tax is based on your AMOUNT OF INCOME where the hell did you get the 40% tax rate from? That would only apply to people making $406k+ a year selling BTC Anyway and how about a link to where ever you are getting this info from instead of just spreading baseless fear and attempting to induce market instability

Two things:

1 - 2014 tax brackets: http://www.tax-brackets.org/federaltaxtable
2 - Most of you are assuming the price has reached its long term equilibrium.  If the BTC/USD rate were to hit $16,000, that means a block is being taxed at 40%.  Granted, $16k/BTC might seem like a bit of a stretch, but don't forget that $1200/BTC would have been unfathomable to many just two years ago.

Or - fuck it!  There's no precedent because bitcoin mining doesn't really fall into any predefined category.  So what's to stop them from slapping a 60 or 70% tax on it?

So tell me...what happens when the IRS also decides that mining pools are effectively businesses and starts taxing their mining income directly - just like the triple incidence of taxation (corporate profits, employee salaries, and shareholder returns) we already see in the corporate world?

The direction I'm trying to point this conversation in doesn't have so much to do with what they want to classify mining revenues as, but rather that this move by the IRS is the exact type of federal power grab that bitcoin was created to weaken.  Similar to Obama's wonton expansion of the legislative branch's authority, the IRS is filling the uncertainty power vacuum with a self-proclaimed authority to excise taxes without establishing proper, well-researched precedents that drive economic prosperity.  Instead, they've made a snap decision to classify mining without acknowledging any of the disparities between it and traditional methods of generating income, and the current policy pays no heed to the fact that mining is an infrastructure-supporting mechanism in addition to an income activity.





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▬▬▬ANN▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬WP▬▬▬
.CHALLENGES ON SMART CONTRACTS.
▬▬▬▬▬▬▬▬ICO STARTS 7th DEC, 2017▬▬▬▬▬▬▬▬







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Ron~Popeil
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May 13, 2014, 06:16:04 PM
 #15

I have never converted BTC to fiat personally. I am no accountant but I think it is only applicable when you actually convert it.

If they do destroy mining pools the hashrate and difficulty drop might make solo mining profitable again. As always innovators will innovate and bitcoin will evolve to compensate for this kind of stuff. 

ranlo
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May 13, 2014, 06:20:18 PM
 #16

Yes Since income tax is based on your AMOUNT OF INCOME where the hell did you get the 40% tax rate from? That would only apply to people making $406k+ a year selling BTC Anyway and how about a link to where ever you are getting this info from instead of just spreading baseless fear and attempting to induce market instability

Two things:

1 - 2014 tax brackets: http://www.tax-brackets.org/federaltaxtable
2 - Most of you are assuming the price has reached its long term equilibrium.  If the BTC/USD rate were to hit $16,000, that means a block is being taxed at 40%.  Granted, $16k/BTC might seem like a bit of a stretch, but don't forget that $1200/BTC would have been unfathomable to many just two years ago.

Or - fuck it!  There's no precedent because bitcoin mining doesn't really fall into any predefined category.  So what's to stop them from slapping a 60 or 70% tax on it?

So tell me...what happens when the IRS also decides that mining pools are effectively businesses and starts taxing their mining income directly - just like the triple incidence of taxation (corporate profits, employee salaries, and shareholder returns) we already see in the corporate world?

The direction I'm trying to point this conversation in doesn't have so much to do with what they want to classify mining revenues as, but rather that this move by the IRS is the exact type of federal power grab that bitcoin was created to weaken.  Similar to Obama's wonton expansion of the legislative branch's authority, the IRS is filling the uncertainty power vacuum with a self-proclaimed authority to excise taxes without establishing proper, well-researched precedents that drive economic prosperity.  Instead, they've made a snap decision to classify mining without acknowledging any of the disparities between it and traditional methods of generating income, and the current policy pays no heed to the fact that mining is an infrastructure-supporting mechanism in addition to an income activity.

You also need to keep in mind that keeping 60% of $20k Bitcoin would be $12k. Keeping 90% of $500 BTC is only $450 in profit. While the tax amount would go up with higher valued BTC, your earnings are significantly higher as well.

If you get to the 40% tax bracket and don't want to pay it, just toss all your BTC here. I'll gladly take the profit you're passing up!


 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




















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spazzdla
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May 13, 2014, 08:29:16 PM
 #17

As a Canadian.. Ya the IRS can go F them selves.
socal
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May 14, 2014, 09:40:25 PM
 #18

Of course since the IRS has no way to monitor the trading arm of BTC yet you could just try not reporting it lol
Fiyasko
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May 14, 2014, 09:45:28 PM
 #19

The IRS can go fuck them selves, Absolutely anyone trying to "tax" bitcoin mining income can go fuck themselves.
It's intolerable and just plain screwed up.
Anyone trying to do such a thing is basically saying "lets send all bitcoin miners offshore to centralized could hashing facilities that can be easily shut down in comparison"

Fuck Right Off, All bitcoiners should stand up with the middle finger to the IRS about this.
I am Canadian... *crosses arms* I am willing to fight a war over this and give my life to defend the future from tyranny
No government should be allowed to "tax" an income source that they have Nothing to do with.

http://bitcoin-otc.com/viewratingdetail.php?nick=DingoRabiit&sign=ANY&type=RECV <-My Ratings
https://bitcointalk.org/index.php?topic=857670.0 GAWminers and associated things are not to be trusted, Especially the "mineral" exchange
SFHere
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May 14, 2014, 10:21:43 PM
 #20

[insert IRS hate here]
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