Posted on 12/06/2013 7:30:16 AM PST by thetallguy24
If you never use legal tender for any transactions, be it for business, salary, expenses, etc., would you have to pay taxes on it? For example, if you're salary was always in BitCoins and you paid for everything in BitCoins, would any of that be taxable? After all, it isn't considered fiat.
Topic 420 - Bartering Income
http://www.irs.gov/taxtopics/tc420.html
Bartering occurs when you exchange goods or services without exchanging money. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services. You must include in gross income in the year of receipt the fair market value of goods and services received in exchange for goods or services you provide or may provide under the bartering arrangement.
more at link...
Fair Tax anyone? lol (minus the prebates and include exemptions for perishable food stuffs)
You shouldn’t be taxed on food and basic necessities, especially when you work in exchange for it.
The encryption and method of storage makes NSA spying unlikely. You would have to be a target already (and a high value one at that) for the gov to spend the resources to crack it.
Like anything else the more prominent a financial method becomes, the more the IRS will pay attention to it. Of course, by definition of purpose, the IRS is interested in REVENUE so, yes, it will tax it! And the 11th commandment of taxation is “Don’t flaunt it because you will then lose it!”
Best of luck, your results may vary and I did not give you tax advice!
Posters at FReerepublic are high value targets already. Just sayin’
That’s the deal with barter - they don’t like it because if I trade tomatoes for rabbits,
we both say they had the same value, and there’s no profit to tax.
I would say that would apply to bitcoin as well.
I trade $1000 worth of bitcoin for $1000 worth of goods or services, and no profit has occurred.
That argument has been used against the income tax,
and failed,
even though it is a legal and valid argument.
>>> we both say they had the same value, and there’s no profit to tax.
I trade $1000 worth of bitcoin for $1000 worth of goods or services, and no profit has occurred.
When trading occurs, you are accumulating one commodity for another. Each of those commodities whether it be bitcoins or pork bellies has value which rises and falls over time.
So it is not necessarily the transaction that is taxed, but rather the change in value of what you own. This form of income is reported as capital gains and is taxed differently than others.
If however, you are receiving a commodity for services, that is recognized as income which you are supposed to report AS wages/salary. The only difference is WHERE you report it on your tax return.
Now... here is where I think your real question resides:
At what point is a bitcoin considered a commodity OR a CURRENCY?
Technically, it cannot be considered a currency because it has no backing and is not recognized as currency by any government. It is therefore a commodity, and is subject to the same income tax regulations for speculative income as everything else.
NOW... what happens IF and WHEN bitcoin’s success positions itself as an effective ALTERNATE form of currency?
If that were to become the case, it would threaten or compete with the value of valid forms of currency, and the federal government would be forced to justifiably ban it.
Now... considering the fact that bitcoin was DESIGNED to be an alternate form of currency, there is ONLY ONE way for it to end.
Encryption is no problem for the NSA. Web searches, destinations, emails, are recorded. Information WILL be shared with any government agency that wants it - including the IRS.
Committing tax fraud and getting caught can give you criminal charges, confiscation of all existing assets, and fines.
Is it worth the risk? I don’t look good in orange. I value the shrinking amount of freedom I have.
I like the Fair Tax concept, understanding the need for constitutional amendment-including a provision limiting spending to no more than revenues, etc.
How would Obama and the Democrats have funded their health care legislation without the ability to tax (impose fines) individuals/companies? You could ask the same question of a myriad of other spending measures. The only answer would be that our elected representatives would be forced to look at setting spending priorities based on anticipated revenues and live within our means. Novel concept, I know.
given enough time and energy you would be correct, How ever if it was so easy no digital currency would be safe and there for all would be worthless. The encryption and storage method for bitcoins is for all intents and purposes completely secure. As I said before for the gov to spend the resources to crack the encryption on to bitcoin wallet you would have to be a major target.
They don’t need to decrypt bit coins to charge you with tax evasion. The rest of the evidence from the NSA and the simple fact they can view what you are spending will be sufficient. Your computer will be seized and your bit coins lost too. In any case, no evidence is actually needed to put you in a terrible position.
that is not a bitcoin issue but how you operate in the underground economy. 2 issues anonymous transactions, think drug deal etc. vs. buying a pizza, vs buying a car. The more records you create in the traditional economy the higher the likelihood your screwed. Screw bitcoins, the shipping invoices of pizza dough and mozzarella are enough to screw mom and pop pizza shops, proof of cash transaction not required. The issue in this thread though is bitcoins.
” and pop pizza shops, proof of cash transaction not required. The issue in this thread though is bitcoins.”
Actually, the topic is whether Bitcoin salary or compensation is taxable. It is. Every other part of the discussion supports the taxable nature and why you should report it.
Good luck.
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