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Author Topic: Do we have to pay taxes on bitcoin?  (Read 767 times)
boconniff40
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March 07, 2012, 04:33:16 PM
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I mean if it's anonymous how can the government know how much we truly make?
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RodeoX
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March 07, 2012, 04:41:44 PM
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Assuming you are a U.S. citizen, you are likely to be required to pay capitol gains. So if you bought 1 bitcoin at $5 then sold or spent it at a value of $8, you would owe taxes on the $3 appreciation in value. The "good" news is that capitol gains are taxed at only 15%. You get to pay less than you do for your earned wages, just like Montgomery Burns! Cheesy
You are also correct that the government may have no way of knowing what you owe. So, again like Mr. Burns, you could just hide it.   

The gospel according to Satoshi - https://bitcoin.org/bitcoin.pdf

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edd
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March 07, 2012, 04:48:40 PM
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Just like your cash transactions, it's up to you to record and report them.

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boconniff40
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March 07, 2012, 05:33:29 PM
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Actually if you spare how many times you exchange BTC to USD, you don't have to pay at all. Think about it.
Stephen Gornick
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March 07, 2012, 05:33:58 PM
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I mean if it's anonymous how can the government know how much we truly make?

Each transaction is logged (either in your local wallet or in your online wallet).  You just need to report it properly, and then the government will know exactly how much you truly made.

I'm purposely being obtuse with my response there.  Of course, you are likely asking if bitcoin use gives the tax authority less information that is useful in enforcing tax regulations.  That is likely true compared to businesses that use checking accounts and credit card transactions for most everything.

From a tax preparation service:
Quote
"Income tax regulations place the burden of proof on the taxpayer. Because of this, to prepare your tax return, you need to keep accurate records that support the income, expenses and credits you report. Generally, these are the same records you use to monitor your business or track your personal finances.

If you operate a business, your records must be available for inspection by the IRS or other tax authority. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination."
- http://www.jacksonhewitt.com/Resource-Center/Tax-Topics/Record-Keeping/

Many businesses are cash-based businesses so Bitcoin doesn't introduce a significant issue that the tax authorities aren't already addressing.

Here's a related article in the Bitcoin wiki:
 - http://en.bitcoin.it/wiki/Tax_compliance

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