Working good for me

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.


You bought x BTC for $5k.


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.


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.


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


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.


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


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


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


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.

http://www.irs.gov/publications/p550/ch04.html#en_US_2013_publink100010601. That's not to say they shouldn't, but they don't.

Obviously he needs to work out the difference in gain rates, but without any specifics it's why he should seek advice as whether claim the losses this year or next. His "significant capital gains" are all relative, and may be wholly in the 0% rate for all we know.

Wash sales aren't applicable to Bitcoin, only stocks and securities, so ignore that.

Yes, what you are suggesting is fine. If you want to claim a loss sell and buy back, however, be aware of the implications.

1) You'll lose money because of the difference in buy and sell price, as well as fees.
2) You'll reset the cost basis to that date, so if you make any gains you'll have to wait another year to get the long-term lower rates.
3) As you mention, you can only deduct up to $3,000 against any income (after reducing any other gains) per year. So if you have a $9,000 loss, it's going to take 3 years to it back.

Use https://bitcointaxes.info, which can show you how much of a loss you would make, so you can take these figures to a tax professional for proper advice.

Bitcoin purchases aren't tax deductible. But you can claim capital losses from trading at a loss, up to the value of your other gains that year and $3,000 income.

Yes, the UK, like every other country I can think of, requires you to pay income tax on items of value you received to the value of your own currency. Whilst this may considered a barter, it is still taxed as income.

https://www.gov.uk/government/publications/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies

There is no threshold for capital gains. The "$600" is often misunderstood, it is a form filing requirement for business and just not relevant to capital gains.


Yes, just like last year and the year before, people will pay taxes on any gains they made selling or spending crypto-currencies.

There is nothing to worry about. When you spend a coin, you just need to know what you bought it for and when, so you can work out if you made a profit (or loss). You then declare that on your tax forms as capital gains/losses (Schedule D). The only time you can ignore it is if the gain is < $0.50, because you only report rounded whole dollars.

Coinbase has a Gains report, so just use that. Or use bitcointaxes.

The IRS doesn't exactly "plan" to use FIFO. FIFO is the preferred method of the IRS. However, there is debate as to what methodology you could use (LIFO, HCFO, CCFO, average, etc ) since Bitcoins are property and therefore essentially have no particular rules.


It doesn't matter where the coin sits, its cost basis doesn't change. If you bought 1 BTC on Coinbase for $500 on date x and transfer it to a wallet, it still has a cost-basis worth $500 from x. Transfer it back to Coinbase, still nothing changes.

What matters is if you start mixing coins of different cost basis. Say you bought another 1 BTC for $400 and transferred it to the same wallet. Then you spend one. Which coin did you spend, the $400 or $500? Technically, the software could have spend either or a mix of the two, but that is almost impossible to track. So your only realistic option is to balance it on paper. If you use FIFO, then it was the $500. If you use LIFO, it was the $400.

End result, if you use Coinbase for all your buying/selling/spending and want to use FIFO, their tool will work everything out for your.

But if you spent using another wallet, on your phone for example, bought/received elsewhere or traded/mined alt-coins, you need a more sophisticated tool. Look at https://bitcointaxes.info that is designed to work out Bitcoin and alt-coin capital gains.

Yes, it's income, and from that point on you own it with a cost basis of that same income value on that date. So when you sell/spend it in the future you will use that work out the different as being your gain (or loss).

So, if you received 1 BTC yesterday, you report $365 income. (you can choose to use any reliable and consistent exchange rate source). If you sell it in a month for $400, you also have to report $35 short-term capital gains...which is taxed as income. If you sold it for $300 in a month, you could declare a loss of $65, which can be offset against your income, so reducing your tax bill.

No it isn't.


That extra 1 BTC is interest income. It's just like being paid cash interest. Find the daily price on the day you received it and report it as income, unless the borrower sends you a 1099-INT, in which case you should use that figure.

As a company, or self-employed, you can deduct all applicable expenses from your net profit, electricity, etc, as well any mining hardware in the year it went into service. But If you set up as self-employed, you'll also be paying the share of self-employment taxes (social security and medicare).

As an individual, hobby expenses can be deducted but only up to the profit you make from your hobby (mining in this case) and no more than 2% of your AGI. You also have to include it as part of your Schedule A and itemize all your deduction, which could come out as less than the standard deduction anyway, in which case not worth it.

In the end it matters how much expenses you have and whether it's worth claiming it through an SE business.

There are no capital gains until you sell those coins. Even then your country's tax rules may not require you to pay capital gains taxes, depending on where you live, how much it was, or how long you held them.

In addition, and depending on your country, you may have received income by receiving those coins. It would be classed as a barter exchange. Look into your tax laws.

Mining. This is plain income and the value of the Bitcoins on that day. So if you mined 1 BTC when it was worth $450 (or whatever daily price chart you use) income. That is just added to your normal income totals and so taxed at your ordinary rate.

If you are a business, or file as self-employed, you can deduct expenses related to your mining activities for that year.

Capital Gains. Whenever you sell or spend a Bitcoin, you need to calculate the difference between what you sold/spent it for and how much you bought it for. That difference is your gain or loss and is taxable as capital gains. If you owned the coins for more than a year, it would be long-term gains, and has a reduced tax rate of 0% or 15% depending on your other income. However, if you've only owned it for a year or less, then the gain is treated as normal income and taxed at your standard income rate.

So if you mined a coin and sold it, e.g. mined 1 BTC when $450, and sold it for $490. First, you'll delcare the $450 as income and pay taxes on that (e.g. 25% or your rate). Then the $40 is capital gains and you'll pay taxes on that. Again, the rate depends on how long you've owned the coin and what other income you have.

Have a look at https://bitcointaxes.info for more information and to work out capital gain taxes.

Try this tax attorney. Free initial consultation. Couldn't harm.

http://www.bitcointaxsolutions.com/

Most countries treat gains made from Bitcoin as capital gains. The rules depend where you live. Likely and technically, you should be reporting gains. However, some places like the UK, for instance, have a personal allowance where the first £10k gains are ignored.

You only get to use long-term gains if they were long term (you owned the coins for more than a year - and can prove it), and it was in the year you cashed out. If you are cashing out in 2014, it's income for 2014.

You don't get to use previous years allowances if you never received the money. However, if you did cash out last year you should have reported them already (or filed an extension), or amend your return to include them.

Your accountant will be able do all this for you. You need to just let him deal with it.

Long-term capital gains are taxed at 0% when your income is less than $36k (for a single person), 15% when it's less than $400k, and 20% thereafter. Income is anything you have earned.

For example, say you are paid $20k/yr, you can have about $16k worth of long-term gains taxed at 0%. The next $365k of long-term gains is taxed at 15%. Anything over is going to be taxed at 20%. So if you had $300k long-terms gains in one tax year, you'll pay about $42.6k in tax. (all this is approximations because deductions, exemptions, etc will change the value and if you're married, the limits are higher).

Trusts, donations, contributions to retirement, are all ways to defer taxes but typically because the money isn't for you or now,. It isn't a way to avoid taxes for you but is if you are planning to save or give money away.

You are going to pay taxes somewhere. Long-term gains rates (assuming your coin are long-term) are a good deal.

This is correct. If the IRS thinks you are in the wrong, it is on you to prove your position. It is also on you to keep records and so if you can't show the source of your income, they will treat it as the maximum possible tax rate.


If this is treated as a barter then you will have received income of the value of the property, which will be taxed as income and might be more than using long-term capital gains.

If you originally mined your coins, then it's going to be income, but if you said you received them when the price was low then that's good news as your income will be low. However, between now and then the price has risen so there will be capital gains taxes to pay.

If you bought them at a low price, again, if you cash out you will owe capital gains taxes. The rate is banded depending on how much and how long you've owned them. But since it sounds like it's been more than a year, depending on your other income, you'll be able to get up to approx. the first $400k at 15% tax, and anything over will be 20%.

If you have only owned the coins for a year or less (or traded them during the year), then it is going to be taxed as income, up to 39.6%.

If you can't prove your cost basis in an audit, they will take the worst case, i.e. income.

There is no simple tax avoidance scheme if you just want the cash now but your accountant may be able to come up with ways to defer taxes depending on where you put it. Transferring into trusts, for example.

You can only deduct expenses that are no more you hobby income, and then only using itemized deductions. This is only beneficial if your expenses plus your other normal itemized deductions are less than the standard deduction.

Income over $400 problem year is one of the criteria that you are running a business, so in your example you probably should look at filing it as self-employed income. That way you get to deduct expensive against your business income, but you also pay any self-employed taxes.

Given there is no guidance, every accountant has their own opinion and technically none are wrong. Some accountants intend to file as currency, some as assets, some as manufactured stock. It's a decision between you are yours. If you got audited, it's unlikely going to cause a huge issue if you have tried to pay your taxes in good faith. Worst case, I imagine, is you might owe more based on what they decide.

This attorney (#3) thinks they are taxable. No doubt you could find one who believes it's a currency and therefore doesn't think that.