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What the IRS Bitcoin Tax Guidelines Mean For You
Coin Desk ^ | 26 March 2014 | Danny Bradbury

Posted on 03/26/2014 6:05:50 AM PDT by Errant

The US Internal Revenue Service finally announced its guidance for virtual currencies yesterday, explicitly referring to bitcoin (see the announcement here and notice here). The increased clarity – provided three weeks before the end of the US tax year - will come as a relief to many who were scared to get involved in bitcoin, commercially. But what does it mean for different members of the bitcoin community?

US businesses wanting to get involved in bitcoin have been waiting for this for a while. As recently as January, US Taxpayer Advocate Nina Olson pressured the IRS in her annual report to Congress, telling it that it needed to publish guidance. The lack of rules was a serious problem, she said, and many businesses would be surprised to hear that capital gains could be imposed on bitcoins.

Well, now, that’s official: in its guidance, the IRS has said that bitcoin should be treated as property, making it subject to capital gains tax. That has significant ramifications for different kinds of businesses and individuals dealing in bitcoin.

(Excerpt) Read more at coindesk.com ...


TOPICS: Business/Economy; Computers/Internet; Government; Society
KEYWORDS: bitcoin; crypto; goldbugs; irs; irsbitcoin; tax
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http://www.wired.com/wiredenterprise/2014/03/what-is-bitcoin/

1 posted on 03/26/2014 6:05:51 AM PDT by Errant
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To: Lurkina.n.Learnin; nascarnation; TsonicTsunami08; SgtHooper; Ghost of SVR4; Lee N. Field; DTA; ...

Click to be Added / Removed.
2 posted on 03/26/2014 6:07:25 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

They don’t need to make it illegal... just treat it as a commodity and tax the hell out of it as a barter exchange. Also, force people to keep accurate records of all transactions, which defeats the anonymous transaction feature.


3 posted on 03/26/2014 6:07:54 AM PDT by Pearls Before Swine
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To: All

From Business Insider:

“The IRS has ruled Bitcoin should be treated as property, not as currency, for tax purposes.

According to Bitcoin tax expert Tyson Cross, this will create a significant burden on Bitcoin users, as every transaction they ever make using the digital currency will have to be reported in some way.

That would not be the case if it had been ruled a digital currency.

“Users will have to track their transactions and determine the amount of their taxable gain each time,” he told BI in an email. “It’s quite a burden. The rules on taxing foreign currency provide an exception for ‘personal transactions’ for that very reason. It would be great to have that exception (or something similar) apply to bitcoins as well.”

But Cross adds the IRS’ guidance may not stand forever. The Treasury Department should now begin developing formal regulations tailored to digital currencies.

“That typically begins with a request for public comments, which was included in the notice,” he said. “Tax professionals can then identify issues and advocate possible solutions. So between now and the issuance of actual regulations (which takes years), there’s ample opportunity to shape the tax treatment.”

The agency says anyone who holds the currency will have to calculate its value from the date it was received to determine whether a gain or loss was realized, and report the result.

If you’ve done any Bitcoin mining, the fair market value of the virtual currency as of the date of receipt is includible in gross income.

Read more: http://www.businessinsider.com/irs-bitcoin-is-property-not-currency-full-release-2014-3#ixzz2x4e2prYO


4 posted on 03/26/2014 6:09:44 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

If it’s going to come into widespread public acceptance ... things like this are inevitable. AND ... things like this INCREASE the public acceptance.


5 posted on 03/26/2014 6:12:52 AM PDT by Star Traveler (Remember to keep the Messiah of Israel in the One-World Government that we look forward to coming)
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To: Errant
ALL you people are insane !

We now have an imaginary tax on an imaginary currency, developed through imaginary entities because someone decided they could realize a fantasy

algore is PISSED !

6 posted on 03/26/2014 6:15:23 AM PDT by knarf (I say things that are true .. I have no proof .. but they're true.)
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To: Pearls Before Swine
Also, force people to keep accurate records of all transactions, which defeats the anonymous transaction feature.

The record "keeping" isn't an issue, since it's all electronic. Moving it over to a tax app, might be a lot work tho. Anonymity never was a strong feature, even from its creation.

This will be burdensome for the little miner guys working out of their homes, unless this first guidance is greatly amended. They are also the ones that process the transactions.

I see someone building an app that will take all of the transaction data, pull in the historical price records (that's brings up another question: the price of record for determining value), and offer the ability to export all a your tax filing software!

7 posted on 03/26/2014 6:18:55 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Star Traveler

Yep


8 posted on 03/26/2014 6:19:43 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: knarf

What’s insane, it the amount and number of taxes “We The People” are subjected to. Land of the free my ass...


9 posted on 03/26/2014 6:21:21 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: All
Nice graphic representation on how bitcoin works from wired (click on chart for a larger image):


10 posted on 03/26/2014 6:34:41 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant
I've tried to read a few of these types of posts and it occurs to me, all the comments that say something like, "We could ... or they should ..." etc. is really the rule making committee !

If I'm correct ( and I believe I am), that this is all an invention and the tool used is a miner, then the same mining concept and technology is surfing these threads (not only on FR) and conglomerating the suggestions

And what makes anyone think the honcho in this whole thing is NOT an obama created EO appointee of some "foreign finance commissioner" (that y'all thought was a legitimate, if useless office, etc.)

???

11 posted on 03/26/2014 6:36:31 AM PDT by knarf (I say things that are true .. I have no proof .. but they're true.)
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To: Pearls Before Swine
WOW!...sounds like you believe in throwing pearls before the swine!

"tax the hell out of it "

"force people to keep accurate records of all transactions"

Do you work for the IRS?   If not; I'm sure they would love to hire you!

 

12 posted on 03/26/2014 6:40:28 AM PDT by PoloSec ( Believe the Gospel: how that Christ died for our sins, was buried and rose again)
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To: knarf
There is a committee that controls bitcoin's development, and of course it values the input of the entire bitcoin community. Then there are numerous other digital currencies bitcoin must compete with, which ensures the whole shebang moves along in a positive direction.

And what makes anyone think the honcho in this whole thing is NOT an obama created EO appointee...

Because bitcoin was created by "geeks" who are not known for their worship of centralized control over anything. That's not to say that in the future, some government or central bank will not take the technology and attempt to use it to their advantage. But again, there is that competition thing from all the other digital currencies.

13 posted on 03/26/2014 6:45:41 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

Is this a parody?


14 posted on 03/26/2014 6:51:54 AM PDT by FreeAtlanta (Liberty or Big Government - you can't have both.)
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To: FreeAtlanta

Nope


15 posted on 03/26/2014 6:52:58 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

Lol, what do you all think airline “skymiles” and credit card “cash back” programs are?

in a round about way, they are alternate currency to skirt the IRS.


16 posted on 03/26/2014 6:56:34 AM PDT by FreeAtlanta (Liberty or Big Government - you can't have both.)
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To: FreeAtlanta

You mean they’re not marketing incentives???


17 posted on 03/26/2014 6:59:55 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: PoloSec

I said, that’s what the IRS will do, not what I want them to do!

Also, that if the government doesn’t like anonymous crypto-currencies, it doesn’t have to outlaw them, it can simply tax them and create onerous record-keeping requirements.

It’s not my desire or recommendation... it’s my assessment.


18 posted on 03/26/2014 7:06:32 AM PDT by Pearls Before Swine
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To: FreeAtlanta

Don’t forget compounded interest


19 posted on 03/26/2014 7:24:02 AM PDT by knarf (I say things that are true .. I have no proof .. but they're true.)
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To: Errant

They trade it as property. What is the big deal. I track when I buy them, and I track when I dispose of the asset. Just like I do with stocks, business assets, and, if I were ever to buy gold and silver, bullion.


20 posted on 03/26/2014 7:29:18 AM PDT by Vermont Lt (If you want to keep your dignity, you can keep it. Period........ Just kidding, you can't keep it.)
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To: Errant

it means a 20-24% cap gains tax, that’s what it means

i’m still trying to understand why the fedgov deserves anything, let along a quarter of every transaction


21 posted on 03/26/2014 7:43:05 AM PDT by sten (fighting tyranny never goes out of style)
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To: Vermont Lt

As long as you are buying and selling them, it isn’t an issue. It’s when you’re mining them that creates issues. For instance, the value at the time they were mined. Who’s to say what the value was (i.e., which exchange value at the time). Seems to me the proper way to handle that would be to tax the asset at time of sell, instead.


22 posted on 03/26/2014 7:58:30 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: sten

Yeah, I’m trying to understand that too. Sure is a strong incentive to go Galt.


23 posted on 03/26/2014 7:59:38 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: sten
Looks like they've already got a full plate:

Examining the IRS Response to the Targeting Scandal (Live thread)

24 posted on 03/26/2014 8:03:21 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: knarf
We now have an imaginary tax on an imaginary currency, developed through imaginary entities because someone decided they could realize a fantasy

Now we have a very real tax on an imaginary currency, developed through imaginary entities because someone decided they could realize a fantasy. Can I write off my Beanie Babies as a capital loss?

25 posted on 03/26/2014 8:06:07 AM PDT by KarlInOhio (Republican amnesty supporters don't care whether their own homes are called mansions or haciendas.)
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To: Errant

City, County, and state tax assessors are going to love this.


26 posted on 03/26/2014 8:33:17 AM PDT by Organic Panic
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To: Errant

The last line makes sense. I’ve seen people, even here at FR, define bitcoin mining as hard work, one saying it was the hardest work he did.

If you do work, and get paid for it, that is income, and of course it should be reported as income.

And unfortunately, bitcoin’s value moves wildly. It isn’t a ‘currency’ in that sense, it is like gold. So like gold, once you have bitcoin, you will need to remember what you paid for it, and when you sell it, or exchange it for money to use to buy something, you will have to see if you had a gain or a loss, and will pay capital gains or incur capital losses.

This did however get me wondering how the IRS handles currency trading. Those are real currencies, but I can’t imagine the IRS just leaves large currency gains on the table, so it seems they would be trying to collect taxes there somehow.

Except of course that is how lefties like George Soros make their money, so maybe the IRS isn’t that interested.


27 posted on 03/26/2014 9:44:02 AM PDT by CharlesWayneCT
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To: Errant; Vermont Lt
Vermont Lt:
They trade it as property. What is the big deal. I track when I buy them, and I track when I dispose of the asset. Just like I do with stocks, business assets, and, if I were ever to buy gold and silver, bullion.

Errant:
As long as you are buying and selling them, it isn’t an issue. It’s when you’re mining them that creates issues. For instance, the value at the time they were mined. Who’s to say what the value was (i.e., which exchange value at the time). Seems to me the proper way to handle that would be to tax the asset at time of sell, instead.

I tend to agree that the record keeping is typical of what is necessary for investments. And while I agree it would be more convenient to tax mining gains at time of sale, the mining operators will just start issuing statements to hashers indicating the USD value based on some consistent price source. In fact, I think this will be required under the IRS rules.

Businesses and investors are used to dealing with these rules and will handle bitcoin as an investment in stride. The real problem is that users of money do not regularly deal with these issues. This will kill consumer adoption of Bitcoin as an everyday payment method.

28 posted on 03/26/2014 10:41:16 AM PDT by Database
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To: Database; Vermont Lt

I predict IRS will be issuing updated guidelines...


29 posted on 03/26/2014 10:55:08 AM PDT by Errant (Surround yourself with intelligent and industrious people who help and support each other.)
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To: Errant

Call me crazy, this just looks like a fiat currency death warrant to me. We shall see.


30 posted on 03/26/2014 11:44:34 AM PDT by TsonicTsunami08 (SEND BITCOIN 1CYfujvffxKKPHKvrQvLP3CDb3Z5Lu7LwM Funny Money)
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To: Errant

Is this going to be like a stock? If you buy it and it goes down and you sell it at a loss you can’t buy it again for 60 days if you want to claim the loss.


31 posted on 03/26/2014 2:14:46 PM PDT by Lurkina.n.Learnin
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To: Errant
For instance, the value at the time they were mined

The value for every minute of every day is well known from large exchanges, and the time is stamped right into the reward transaction in the chain which will be there forever, or until spent rewards are culled in which case they should have been taxed.

32 posted on 03/27/2014 4:33:36 PM PDT by palmer (There's someone in my lead but it's not me)
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To: CharlesWayneCT
you will need to remember what you paid for it,

No need. The transaction where you bought it is in the chain with your public key in it. The time of the transaction is in the block. The value at that time can be looked up by an exchange that keeps track.

33 posted on 03/27/2014 4:36:17 PM PDT by palmer (There's someone in my lead but it's not me)
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To: CharlesWayneCT

I see bitstamp.net has a daily price available, that’s probably good enough for the IRS.


34 posted on 03/27/2014 4:38:09 PM PDT by palmer (There's someone in my lead but it's not me)
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