Quote from: viking02 on December 15, 2014, 10:01:17 PM

I was told b/c im sending bitcoin to a sportsbook and it converts into usd... im actually selling bitcoin. Is this true? Does that mean i have to pay tax on it the moment it convert into usd in my sportsbook acct?

Bitcoin is taxed as property, and treated as a capital asset, so yes, whenever you sell or exchange property you have a tax event.

You don't pay taxes the moment it is converted, but you need to record any potential gains (or losses), so they can be included in your 1040 Schedule D for your tax year.

Quote from: viking02

Example if i bought 5000 dollars worth of bitcoin

You bought x BTC for $5k.

Quote from: viking02

and send it to blockchain then to heritage sports

You "sold" x BTC for ~$5k.

The difference less any trading fees is your gain. This is more than likely going to be a loss anyway, because of the difference in buy and sell prices as well as fees. You can get a tax benefit from losses, you still worth recording.

Quote from: viking02

then say i have just a small 3 dollar profit.... does that mean i have to pay tax on it?.

There are no limits for capital gains, with the exception that since figures are rounded to the nearest dollar on your tax forms, any gains less than $0.50 can be ignored.

Quote from: viking02

im not even withdrawing it yet... b/c if i withdraw it... assumign its in bitcoin, then the same 5003 dollar when i withdraw it to my bitcoin wallet might be a bit less than that.

Doesn't matter. If you are having it converted to USD (or anything else) it is still as tax event.

Quote from: viking02

Are bitcoin buying and converting recorded? Thus the last thign i want is to have my taxes reported with my acct for my poker winnings... then later on i found out i had some 3 dollar profit on bitcoin that i have some minor issue with my taxes that i didnt know about if thats true.

First, the US tax is an honor system. You report what you owe. If, if, you are audited, the IRS may well investigate based on your earning or bank accounts not matching your income.

Bitcoin buying/selling isn't reported to the IRS by anyone yet, as far we we know. It isn't like stocks. Nonetheless, you should report any gains, since it isn't difficult and if you are in a high-risk category of being audited, you won't have to worry about it.

However, sounds like you are going to have a loss anyway, in which case you won't have underpayed taxes so have no problems.

Quote from: viking02

read that if you don't convert your bitcoin to your bank acct, then you dont' have to report it. Is that true?

No. Any asset exchange is a tax event, or anywhere where the funds are in your control.

Quote from: viking02

I read bitcoin deals with capital gains so does that mean unless i withdraw it back to usd, then i dont? The thing here with gambling taxes is it doesn't matter if you withdrew or not. Example say for the year i was up 60k. I only withdrew 25k. On my taxes, i have to report 60k, not 25k even though 25k is all i withdraw.

Yes, capital gains only get calculated when you sell or spend those Bitcoins. Holding on to them has no tax effect.

Quote from: viking02

What really confuses me is i hear bitcoin is anonymous so if thats the case....

Anonominty is irrelevant. Cash is anonymous. Tax reporting is up to you.

Quote from: viking02

Just curious if someone were to have really small capital gains like even $1, do you have to report it?

Legally, yes. But say you didn't. First, you have to get picked and be audited. They have to find that unpaid tax gain. You then owe $0.25 taxes. You'll have to pay it.

You can use https://bitcointaxes.info to help work out any gains.