Tax thread

this user gets it

Yes. Every sale is a taxable event. Even if you buy a Amazon Gift card with BTC it's a taxable event, because that's technically a sale.

Any losses you incur will offset gains. If you end the year with a net loss, it will offset your normal income tax, assuming you work. Any net losses over $3,000 can be withheld and applied to the next tax year.

Okay now we're approaching confusionland.

Circling back to my first example of buying $40 worth of bitcoin, say I hold it through an increase and crash, and then sell when it gets back to $40 and "break even". I'd still pay the ~25% short term capital gains tax on that sale and even though I bought and sold at the same price, I'd be losing $10? Fucking shit, dude.

But that loss of $10 could be deducted from federal income taxes deducted from my fiat paycheck? Or it would have to be over 3k

>I'd still pay the ~25% short term capital gains tax on that sale and even though I bought and sold at the same price, I'd be losing $10? Fucking shit, dude.

No, you'd pay 25% of the profit you made on the sale, which is zero. So zero dollars.

Capital gains are on profits, sale price minus purchase price.

Buy @ $40

Okay, thanks user. I think I'll be able to navigate this morass safely now. So buying/selling/trading BTC is all done under Class D 1040? No other forms?

I'm pretty retarded and might be wrong, but at the end of the year, whether you tax each transaction individually and add them up or just take your lump sum profit at year's end and tax it at once, the result is the same, right?
Is it necessary to record the dollar equivalent of every BTC-Alt trade you make through the year with this in mind? Seems like a monumental amount of work.

I believe what most people do is print out the records from whatever exchange they use at the end of every fiscal year

Not exactly sure what form to use. I use the 1040 for stocks.
This might be helpful... or more confusing ttlc.intuit.com/questions/2591167-forex-gains-and-losses

yeah, either way you do it, it'll be the same.

>Is it necessary to record the dollar equivalent of every BTC-Alt trade you make through the year with this in mind?
Technically yes, I would think so.
>Seems like a monumental amount of work.
that's why people who invest in stocks (before e-filling was a thing) had accountants. For stocks, you had to enter each transaction on a form. Now you just import it from the broker.

Can't wait until the end of the year

Just hold as much BTC as you can and never go back to fiat. How hard is that?

I was just looking at bittrex because of this, and they record the BTC amount, but not the USD equivalent.

I have no issue paying the full income tax rate on everything I make but the record keeping side here quickly becomes ridiculously complex if you want to make any money day trading.

>How do you handle taxes on crypto?
cryptobizcentral.com/taxes.html
>How do you feel about crypto taxes?
I'm holding out hope that some day in the future, the US and other countries will recognize crypto as currency and not tax them. Maybe have an income tax for mining, but nothing for trading.
>What kind of records do you keep and what forms do you file?
I still have a record of every trade I've made.

Just write a Python script that compares the times of each trade to the graph of Bitcoin for that exchange and compile the USD values.

I still need to pay rent user

>if you want to have a fun side hustle doing a little low-risk day trading just learn a programming language and use it to write a script lolol

If you can't learn Python, I fear you might be mentally retarded.

Most anons probably could, what I'm saying is that why would anyone bother if their only goal is to fuck around a little with daytrading crypto?

Question out of pure curiosity:if I buy BTC, hodl, have some gains, and then I withdraw through a BTC ATM, does the ATM deduct taxes on the amount you're withdrawing? Or do you have to keep records of it even though it didn't go through your bank account and there's no way to identify wallets?

So you don't get ass-fucked by the IRS come tax season. If you're not making that many trades per day, you can just manually write down the USD value per trade. Takes like 2 seconds.

Just dont pay until they ask lmao

Any anons know if transferring from an exchange to your personal wallet is a taxable event?

It is not. Only actual trades are taxable.

You're supposed to keep records of it yourself, but they're not going to hunt you down if the amount is small, probably. No real way of knowing who owns the wallet either unless it's linked to some exchange where you purchased the BTC.

So do I have to record/pay tax on my BTC>ESP (on yobit) transaction?

you have to pay tax for whichever country yo deposit fiat currency in

That's where shit gets confusing, for me.

Maybe the taxable event occurs whenever the BTC turns back into dollars, regardless of what happens in between? (buying alts) I'm not sure, someone with a forex background would likely know more.

But also, if this is true:
Why not just pay taxes on total profits?

Do you only have to worry about taxes when you go to FIAT

I've been writing down every single shitcoin trade but if it isn't necessary I'll stop

You have to report capital gain and when you deposit to fiat.

You buy 10 BTC at 2,000$ USD and sell it 2 weeks later at 2,300$ USD.

You have to report 300$ USD in taxes under whichever regulation cryptocurrency is for your region

Ok so lets say i use a site to buy butcoins, transfer to a diffrent site to do day trading, and then transfer back to original site and convert to fiat.
Is that taxable? Its not like they can track my trading.

So altcoin trading doesn't matter

Thanks mate

Altcoin trading does matter. Think of it like forex trading. You still pay taxes on trades done in foreign currencies.

If I trade between LTC and BTC, no government gives a hoot.

The second I trade between BTC and USD/CND/CNY/EUR/..etc they want to know and tax you.

May I remind you taxation is another way for the government to keep track on its citizens to ensure you essentially are not 'lying to your peers' as to say, and commit crime to gain profit in society.

Ironically is the crime organizations that are gaining huge returns from cryptocurrency

What country are you in?

You guys are forgetting about 1031 exchanges. Crypto is considered a capital asset.

>instead of constantly cashing out 10k and get raped by taxman, just keep accumulating
>eventually have enough to pay some kike accountant to guide you through the loopholes
>cash out and rape the taxman instead
Simple lads

Which means?
Like-kind exchange ?

Yes. As far as my accountant is treating it. So it'll fuck up my cost basis long term. But, what's my cost basis in BCC? I mean, I received it for holding BTC at a certain price. It gets really confusing.

Holy fuck,income tax is way better.Most of the people in biz earn under 10k yearly anyway,judging from blockfolio threads

Easy be a Kike yourself :^)

Not really,Singapore has no CGT and it isn't a third world tax haven

Blockstream will help you with this, the will fix the taxes and fees etc.

I heard that doing a 1031/ considering crypto a like-kind exchange is practically begging for an audit. Although I guess your accountant would know better.

what if i dont have records of my old trades anymore?

Someone could make good money doing a TurboTax for crypto

What if I withdraw only what I put in?

How so? IRS defines cryptocurrency as property (capital asset), and unless said otherwise, like-kind exchange rules apply, as long as you file Form 8824 in the tax year before you cash them out.

Why would they audit you if you report your taxes fairly? I thought they would appreciate this, so wtf. It's way too complex to report fractions of amounts of a bth price to US currency to alt coin price to bth price to US currency, and 1031 is the correct way to do it following the preceding stuff, so what makes you say that?

>cryptos
>paying taxes

youre doing it wrong kid

I don't fucking pay taxes on crypto since even I have no fucking clue how much I've put in or out at this point.

I have made literally tens of thousands of trades in crypto at this point, in multiple fiat currencies, and cashed out pieces here and there for years, sometimes as cash and sometimes to banks. I have no idea how much.

My taxes are literally impossible.

I don't live in burgerland so I don't have to pay taxes on crypto ;)

I literally cash out like a few dollars per day, sometimes in cash and usually in foreign currencies, with no record any where of how much I have done.

What the fuck do you expect me to do about that?

They can track that very easily if they want to. The site where you buy bitcoins has your identity verified and then the irs can contact the exchange you sent your bitcoins to based on the address and request your full trading history. This is all very easy to track but whether the IRS would even bother depends entirely on your trading volume :D

the whole point of cryto currencies is to bypass ppl like the feds. If you want to be the retard and cash out in a US bank there by signalling you made money, go ahead. But if your not retarded, you'd book a plane to some off shore tax haven and dump your crypto proceeds there. Plus you think the IRS has the time to look through and trace the entire blockchain of ledger of buys and sells in an unregulated market
Do everyone a favor remove yourself from the gene pool

Turbotax, but on the blockchain. All tax "transactions" is stored on blockchain, miners verify the math.
>mfw TaxCoin becomes a thing, paying you to be legal

Imma say it once more peeps. This is very valuable. Once you realize the importance of offshore companies you and ways to defer taxes, paying taxes on anything, from coffee, to crypto will all make since.

Here it is..ready..yoou sure? Ok.

The taxable event happens once you deposit fiat money back into your bank account and the money that is taxable is whatever amount you gained after original contribution.

so.. You buy $1k worth of bitcoin. You make 2.23k back in 2 months. First that is short term capital gains. So you will be taxed short term capital gains since it was less than 6 months.
Anyways, well the tax is easy. Here it is.
$2,230-$1,000=$1,230 taxable income.
So that 1,230 dollars is taxed at 15% for short term capital gains.

Your total tax need to pay on that is $184.50

Follow this formula and succeed and never worry.

>The site where you buy your coins has your identity verified
Not necessarily, you could use local bitcoin

Accountant here, YOU ONLY PAY TAXES ON GAINS WHY DON'T NORMAL PEOPLE UNDERSTAND THIS. YOU CAN NEVER GO NEGATIVE BECAUSE OF TAXES, BECAUSE

YOU

ONLY

PAY

TAXES

ON

GAINS
REEEEEEEEEEEEEEEEEEEEE

Yeah this irritates me greatly. People confuse incomtax with fees.

Hey, if you're still around, I'd appreciate some info. This year I spent about $6000 on crypto and proceeded to lose $2000 of that initial capital. I also spent $3000 on mining equipment and made some money from mining, and while mining I successfully traded. My portfolio is currently worth about $10,500. All in all, I went from about $2000 in the hole at my lowest to about $1,500 in profit at present.

My question is this: will my tax liability simply be, after doing all of the math (which I assume will be a giant headache), the $1500 difference between the total cost of my crypto purchase plus my hardware costs and whatever portfolio value I cash out at, or is there some kind of tax fuckery that could cause me to pay more than I've profited?

tl;dr: Made a lot of mistakes, lost money, learned from them and made better choices, made money, now confused about what the tax man will want.

I am a poorfag and I've never handled more than about $8,000 in one year from low-tier jobs, and I've always just filed taxes with the local taxman and got my little $100 back or whatever, so I'm really dubious about this whole thing.

Thanks for any advice

What about in my case, where a lot of my gains have come from an investment in hardware? Mostly I'm worried that I won't be able to deduct that somehow and that I'll be taxed on far more than I should be. Is that an irrational fear?

Woops, my numbers are wrong, it was closer to about $3000 in crypto and $6000 in hardware and I'm at $10500 now. I kept spreadsheets on purchases, etc., I just don't have them on hand right now.

You should be able to deduct your hardware since its an asset. But I dont know how all that works.

Well, tl;dr, if I can't deduct the hardware, it sounds like I'm actually going to end up paying more in capital gains than what I've made in real profit ($1500), which is what worries me. This experience was worthwhile in the sense that I learned some important lessons, but I don't think $1500 is worth the time or trouble I've gone to, and if there is some tax fuckery at the end of it then I'm really not gonna be happy

Lmaoing at americucks paying tax on burgerking tokens

This might help: schwab.com/insights/taxes/investment-expenses-whats-tax-deductible

2% floor rule is like: If you made say $100,000 adjusted gross income and spent $5,000 for investment expenses, you could deduct $3,000 of that. $5,000 - (100,000*.02) = 3,000

It looks like it's deductible, but you'll have to itemize your expenses for 2017 rather than take the standard deduction.

And reporting it on Schedule A IIRC. Please be advised I'm not entirely sure if mining equipment qualifies, so I'd try phonecalling a tax professional about it

You're going to confuse them with that. I'm an accountant as well. You should mention that net losses on a sale will offset gains, and you pay tax on the NET gain.

So here's the thing, you aren't a business. If you were a business entity, you could easily use your hardware expense to offset your revenue.

You could possibly write off the hardware cost as an expense, BUT you would need to itemize your taxes. That means you'll list a bunch of things that you can use as tax deductions. Things like, Home mortgage interest, Property, state, and local income taxes., Investment interest expense, Medical expense,Charitable contributions, Miscellaneous deductions, and your hardware.

In order for that to make sense for your tax return, those deductions must add up to more than the standard deduction.

The standard deduction for 2017 is $6,350 for any user filing independently. So, like i said, the only way writing off your hardware looks rational is if you're able to come up with over $6,350 worth of itemized deductions.

>asset
So, i should be able to write off my car's value. My entire house's value? My workstation's value? My stock positions?

I don't think it works like that.

nice info

>so I'd try phonecalling a tax professional
this for sure

Thanks for the info,
> but you'll have to itemize your expenses for 2017 rather than take the standard deduction
Does this have any meaningful implications on my bottom line or is it just something I'll encounter when filling out the forms themselves?

My main concern is just that my 'investment' in hardware was such a huge proportion of my current portfolio value ($6000 out of $10,500) and my net profit is so low ($1500) that this will create a problem.

>So here's the thing, you aren't a business.
Can't I file as a sole proprietor somehow? What if I register an LLC (cheap in my state)?
> In order for that to make sense for your tax return, those deductions must add up to more than the standard deduction
I have no other income for this year, I've just been NEETing it up on savings, so I'd have had no tax liability and no deduction otherwise AFAIK

What the above user said, if ALL of your itemized expenses are lower than the 2017 standard deduction rate, you should use the standard deduction rate instead. Google the things you can itemize and see if they'll go above the standard deduction rate to know whether to use it or not. You could probably deduct the whole $6,000 (minus the 2% floor) and it would effect your ENTIRE earnings total, not just your gains. But when you cash out the future stuff you won't be able to deduct that hardware again (and will have $0 cost basis on all your mined coins, meaning you'll report the entire amount of the coin as gain when you cash out)

>Can't I file as a sole proprietor somehow? What if I register an LLC (cheap in my state)?

I'm not sure if it's a great idea to report an LLC making money before it's inception.

This isn't tax law or anything... but, you could try to use the $6000 as cost basis of 1 transaction. Then use everything you've mined with the hardware as the proceeds of that transaction. This would only work in year 1, I think. If it "works" at all.

The way taxes are, they certainly weren't designed with crypto in mind.

Are my initial crypto purchases included in itemized expenses?

>I'm not sure if it's a great idea to report an LLC making money before it's inception.
I've googled around and it seems like this is perfectly fine, but it's hard to say. I'll do more research before I actually proceed.

It seems so needlessly complicated. I just want to pay them their shakedown money and be on my way. ;_;

>Are my initial crypto purchases included in itemized expenses?

No, that'd be included in your Schedule B or D as your cost basis. But you'll only have to report the gains from those as added income

I took an overall loss on my initial crypto trades (~2k)—will that offset some of my mining and subsequent trading gains?

You can only carryforward long-term losses (if you held the asset more than a year before you sold it) that go beyong your capital gains. But if you have short-term losses, you can use those to deduct (only) the short term gains

Carryforward as in use those losses that you didnt deduct (after bringing gains to $0 I mean).

So if you have 10,000 short term loss and 5,000 short term gain, you wont get to use that 5,000 left over later on, but wont pay taxes on your gains if thst makes sense

>you can use those to deduct (only) the short term gains
I'm not clear on if this includes gains from my mining venture—does it? I'm sorry for asking so many probably stupid and redundant questions, I'm just ensuring that I fully understand you.

Thanks for the help

This is how i handle taxes on crypto:
What crypto?

good luck when your exchange reports your numbers to the IRS

I would say so, yes, since your mining outlay was investment expenses, so your mining gains would be investment incomce that's offset by that

Based on what you're telling me and what I'm reading elsewhere, it sounds like taxes on crypto are very open to interpretation. I wonder how long it'll take the IRS to catch up.

It's still a completely new industry and thing all together so yeah lol. You're technically not in the business of mining but more independent investor-like. Until they come out with their own guidance specifically about it, you just have to try to compare it to how similar things are accounted for. I see in a year or two maybe it being a lot more clear, and regulations making it a lot easier for taxpayers to know based on tax forms that the exchanges will have to give them. And if not, taxcoin is going to M O O N

For any canucks wondering our revenue jews have come up with rules
canada.ca/en/financial-consumer-agency/services/payment/digital-currency.html