Taxes on Cryptocurrency

noko

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While he talks about traders, miners really fall into the same category due to the many transactions that occur. In fact can be much worst then most traders. Argument if one ever gets audited is a basic contract between you and the pool. Once you do work they pay you, which at that point you can track. What goes on inside the pool is not our concern or is it possible to track. Just like an employer has many steps, processes and tax laws they abide by which you do not have to consider, only your paycheck with the appropriate tax deductions. Which looks like that is what the IRS is looking at in getting from the minners - Social security tax, income tax, Medicaid tax etc. It also falls on us to find all the deductions such as fees, losses etc.

In any case, use experts to help you on this, I will definitely sit down with an HR rep with this and find another one until I am satisfied - at least I will have some sort of representation if the IRS wants to get really stupid.
 

Gamerdad

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Just FYI. The bitcoin.tax site was very helpful. No personal info required and free for anyone with less than 100 trades/transactions, $20 for more than 100. You just export your CSVs from any exchange and it prepares an 8949 form. It also prepares an income report for miners as well. Even if you're not going to give this info to the IRS, it's good to keep handy in case you ever get audited.
 

IronMan_74

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so what would one have to do in order to claim mining hardware as a deduction on their taxes? i just started mining and only have 3 cards going at the moment bringing in about $200 per month.
 

w1retap

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so what would one have to do in order to claim mining hardware as a deduction on their taxes? i just started mining and only have 3 cards going at the moment bringing in about $200 per month.
Itemized deductions. Although with such a small amount of hardware, it's unlikely to make a difference in your taxes since it probably doesn't exceed the percentage of expenditures for your income bracket.
 

hlfbkd420

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Itemized deductions. Although with such a small amount of hardware, it's unlikely to make a difference in your taxes since it probably doesn't exceed the percentage of expenditures for your income bracket.

Not quite... Business expenses are not put into itemized deductions like your mortgage interest, kids, donations, etc. There is an entirely different form you fill out for business expenses.. I take the standard deduction because I can't itemize. That doesn't take business expenses and income into account.

In order to really claim business expenses, you will need to have made more than $600 for the year from your mining operation.
 

IronMan_74

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Not quite... Business expenses are not put into itemized deductions like your mortgage interest, kids, donations, etc. There is an entirely different form you fill out for business expenses.. I take the standard deduction because I can't itemize. That doesn't take business expenses and income into account.

In order to really claim business expenses, you will need to have made more than $600 for the year from your mining operation.

do you have to have a "business" setup in order to claim the business expenses? or can you just claim it as a home business without having to file anything to create an official business? i mined in 2017 for 2 months and didn't cash anything out until yesterday, so i have barely anything to report, but i hope to have more than $600 in mining for 2018 and would like to understand how this would work for next year.
 

w1retap

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Not quite... Business expenses are not put into itemized deductions like your mortgage interest, kids, donations, etc. There is an entirely different form you fill out for business expenses.. I take the standard deduction because I can't itemize. That doesn't take business expenses and income into account.

In order to really claim business expenses, you will need to have made more than $600 for the year from your mining operation.
I itemize my deductions every year and I don't have a business. I get more back over the standard deduction.. I even claim some of my computer/electricity/cell phone use for work related deductions for when I work from home. I don't see why it would be any different for claiming cryptocurrency related deductions. On form 1040, you could put it under unimbursed miscellaneous expenses. https://www.thebalance.com/itemized-deductions-3192880 or https://www.schwab.com/resource-center/insights/content/investment-expenses-whats-tax-deductible It does not highlight anything cryptocurrency related, but if we're expected to be taxed on it now, certainly you must be able to deduct expenses. After all, it is an investment expense. As it stands right now, you're able to deduct software and online services that are used for "traditional" investment management -- with cryptocurrency that would be considered the hardware/electricity used to manage your investment.
 
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CookieFactory

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I'm curious, has anyone deposited out a large amount ($1 mill+) vfrom Coinbase (or an exchange) to your bank? If so, did you make a single deposit or did you split it up? Any lessons learned? Asking for a friend.
 

RevMen

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Your friend is going to have to work that out with Coinbase. They have limits on withdrawals that start out fairly low. Higher limits must be applied for.
 

mkrohn

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I'm curious, has anyone deposited out a large amount ($1 mill+) vfrom Coinbase (or an exchange) to your bank? If so, did you make a single deposit or did you split it up? Any lessons learned? Asking for a friend.
you'll basically end up having coinbase treat this almost like a retirement cashout where they'll auto hold a big chunk that gets sent straight to the IRS. I'd probably just go through whatever the next layer of validation is keep doing whatever my daily limit with CB is. I'd probably split it across many exchanges though doing the daily limits i hit for each but yeah you can bet money on having to kiss a lot goodbye to the IRS quickly. I'd funnel it overseas though and opt out of paying taxes on it. when you're in the $1M+ range you have options for legal tax evasion though.
 

wolfofone

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do you have to have a "business" setup in order to claim the business expenses? or can you just claim it as a home business without having to file anything to create an official business? i mined in 2017 for 2 months and didn't cash anything out until yesterday, so i have barely anything to report, but i hope to have more than $600 in mining for 2018 and would like to understand how this would work for next year.

For federal taxes you can just file a schedule c as a new sole proprietorship and business expenses can reduce your income and what you are ultimately taxed on. Your state may be a bit tricker depending how crazy they are abt needing licenses for home based businesses but it should be fine since you have no employees in a hime based business not advertised..
 

hlfbkd420

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I itemize my deductions every year and I don't have a business. I get more back over the standard deduction.. I even claim some of my computer/electricity/cell phone use for work related deductions for when I work from home. I don't see why it would be any different for claiming cryptocurrency related deductions. On form 1040, you could put it under unimbursed miscellaneous expenses. https://www.thebalance.com/itemized-deductions-3192880 or https://www.schwab.com/resource-center/insights/content/investment-expenses-whats-tax-deductible It does not highlight anything cryptocurrency related, but if we're expected to be taxed on it now, certainly you must be able to deduct expenses. After all, it is an investment expense. As it stands right now, you're able to deduct software and online services that are used for "traditional" investment management -- with cryptocurrency that would be considered the hardware/electricity used to manage your investment.

Not all folks qualify to itemize... If your itemized deductions are lower than the standard deduction then you should take the standard deduction. If you only take the standard deduction, you can't include mortgage interest or donations. (if my typing doesn't make sense I apologize. I am no wordsmith)

My understanding is you would need a schedule c for the deductions you are trying to itemize if they are business related. I wouldn't be putting them where you are but ymmv of course.
 
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sleepeeg3

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2. As far as cashing out goes, I'm sure that will be cracked down upon as well. I'm trying to come up with a legal strategy to cash out in the future to pay minimal taxes on this. I'm thinking of possibly using a donation method or gift method.
LocalBitcoins solves this and many issues. The amount you receive from selling is also much higher.
 

w1retap

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LocalBitcoins solves this and many issues. The amount you receive from selling is also much higher.
Except it is the maximum form of shadiness (sometimes dangerous -- I'm near Detroit). Also, there have already been people busted for money laundering within 30 miles of me using LocalBitcoins.
 

mkrohn

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Except it is the maximum form of shadiness (sometimes dangerous -- I'm near Detroit). Also, there have already been people busted for money laundering within 30 miles of me using LocalBitcoins.
thats probably because they were money laundering and not paying taxes.
 

oblox

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Except it is the maximum form of shadiness (sometimes dangerous -- I'm near Detroit). Also, there have already been people busted for money laundering within 30 miles of me using LocalBitcoins.
You don't have to actually meet anyone to use localbitcoins...
 

hlfbkd420

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thank God this isn't a tax forum... People would be confused ...

don't read this shit. Consult an accountant... Hopefully...... They know what the fuck they are doing.
 

w1retap

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You don't have to actually meet anyone to use localbitcoins...
I know, I've just read numerous reddit posts on payment reversals, even from bank transfers once the BTC send cleared.
 

w1retap

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thank God this isn't a tax forum... People would be confused ...

don't read this shit. Consult an accountant... Hopefully...... They know what the fuck they are doing.
Well, I called two today (one @ H&R, the other at Jackson Hewitt). They said they hadn't heard anything about cryptocurrency and just said "keep your receipts" if you're audited, lol. This might get a little complicated and involved..
 

CookieFactory

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you'll basically end up having coinbase treat this almost like a retirement cashout where they'll auto hold a big chunk that gets sent straight to the IRS. I'd probably just go through whatever the next layer of validation is keep doing whatever my daily limit with CB is. I'd probably split it across many exchanges though doing the daily limits i hit for each but yeah you can bet money on having to kiss a lot goodbye to the IRS quickly. I'd funnel it overseas though and opt out of paying taxes on it. when you're in the $1M+ range you have options for legal tax evasion though.

Thanks for the info. Do you have any links or other "get started" leads for the legal tax evasion stuff?
 

blade52x

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I tried buying bullion off APMEX using Bitcoin recently (wanted to avoid a bank wire fee, not taxes - of course I forgot that Bitcoin fees were high). Anyway, I don't know what Bitpay did, but I couldn't find or acquire the address to send payment to. So it didn't go through. I had to use bank wire in the end anyway. So YMMV there - be prepared to have a backup payment method ready.
 

Dayaks

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So, anyone use one of those bitcoin ATMs to get money out?

Also can't you just report your btc to bank account as income? Avoid all the captial gains and headaches crap? (I realize this would cost $$$ but would avoid guesses incase audited?)
 

yowen

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So, anyone use one of those bitcoin ATMs to get money out?

Also can't you just report your btc to bank account as income? Avoid all the captial gains and headaches crap? (I realize this would cost $$$ but would avoid guesses incase audited?)

You could. But would you be doing it right? There seems to be a healthy amount of confusion and speculation about that. Someone above mentioned they we went to two different tax places and both simply said "keep receipts". I'd like to hear from a tax expert that may actually have more advice than "keep receipts", someone that's dug into it a bit. A tax preparer at HR might be good at preparing your run-of-the-mill tax situations, but they likely haven't bothered to research crypto currencies.
 

odditory

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You could. But would you be doing it right? There seems to be a healthy amount of confusion and speculation about that. Someone above mentioned they we went to two different tax places and both simply said "keep receipts". I'd like to hear from a tax expert that may actually have more advice than "keep receipts", someone that's dug into it a bit. A tax preparer at HR might be good at preparing your run-of-the-mill tax situations, but they likely haven't bothered to research crypto currencies.

"Keep receipts" is accountant-speak for "we have no clue".
 

draksia

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http://bitcoinist.com/cryptocurrency-investors-lose-tax-break/



1. So, how will everyone be handling this? For one, I don't have records of all my transactions, since some were done on exchanges that are long gone, or wallets that are long gone. Maybe those are exempt since the rule kicks in Jan 2018.

2. As far as cashing out goes, I'm sure that will be cracked down upon as well. I'm trying to come up with a legal strategy to cash out in the future to pay minimal taxes on this. I'm thinking of possibly using a donation method or gift method.

Anyone care to share some insight? -- remember, keep it legal so the thread doesn't get closed.

If you don't have the information on when you got it it is treated as if you got it for 0 and you have no bias for it. Granted you can probably just estimate it and be ok.
 

w1retap

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So, anyone use one of those bitcoin ATMs to get money out?
It's cheaper just to take a long term capital gain tax for me. The BTC ATM machine around the corner from me charges 15-20% fees.
 

Dayaks

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It's cheaper just to take a long term capital gain tax for me. The BTC ATM machine around the corner from me charges 15-20% fees.

So you don't mine. I guess it's a hell of a lot easier if you're not a miner.
 

Justintoxicated

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So what do I do if I mined coins back in 2014 and no longer have access to my mining pool account? Or does this even matter? I am extremely confused.

When does the coin become mine? I would assume once it goes into my wallet and a mining pools wallet?

What is the value of the coin when it enters my wallet? I would assume nothing until it gets to an exchange or else it's impossible to calculate or keep track of?
 

draksia

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So what do I do if I mined coins back in 2014 and no longer have access to my mining pool account? Or does this even matter? I am extremely confused.

When does the coin become mine? I would assume once it goes into my wallet and a mining pools wallet?

What is the value of the coin when it enters my wallet? I would assume nothing until it gets to an exchange or else it's impossible to calculate or keep track of?

Do you have the coins or did you lose them?
 

Justintoxicated

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Do you have the coins or did you lose them?
I recovered my wallet and it has some coins. WSE server just paid for itself :) Amazingly it's not $40 worth of coins anymore (or whatever it was worth when I stopped mining). more like 3k worth? I still cannot get into my Coinotron account. I think it's toast but I had it set to auto payout so probably not allot on there anyhow
 

draksia

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You only taxes on action you take, losing and finding them is no different than having a painting you forgot about in your garage and it turns out to be a Picaso. If you sell it you own taxes, if you trade it for a car you owe taxes. If the value goes up 10x or halves you don't owe anything.
 

Justintoxicated

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http://theminersunion.com/2017/09/11/what-you-need-to-know-about-bitcoin-mining-taxes/

Still not sure how you know when your coin gets added to the blockchain if you using a pool?

Can the government track when you actually received the coin? If not, then who cares because you probably don't even have this information yourself, in fact, you probably never even added the coin to the blockchain, because you were only working on a piece of it and were simply paid in bitcoins for the work you did. So then to me, this means, the coin would become income when it actually gets added to your wallet (either on the pool or your personal I have no idea). But since this is a continual thing it's not practical to track, I mean does it have to be a whole coin? What if it's only .02 percent of one? It makes no sense....

How would I know how much electricity I can claim? Especially when electricity is a variable rate? How do I calculate that!?! It would only be possible to do such things as an estimate at best, and even coming up with an estimate is near impossible.
 
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