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[DPoS2]

I guess I might get a quick answer from this forum. My question is whether/when/how to pay tax on mined BTC. IRS requires tax for any gain even from garage sales.

Gain from garage sales??  There is an acquiring cost associated with everything, and a depreciation in the value but hardly anyone sells stuff for a profit at garage sales.

 For mined bitcoin I doubt you have to do anything until you sell or trade your bitcoin and you have a lot of cost in creating them from miner cost, operational cost, electric & anything else you want to say went towards supporting your efforts

It's all bullshit - tell them to find the trillions thrown away in the middle east before bending you over

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[rifleman74]

I guess I might get a quick answer from this forum. My question is whether/when/how to pay tax on mined BTC. IRS requires tax for any gain even from garage sales.

Gain from garage sales??  There is an acquiring cost associated with everything, and a depreciation in the value but hardly anyone sells stuff for a profit at garage sales.

 For mined bitcoin I doubt you have to do anything until you sell or trade your bitcoin and you have a lot of cost in creating them from miner cost, operational cost, electric & anything else you want to say went towards supporting your efforts

It's all bullshit - tell them to find the trillions thrown away in the middle east before bending you over

In theory, you're supposed to include mined bitcoin at the time you receive it in your gross income.  Good luck trying to find the exact price of a slice of a BTC after 101 confirmations.  If you can come up with any sort of basis and keep it consistent throughout, there's no way the IRS would be able to come up with "better" numbers than what you have. 


MINE ON AND CRACK THIS F'N BLOCK! 

[NotFuzzyWarm]

The ONLY way to be consistent on taxes from earned BTC is to track the income when you exchange it for Fiat.
Because different exchanges give us different rates there is no way to just track value of BTC earned -- which exchange would be used as the reference? Throw in the wildly varying price and profit/loss would be impossible to calculate.

Tracking the income at time of exchange into 'real money' or purchased goods is the only way it works.

[rifleman74]

The ONLY way to be consistent on taxes from earned BTC is to track the income when you exchange it for Fiat.
Because different exchanges give us different rates there is no way to just track value of BTC earned -- which exchange would be used as the reference?
Tracking the income at time of exchange into 'real money' is the only way it works.

But your basis is the price when you received the "Reward" from mining the blocks...it's not just straight 100% income.  That's what the IRS is "trying" to do.

[firetreeactual]

The ONLY way to be consistent on taxes from earned BTC is to track the income when you exchange it for Fiat.
Because different exchanges give us different rates there is no way to just track value of BTC earned -- which exchange would be used as the reference? Throw in the wildly varying price and profit/loss would be impossible to calculate.

Tracking the income at time of exchange into 'real money' or purchased goods is the only way it works.

Agreed. One must understand the the IRS itself has no clear policy, or understanding, of how to manage the situation in the first place. I track every penny of negotiated coin (ie., when turned into USD), and that's what I report. Any other way makes no sense at all...but there are several government entities that think it does.

EDIT: and no, the price at time of earning the block cannot work, either...whose price are you quoting? At what specific time? How do you corroborate that? This opinion (of mine) only applies to mined BTC, however. If you buy BTC at a given price, and sell it, then it's a capital gain.

[Tnaa97]

thanks. i used to mine on kano pool but i had to leave because electricity bills were killing me in bad months (£0.15/kWh rate)
I think it's time to go back to Kano pool now  
+1

Sooo, I just increased the size of my pool by 50%!!

Easy to do when you add your 3rd S7. (:

Doing the BLOCK Dance!

Mine on!

[NotFuzzyWarm]

But your basis is the price when you received the "Reward" from mining the blocks...it's not just straight 100% income.  That's what the IRS is "trying" to do.

No, the basis is when you SELL the BTC.
Ja the 1st revs of the IRS rulings were shooting to use value when the reward is received, similar to how they tax bartering however as is the case with the metals market, the price volatility prevents that method from working fairly. That and the fact that barter does not allow for accumulating income. So, for simplicity they now view it as simple income at time of exchange into fiat or durable goods.

Another way to look at it: Farming. If ya grow crops you are not taxed on the crops themselves. You can grow and stockpile for years and never owe a single cent. You are taxed when they are sold.

[rifleman74]

The ONLY way to be consistent on taxes from earned BTC is to track the income when you exchange it for Fiat.
Because different exchanges give us different rates there is no way to just track value of BTC earned -- which exchange would be used as the reference? Throw in the wildly varying price and profit/loss would be impossible to calculate.

Tracking the income at time of exchange into 'real money' or purchased goods is the only way it works.

Agreed. One must understand the the IRS itself has no clear policy, or understanding, of how to manage the situation in the first place. I track every penny of negotiated coin (ie., when turned into USD), and that's what I report. Any other way makes no sense at all...but there are several government entities that think it does.

EDIT: and no, the price at time of earning the block cannot work, either...whose price are you quoting? At what specific time? How do you corroborate that? This opinion (of mine) only applies to mined BTC, however. If you buy BTC at a given price, and sell it, then it's a capital gain.

I agree that it's tough to figure out the price since you mine it at one time...and then approximately 16 hours later you can have the opportunity to receive that percentage in a wallet.  That is what the IRS is trying to do, but again I don't see how they can enforce that.   

[rifleman74]

But your basis is the price when you received the "Reward" from mining the blocks...it's not just straight 100% income.  That's what the IRS is "trying" to do.

No, the basis is when you SELL the BTC.
Ja the 1st revs of the IRS rulings were shooting to use value when the reward is received, similar to how they tax bartering however as is the case with the metals market, the price volatility prevents that method from working fairly. That and the fact that barter does not allow for accumulating income. So, for simplicity they now view it as simple income at time of exchange into fiat or durable goods.

Another way to look at it: Farming. If ya grow crops you are not taxed on the crops themselves. You can grow and stockpile for years and never owe a single cent. You are taxed when they are sold.

lol, no way the basis can be when you sell the BTC...that's the gain or loss.   Otherwise you'd have zero taxable gain/loss...that's not going to work for the IRS.

Read Q8 on the following link. 
https://www.irs.gov/pub/irs-drop/n-14-21.pdf

[fjtropepe]

But your basis is the price when you received the "Reward" from mining the blocks...it's not just straight 100% income.  That's what the IRS is "trying" to do.

No, the basis is when you SELL the BTC.
Ja the 1st revs of the IRS rulings were shooting to use value when the reward is received, similar to how they tax bartering however as is the case with the metals market, the price volatility prevents that method from working fairly. That and the fact that barter does not allow for accumulating income. So, for simplicity they now view it as simple income at time of exchange into fiat or durable goods.

Another way to look at it: Farming. If ya grow crops you are not taxed on the crops themselves. You can grow and stockpile for years and never owe a single cent. You are taxed when they are sold.

lol, no way the basis can be when you sell the BTC...that's the gain or loss.   Otherwise you'd have zero taxable gain/loss...that's not going to work for the IRS.

Read Q8 on the following link. 
https://www.irs.gov/pub/irs-drop/n-14-21.pdf

I sent it over to my CPA and told them they need to figure it out.

[Waztim]

140.75% of Diff, come on BLOCK!! Mine On!!

[2tights]

yes, yes. fine. Good.

Lets get another block, first, though.

[NotFuzzyWarm]

But your basis is the price when you received the "Reward" from mining the blocks...it's not just straight 100% income.  That's what the IRS is "trying" to do.

No, the basis is when you SELL the BTC.
Ja the 1st revs of the IRS rulings were shooting to use value when the reward is received, similar to how they tax bartering however as is the case with the metals market, the price volatility prevents that method from working fairly. That and the fact that barter does not allow for accumulating income. So, for simplicity they now view it as simple income at time of exchange into fiat or durable goods.

Another way to look at it: Farming. If ya grow crops you are not taxed on the crops themselves. You can grow and stockpile for years and never owe a single cent. You are taxed when they are sold.

lol, no way the basis can be when you sell the BTC...that's the gain or loss.   Otherwise you'd have zero taxable gain/loss...that's not going to work for the IRS.

Read Q8 on the following link.  
https://www.irs.gov/pub/irs-drop/n-14-21.pdf

That IRS drop is what I was referring to with the viewing BTC tax as barter.
Much of this has been hashed and re-hashed in Taxes on Bitcoins thread (now locked).
Point is, as firetreeactual and I pointed out, that guidance is useless because there is no reference to which used exchange given in it. Look at the exchanges and you will see several hundred $ spread in pricing so which to report with? The lowest one? The highest one? Let's face it, the IRS still needs to nail this down.

The only thing that makes fully repeatable sense - and the only verifiable way - is basing taxes owed when you actually do the exchange into fiat. Only then is there no question as to the 'real' value. Then there is the matter of *just how* the IRS would have any knowledge of your (mined) BTC holdings? When you exchange into fiat, that goes straight into my bank and both Coinbase and my bank record it/report it to the IRS. That is all they see so that is all I report.

As for P&L, that mainly enters in only if you are trading or running as a business. Trading is straightforward cost-to-buy vs sell price. As a business, the taxable value of BTC is being offset by Section 179 deducts and normal business operating expenses, eg power/rent, etc. With personal mining there are no deducts so is pure additional income and taxed as such.

[DPoS2]

With personal mining there are no deducts so is pure additional income and taxed as such.

No deducts with personal mining?   Those miners and electrons are just like a free apple tree on the side of the road to be picked?

or am I missing what you meant?

[wavelengthsf]

140.75% of Diff, come on BLOCK!! Mine On!!

Can someone ELI5 this percentage? New to mining at Kano's and I was used to other interfaces and labels.

In general, the numbers of shares should be roughly the difficulty. So at today's difficulty, you'd be expected to find a block after 1,931,136,454,487 shares. However, it isn't a perfect calculation, since there is variance and luck. So when you see 140% diff, it means we've shared 40% over the amount that should give a block, statistically.

[wavelengthsf]

That IRS drop is what I was referring to with the viewing BTC tax as barter.
Much of this has been hashed and re-hashed in Taxes on Bitcoins thread (now locked).
Point is, as firetreeactual and I pointed out, that guidance is useless because there is no reference to which used exchange given in it. Look at the exchanges and you will see several hundred $ spread in pricing so which to report with? The lowest one? The highest one? Let's face it, the IRS still needs to nail this down.

The only thing that makes fully repeatable sense - and the only verifiable way - is basing taxes owed when you actually do the exchange into fiat. Only then is there no question as to the 'real' value. Then there is the matter of *just how* the IRS would have any knowledge of your (mined) BTC holdings? When you exchange into fiat, that goes straight into my bank and both Coinbase and my bank record it/report it to the IRS. That is all they see so that is all I report.

As for P&L, that mainly enters in only if you are trading or running as a business. Trading is straightforward cost-to-buy vs sell price. As a business, the taxable value of BTC is being offset by Section 179 deducts and normal business operating expenses, eg power/rent, etc. With personal mining there are no deducts so is pure additional income and taxed as such.

I run my mine as an LLC.

My CPA advised me to recognize each payout from mining as revenue at the time the TX in confirmed. So I record the date/time and then the price based on the CME reference rate for that day.

Of course, you can deduct power, hardware, internet, facilities costs, etc from this.

I think in general its best to talk to your CPA, or whomever will need to defend you in court if you get audited, to make sure their position is clear.

[rifleman74]

That IRS drop is what I was referring to with the viewing BTC tax as barter.
Much of this has been hashed and re-hashed in Taxes on Bitcoins thread (now locked).
Point is, as firetreeactual and I pointed out, that guidance is useless because there is no reference to which used exchange given in it. Look at the exchanges and you will see several hundred $ spread in pricing so which to report with? The lowest one? The highest one? Let's face it, the IRS still needs to nail this down.

The only thing that makes fully repeatable sense - and the only verifiable way - is basing taxes owed when you actually do the exchange into fiat. Only then is there no question as to the 'real' value. Then there is the matter of *just how* the IRS would have any knowledge of your (mined) BTC holdings? When you exchange into fiat, that goes straight into my bank and both Coinbase and my bank record it/report it to the IRS. That is all they see so that is all I report.

As for P&L, that mainly enters in only if you are trading or running as a business. Trading is straightforward cost-to-buy vs sell price. As a business, the taxable value of BTC is being offset by Section 179 deducts and normal business operating expenses, eg power/rent, etc. With personal mining there are no deducts so is pure additional income and taxed as such.

I run my mine as an LLC.

My CPA advised me to recognize each payout from mining as revenue at the time the TX in confirmed. So I record the date/time and then the price based on the CME reference rate for that day.

Of course, you can deduct power, hardware, internet, facilities costs, etc from this.

I think in general its best to talk to your CPA, or whomever will need to defend you in court if you get audited, to make sure their position is clear.

What he said.   You recognize the payout on the 101st block or when the reward/payment is generated on the website?  Either can work, just as long as you're consistent. 

[rifleman74]

But your basis is the price when you received the "Reward" from mining the blocks...it's not just straight 100% income.  That's what the IRS is "trying" to do.

No, the basis is when you SELL the BTC.
Ja the 1st revs of the IRS rulings were shooting to use value when the reward is received, similar to how they tax bartering however as is the case with the metals market, the price volatility prevents that method from working fairly. That and the fact that barter does not allow for accumulating income. So, for simplicity they now view it as simple income at time of exchange into fiat or durable goods.

Another way to look at it: Farming. If ya grow crops you are not taxed on the crops themselves. You can grow and stockpile for years and never owe a single cent. You are taxed when they are sold.

lol, no way the basis can be when you sell the BTC...that's the gain or loss.   Otherwise you'd have zero taxable gain/loss...that's not going to work for the IRS.

Read Q8 on the following link.  
https://www.irs.gov/pub/irs-drop/n-14-21.pdf

That IRS drop is what I was referring to with the viewing BTC tax as barter.
Much of this has been hashed and re-hashed in Taxes on Bitcoins thread (now locked).
Point is, as firetreeactual and I pointed out, that guidance is useless because there is no reference to which used exchange given in it. Look at the exchanges and you will see several hundred $ spread in pricing so which to report with? The lowest one? The highest one? Let's face it, the IRS still needs to nail this down.

The only thing that makes fully repeatable sense - and the only verifiable way - is basing taxes owed when you actually do the exchange into fiat. Only then is there no question as to the 'real' value. Then there is the matter of *just how* the IRS would have any knowledge of your (mined) BTC holdings? When you exchange into fiat, that goes straight into my bank and both Coinbase and my bank record it/report it to the IRS. That is all they see so that is all I report.

As for P&L, that mainly enters in only if you are trading or running as a business. Trading is straightforward cost-to-buy vs sell price. As a business, the taxable value of BTC is being offset by Section 179 deducts and normal business operating expenses, eg power/rent, etc. With personal mining there are no deducts so is pure additional income and taxed as such.

But Fuzzy, what is your basis then?  You have to have some costs of goods sold (mined), otherwise it's just straight 100% income.  The IRS won't care if whatever cost basis you can come up with is consistent, even if it's to your advantage.  They won't be able to spend the time to come up with something that rules better in their favor...just simply not worth it.


That being said, let's find another block!

[wavelengthsf]

What he said.   You recognize the payout on the 101st block or when the reward/payment is generated on the website?  Either can work, just as long as you're consistent. 

I recognize it once Kano sends the payment - I believe that's always the 101st confirmation.

[luxMiner]

hey, i slipped off the first page! that is not acceptable! i will just have to add another 100THs.... -come and get me!!

let's gooooo!!