I recently did a transfer from my electrum wallet to my circle account. At first i was surprised i got a few dollars in my circle account because i had thought i would receive the amt of btc i sent from electrum. It was a test transfer of just 0.02 btc so basically $5.50 or so. I then saw that i could change my currency on circle to bitcoin as oppose to usd.
However it says if i want to do this i have to check both options
1. If I choose to convert back to US dollars, this is considered a taxable event.
2. I understand that the price of bitcoin can be volatile, and often changes rapidly.
1. First off, does that mean even if my balance was 0... I would have to check both of these options before i continue? I have around $5.50 in my circle usd account at the moment.
2. Even if my account was in bitcoin currency and not USD, wouldn't that mean when i sell the bitcoins to circle and get credited with an ACH transfer, well that is considered a taxable event?
3. Are transfers from circle or coinbase to bank account reported to the irs? I can imagine bigger amounts are yes. But what if someone just did a $200 transfer from circle or coinbase to their bank of america account and only did 1 transaction for the year. I know that is suppose to be reported but i want to know is that transaction reported similar to how a W2 form is reported? However, if someone just did a few transfers from circle/coinbase to their usa bank account... let say a few of them for 100 or 200 dollars each, would they get in trouble for not reporting it? I assume since so many ppl use bitcoin and im sure tons of ppl have done bitcoin transactions and many might have done a few transactions only for 100-500 dollars total, i assume those people who don't report the bitcoin isn't going to get in trouble? Im sure there are tons of ppl who might have just did 1 bitcoin withdraw for 20 dollars and obviously didnt know you had to pay tax on it even if its like a 1 dollar gain etc.
4. The reason why i ask this is b/c i wanted to know does me checking that option
If I choose to convert back to US dollars, this is considered a taxable event.
Does that mean its automatically reported to the IRS even if i did like a 5 dollar transfer.
5. I'm assuming whether its checked or not, well any time you go from coinbase or circle to your bank acct, you are selling bitcoin and thus whether you checked anything or didn't have option to check this like on circle, it would be the same thing?