I am building an online shopping cart (in US) with a payment option to pay a electrum bitcoin wallet address. I will later transfer the bitcoin to an exchange like coinbase, and periodically from there to my bank account.
1. As I understand, i only need to claim capital gains once I transfer to my bank account. is that right? and would this be the same for bitcoin "income" in general?
2. If I want to report bitcoin income on a tax return, do I simply add it to the "other income" how should I label it?
3. From your experience, will this trigger an audit to any greater degree?
4. If I do get audited, what must I show them? I only plan on maintaining a numerical client ID and amount paid in quickbooks. All other info like client name, email, IP...etc will get auto purged as part of my privacy policy.
The exchange would only show random deposits from various temporary electrum wallets. Would this routine be an issue if the IRS wanted to audit?
I guess the bottom line is, I want to get the IRS their money, but in terms of "information" only provide what I am legally required to.