Cryptocurrency and taxes

Gilthanis

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So we all know that the government expects everyone who is dealing with cryptocurrencies to pay taxes (which falls under the capital gains taxes in the US) on their profit. My question is, has anyone actually attempted to do this on their taxes and how did they go about it? I don't mine or buy/sell, so this is more of a curiosity.
 

Spazturtle

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You do it the same way you declare when you get Christmas or birthday presents so you can be taxed on their value.
 

jwcalla

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You do it the same way you declare when you get Christmas or birthday presents so you can be taxed on their value.

I don't think you have to declare personal gifts, assuming the total value is under a certain amount.
 

oblox

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Good luck with that if you are exchanging into fiat anything substantial. I agree, crypto gains still in crypto is pointless to claim because it could go to 0 tomorrow, but if you are converting to USD, don't be surprised if the IRS questions where these bank deposits are coming from, especially if they see it from Coinbase. A few hundred, maybe even a few thousand, no big deal, but if you are cashing out $10k+, I'd certainly be claiming it as capital gains and paying your taxes on it.
 

Spazturtle

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Good luck with that if you are exchanging into fiat anything substantial. I agree, crypto gains still in crypto is pointless to claim because it could go to 0 tomorrow, but if you are converting to USD, don't be surprised if the IRS questions where these bank deposits are coming from, especially if they see it from Coinbase. A few hundred, maybe even a few thousand, no big deal, but if you are cashing out $10k+, I'd certainly be claiming it as capital gains and paying your taxes on it.

If you are trading serious amounts I would hope you would know what you are doing. You would declare it the same way you declare cashing out a stock or bond.
 
D

Deleted member 222586

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You do it the same way you declare when you get Christmas or birthday presents so you can be taxed on their value.

Is this a joke (European fellow here)? Do you really have to declare and pay taxes on gifts?!?!?!?!

---

How serious is US law for those that don't pay their due taxes? 50% extra?
 

oblox

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If you are trading serious amounts I would hope you would know what you are doing. You would declare it the same way you declare cashing out a stock or bond.

Obviously, but from a standpoint of crypto-to-crypto capital gains, it would be very difficult, if not impossible for the IRS to track them.
 

J Macker

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Yeah or sales tax for online purchases for business that don't collect it at the time of checkout.

don't forget, you need to report it the same as money raised from having a "Yard sale".

If you bought a collectible in 2004, and it gained value then you sold it at a yard sale, you need to pay the tax on your gains.
 

LZ_Xray

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Good luck with that if you are exchanging into fiat anything substantial. I agree, crypto gains still in crypto is pointless to claim because it could go to 0 tomorrow, but if you are converting to USD, don't be surprised if the IRS questions where these bank deposits are coming from, especially if they see it from Coinbase. A few hundred, maybe even a few thousand, no big deal, but if you are cashing out $250k+, I'd certainly be claiming it as capital gains and paying your taxes on it.

Fixed. If the IRS checked even a tiny fraction of a percent of the $10k+ bank transactions out there, half the world would be employed by the US IRS. $10k is not even on their radar.
 

J Macker

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yeah, and $10k is PER transaction when it's flagged by your bank and reported to FINCEN.

Not $10k per day. or per week. $10k per transaction.

(I raise a lot of money at yard sales, so I'm careful to keep track of all my sales & pay taxes for profits on 1932 baseballs)

:rolleyes:
 

collegeboy69us

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what about stuff you buy with crypto instead of $?

does it need to be declared?

Nope - because either 1) you bought the crypto with money or 2) you mined the crypto yourself.

Either way the government has no interest in what you trade for since all they care about is US Dollars coming into your account. I could trade my 2012 Kia straight up for a pack of bubble gum or a Bentley makes no difference to them.

Just like you can wheel and deal in stocks and be loaded on paper, don't have to do or say anything till you cash them out to dollars.
 

DracoNB

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Nope - because either 1) you bought the crypto with money or 2) you mined the crypto yourself.

Either way the government has no interest in what you trade for since all they care about is US Dollars coming into your account. I could trade my 2012 Kia straight up for a pack of bubble gum or a Bentley makes no difference to them.

Just like you can wheel and deal in stocks and be loaded on paper, don't have to do or say anything till you cash them out to dollars.

Actually that is all wrong. They want their cut no matter what medium you trade with. If you traded your Kia for a pack of bubble gum they want a cut at fair market value.

http://www.irs.gov/taxtopics/tc420.html
 

collegeboy69us

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if I bought 1 BTC for $1000 back during the boom time....and suddenly feel the urge to trade the 1 BTC directly for two 750Ti's, the US government will be getting a cut of nothing. The Gross income from that whole ordeal there is around minus 600 dollars.

You can't suddenly say that after spending 1000 dollars (of already taxed money I had on hand) that converting it to BTC, losing tons of value, and then trading for two GPUs, that I owe them taxes on $400 "income". (which is actually a loss at the bottom line)

if you really want to get that detailed in the barter section of the "value" of BTC, factor in the cost of mining hardware, electricity, even transaction fees. with the

At the end of the day -- unless you are buying Lamborghini's or trading BTC for real estate or other big ticket taxable items, don't worry about a thing. the IRS has zero way to know about you xferring BTC to someone in exchange for them mailing you a GPU or other every day item.
 

Parja

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if I bought 1 BTC for $1000 back during the boom time....and suddenly feel the urge to trade the 1 BTC directly for two 750Ti's, the US government will be getting a cut of nothing. The Gross income from that whole ordeal there is around minus 600 dollars.

You can't suddenly say that after spending 1000 dollars (of already taxed money I had on hand) that converting it to BTC, losing tons of value, and then trading for two GPUs, that I owe them taxes on $400 "income". (which is actually a loss at the bottom line)

if you really want to get that detailed in the barter section of the "value" of BTC, factor in the cost of mining hardware, electricity, even transaction fees. with the

At the end of the day -- unless you are buying Lamborghini's or trading BTC for real estate or other big ticket taxable items, don't worry about a thing. the IRS has zero way to know about you xferring BTC to someone in exchange for them mailing you a GPU or other every day item.

Still just all kinds of bad information.

I'm just gonna leave this here...
http://www.irs.gov/pub/irs-drop/n-14-21.pdf
 

jwcalla

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That statement makes it plainly clear something I mentioned awhile ago in a different thread: mining "income" must be reported as 1099 self-employment income and you have to pay self-employment tax.

At the end of the day -- unless you are buying Lamborghini's or trading BTC for real estate or other big ticket taxable items, don't worry about a thing. the IRS has zero way to know about you xferring BTC to someone in exchange for them mailing you a GPU or other every day item.

I'm not so optimistic. My understanding is that every transaction and aspect of the BTC economy is trackable and recorded (and probably not nearly as anonymous as people think). It's hard to believe that .gov couldn't find a rather easy way to sniff this stuff out. It's yet another major, fundamental flaw in BTC.

Dealing with just plain paper cash off the books is probably far, far harder to track than BTC with an electronic, permanent paper trail.

I also don't buy the idea that the IRS only goes after guys making $250k+ or whatever. That may be when an individual employee gets put on an audit case, but there are all sorts of automatic flags and triggers that can get somebody targeted.

The government owns you.
 

collegeboy69us

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I will agree that the government can easily see any electronic transfers instantly if the amount gets close to 10K.

back in the good ole days of oil and gas I remember getting something like 3 paychecks at once and even though the total amount was less that 10K (very close) they still gave me the run around and said something about a verified hold and report they had to do. Either way if you have any sort of volume of US dollars coming into your control at an established financial institution they are required by law to report your activity. How much investigating they do depends on your situation of course. The one thing to never do is lie to them or try to pull the wool over their eyes, they have been around a long time and heard every story under the sun as to "where that money came from"

To reply to Parja again -- double taxation happens, but it's generally frowned upon here in the US. And in my previous example giving the federal government any cut of the value of the BTC -> GPU trade is exactly double taxation. There is no income or profit element if you used post-tax dollars to buy said BTC in the first place.

This would be like you saying I owe the government if I take my US dollars, convert them to video game tokens (property) for the local ChuckECheese restaurant. After a loss of value due to market conditions, converting back to US Dollars, I suddenly owe them again? Nope, I don't think so. Just like there are capital gains tax there are also capital losses. These can actually be used to soften the blow to investors who lose sums of money in the market.

http://www.investopedia.com/articles/investing/062713/capital-losses-and-tax.asp
 

Nexillus

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For what I am doing for taxes is a bit different if you just buy it as an investment. I mine and I do the following. I keep an excel spread sheet (multiple actually) of all the coins I have mined or are mining. In those it keeps a record of all received transactions for incoming coins. I will log the fair market value at that time of them being received. I will then convert this to USD at the end of the day/week/month. To keep a running total of each. It is a bit tedious but this way I can track everything I am making. Also when I do finally convert it to FIAT or trade them I will log the fair market value at that time as it could be counted as a gain (hopefully) or loss. I have quite a few excel spreadsheets.
 

blade52x

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It's definitely messed up right now and needs some revisions.

The IRS has a lot to gain from crypto, but the way are doing it now is actually going to benefit them far less than if just make it simple - pay your total gains when you cash out (ie either 40% short term or 20% long term). Allow crypto to crypto trades to fall within 1031 of the like-trading. And in return for 1031, if you lose money, the IRS owes you nothing.

Then us crypto owners are happy, and the IRS gets their cut. Done. Simple. If it were this simple, you'd have way more people actually filing their taxes because of simplicity. I bet a lot of 2013 taxes weren't filled out for crypto just because no one had any idea how to do it.
.
 
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Nexillus

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It's definitely messed up right now and needs some revisions.

The IRS has a lot to gain from crypto, but the way are doing it now is actually going to benefit them far less than if just make it simple - pay your total gains when you cash out (ie either 40% short term or 20% long term). Allow crypto to crypto trades to fall within 1031 of the like-trading. And in return for 1031, if you lose money, the IRS owes you nothing.

Then us crypto owners are happy, and the IRS gets their cut. Done. Simple. If it were this simple, you'd have way more people actually filing their taxes because of simplicity. I bet a lot of 2013 taxes weren't filled out for crypto just because no one had any idea how to do it.
.

I completely agree it needs to be revised
 
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