US IRS tax reporting for cryptocurrencies


#1

Hi Guys & Gals,

I live in the US and have questions about tax implications of owning crypto currencies.
I didn’t find any top with this so am creating one here.
I am curious as to what websites/software are you guys using for creating tax statements.

Do you have to pay taxes when you exchange/buy altcoins with BTC, ETH?
If you are not selling any coin, do you still own taxes?
Any good CPA names for crypto tax reporting purposes?
I would appreciate any input in this regard.


About the Law & Tax category
Great Links NEEDED!
#2

I use this web app https://www.bitcoin.tax


#3

Thanks for your reply. I found another website listing few more websites.
I wonder if anyone has used them.


#4

I’ve had a TPN with the IRS for over a decade now. An Accountant in my pre-BTC life. If anyone is curious on legally means to circumvent taxation. Purchasing a small piece of property in Bahamas or Bermuda and gaining residency. Will allow you to withdraw gains in one of these countries as a resident without paying any capital gains tax.
You may also renounce citizenship by gaining a non-citizen resident passport. Operating in that manner you do not have a social security number and therefore can’t receive a 1099. You simply remove your corporate entity from the system.
Also, keep in mind that when you file your taxs, you are entering into an agreement that did not exist prior to you creating it with the agency. It is when the agency files on your behalf that an involuntary action is created.


#5

It’s a strange thing: tax over cryptocurrency… Here (Holland) we have to give the balance of what you own in total (bank, cryptocurrency…) the last day of the year and you pay only 1,5% tax or something like that… The same like your savings on the bank… And the first 29.250 dollar is free of tax… I think it’s cheaper than the most countries… :smile:


#6

I have seen other discutions about taxes getting a lot of heat. I am not using cryptocurrencies as a way to circumvent obligations, but I am happy to learn from other experience/point of view. I want to start mining coins (I may have to wait next year before i start). I am wondering if I am better to register a small business and get tax ids, it may have advantages since I’ll spend money on the rig and electricity.


#7

You may register the business under the e-resident program in Estonia and pay significantly lower taxs. This works well since you don’t employ anyone as a miner.


#8

I’m Canadian, but it still apply… and I may have cheaper electricity, get deductions for equipments. I have to ask other entrepreneurs for advises.


#9

Yes, thankfully anyone can participate in the program.

https://e-resident.gov.ee


#10

Would one also be required to provide their Bitcoin address to verify fair market value at the time of acceptance? Also, what happens if one claims, and then afterwards, through some unfortunate event, the wallet is lost and all funds are no longer accessible?

Tax Tips for Bitcoin and Virtual Currency
Updated for Tax Year 2017

Bitcoin miners must report receipt of the virtual currency as income

Some people “mine” Bitcoins by using computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger.

According to the IRS, when a taxpayer successfully “mines” Bitcoins and has earnings from that activity whether in the form of Bitcoins or any other form, he or she must include it in his gross income after determining the fair market dollar value of the virtual currency as of the day he received it. If a bitcoin miner is self-employed, his or her gross earnings minus allowable tax deductions are also subject to the self-employment tax.


#11

Any and all information obtained on an individual by the agency is done by 1099. Some exchanges require your identification, some do not. The ones that do will file a 1099 on your behalf if more than $10,000 has transacted under your account in accordance with FDIC. This includes any visa/MC branded BTC debt cards. But, wallet information that pertains to a privately controlled key. Should never be disclosed to any party/parties. The financial information contained is not available to any agencies unless disclosed freely by an individual.


#12

Nooice.


#13

That sounds like guidance that can’t meaningfully be enforced. I’m not giving anyone any advice but how in the heck would the IRS know you were mining Bitcoin unless you registered a business (then you would need to show you were trying to make profits)?


#14

I thought (in the US) you only assumed a tax liability when you converted to Fiat. “What happens in crypto stays in crypto”. Personally, I think it best to leave the details between me and the fence.


#15

It’s apparently cryptocurrency to Fiat and when you trade for other cryptocurrencies.


#16

I did some research and found that.

  1. Pay tax when convert to Fiat.
  2. Pay tax when we trade other cryptocurrencies. This one is really tough. We make profit when we sell but the profit is not convert to FIAT, and we need to pay the tax for that profit. I only have money when I convert to Fiat to pay the tax.

I feel like I should buy and hold for at least 1 year. Then I sell and convert to fiat to pay the tax. Does anyone have a good advice?


#17

Thank you for doing some research into this. I find myself perplexed a bit here. So we have to pay taxes when you trade cryptocurrency from 1 coin to another? If it isn’t converted into Fiat, why would we have to pay taxes on it? Sorry if it is a stupid question lol. I’m new to cryptocurrency all together. So in this case, buying and holding for over a year is best, I guess?


#18

Either way your still going to be taxed. Just less paper work to hold longer. If you want to be an upstanding citizen and pay your taxes anyways :smile:


Tax Accounting Solutions
#19

You are correct the trading of one coin to another is a taxable transaction. This is where apps or sites like cointtracking.info come in handy as they track mining income and provide various reports for realized and unrealized gains. On cointracking.info you can also choose several different options for calculating these numbers such as FIFO (first in first out) or LIFO (Last in first out). Not real sure on the differences between the two for tax reporting purposes of calculating gains but the options are there.

@smitty as far as the IRS knowing that you mine bitcoin is pretty tough to enforce as long as you use an address that has never been touched by another address that has been involved with any of the US exchanges like Bittrex and Coinbase. They are able to track your address from there as they have a bitcoin address with a Name.

If you choose not to follow the guidance that has been issued by the IRS that is up to you. I am not here to skirt the law or stick it to the man I have explained this in other tax topics. I am just explaining to the best of my knowledge of how the IRS wants our taxes calculated.


#20

I guess I better prepare myself as best as I can. I can’t afford to get in trouble with the man ( IRS ) lol.