The IRS and bitcoins - GoFuckYourself.com

L-Pink · 03-20-2013, 06:30 AM

How do you have a currency, bitcoins, that can increase in value between the time you receive it for services rendered and when you spend it? How do you track and pay tax on the monetary gain of appreciating currency?

To be legally compliant with the IRS any appreciation in a sold asset must be taxed. Who keeps track of this? Or is every bitcoin transaction an IRS violation?

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dyna mo · 03-20-2013, 06:33 AM

if i sell my car for a profit, i don't have to claim that as income.

BlackCrayon · 03-20-2013, 06:50 AM

bitcoin attracts people based on the premise that they don't have to pay taxes or report anything to the IRS and can circumvent government intervention. they somehow think they're gonna change the world or something. they're dreaming. i wonder who they will report to when their bitcoins get stolen from their computer.

HushMoney · 03-20-2013, 07:04 AM

Quote:

Originally Posted by dyna mo

if i sell my car for a profit, i don't have to claim that as income.

L-Pink · 03-20-2013, 07:09 AM

Quote:

Originally Posted by dyna mo

if i sell my car for a profit, i don't have to claim that as income.

ANY gains from sales of personal property/assets must be included in your income for tax purposes.

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L-Pink · 03-20-2013, 07:14 AM

To be IRS compliant with a bitcoin transaction you would have to state the value of the bitcoin when acquired, the value when sold, pay tax on the appreciation. Imagine making a rent payment with Apple stock, same thing.

An accounting nightmare that is your responsibility to document on a "first in, first out" basis.

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TheSquealer · 03-20-2013, 07:14 AM

Quote:

Originally Posted by dyna mo

if i sell my car for a profit, i don't have to claim that as income.

haha.. really? I think you need a new accountant. Otherwise, i propose we sell the same $300.00 car back and forth between each other for absurd amounts of money so we can avoid income taxes all together. We'll just be two guys who both happened to sell our cars for 100X what they were worth.

dyna mo · 03-20-2013, 07:28 AM

apparently, i was misinformed when i sold my truck last year. 1st vehicle i sold for a gain.

dyna mo · 03-20-2013, 07:33 AM

When you sell your car, only the portion of the selling price that exceeds the adjusted basis of the car is taxable gain. For example, if your car has an adjusted basis of $5,000 and you sell the car for $6,000, you have a gain of $1,000. If your basis is less than or equal to what you paid for the car, you don't have to include the income from the sale on your tax return.

L-Pink · 03-20-2013, 07:39 AM

Quote:

Originally Posted by dyna mo

When you sell your car, only the portion of the selling price that exceeds the adjusted basis of the car is taxable gain. For example, if your car has an adjusted basis of $5,000 and you sell the car for $6,000, you have a gain of $1,000. If your basis is less than or equal to what you paid for the car, you don't have to include the income from the sale on your tax return.

Correct you pay tax on the gain.

In a bitcoin transaction almost every transaction will be for a different amount value wise than the bitcoin was acquired for. This variance on a first in/first out value basis will need to be accounted for to be IRS compliant.

This alone makes bitcoins worthless as a form of payment unless you are trying to scam the system.

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L-Pink · 03-20-2013, 07:50 AM

As far as bitcoin payments for services rendered … at the time of payment you would need to value the bitcoin income based on the dollars value that day. That is your taxable income amount for IRS purposes.

Again who in the hell is going to bother doing that? What a bookkeeping nightmare!

If your intention is to avoid IRS guidelines and be off the grid good luck. In the event of an audit almost every transaction can be viewed as tax evasion.

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dyna mo · 03-20-2013, 07:54 AM

Quote:

Originally Posted by L-Pink

Correct you pay tax on the gain.

In a bitcoin transaction almost every transaction will be for a different amount value wise than the bitcoin was acquired for. This variance on a first in/first out value basis will need to be accounted for to be IRS compliant.

This alone makes bitcoins worthless as a form of payment unless you are trying to scam the system.

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are bitcoins considered income or capital gains?

ThunderBalls · 03-20-2013, 07:54 AM

Quote:

Originally Posted by dyna mo

When you sell your car, only the portion of the selling price that exceeds the adjusted basis of the car is taxable gain. For example, if your car has an adjusted basis of $5,000 and you sell the car for $6,000, you have a gain of $1,000. If your basis is less than or equal to what you paid for the car, you don't have to include the income from the sale on your tax return.

Ya think? How old are you? 15?

pornguy · 03-20-2013, 07:56 AM

Quote:

Originally Posted by dyna mo

if i sell my car for a profit, i don't have to claim that as income.

Correct. Unless its a capital gains issue like selling houses. Even that has changed.

But not to worry folks. uncle sam will find a way.

dyna mo · 03-20-2013, 07:57 AM

also, doesn't the irs account for bartering? wouldn't what you describe fall under this category of transactions?

in bartering, the value of a thingie is dynamic right?

L-Pink · 03-20-2013, 08:00 AM

Quote:

Originally Posted by dyna mo

are bitcoins considered income or capital gains?

If you buy them for speculation they are treated as any other investment. Capital gains kick in if held for a minimum amount of time.

If you take them as payment for goods or services they need to be valued the day they are received and then taxed as ordinary income.

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dyna mo · 03-20-2013, 08:01 AM

Quote:

Originally Posted by ThunderBalls

Ya think? How old are you? 15?

that was a quote from a tax website.

but no, i am not 15.

obviously, i was incorrect in what i thought and posted in my 1st post, not sure why you feel the need to try and insult someone just because they are misinformed and also already cleared up the confusion.

says a lot more about you than me.

CyberHustler · 03-20-2013, 08:02 AM

Quote:

Originally Posted by pornguy

uncle sam will find a way.

Absolutely

TheSquealer · 03-20-2013, 08:06 AM

Quote:

Originally Posted by dyna mo

also, doesn't the irs account for bartering? wouldn't what you describe fall under this category of transactions?

in bartering, the value of a thingie is dynamic right?

The answer in general to all your questions is this "if you come out ahead, you'll be taxed on it". Additionally, all questions are only relevant to the last 6 months and the most current tax code updates, so few could give you competent answers on questions as the answers change quite frequently.

L-Pink · 03-20-2013, 08:10 AM

Quote:

Originally Posted by dyna mo

also, doesn't the irs account for bartering? wouldn't what you describe fall under this category of transactions?

in bartering, the value of a thingie is dynamic right?

If you barter, you must report on your tax return the fair market value of the products or services you received.

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dyna mo · 03-20-2013, 08:11 AM

Quote:

Originally Posted by TheSquealer

The answer in general to all your questions is this "if you come out ahead, you'll be taxed on it". Additionally, all questions are only relevant to the last 6 months and the most current tax code updates, so few could give you competent answers on questions as the answers change quite frequently.

my question was in regards to this comment by L

Quote:

Originally Posted by L-Pink

In a bitcoin transaction almost every transaction will be for a different amount value wise than the bitcoin was acquired for. This variance on a first in/first out value basis will need to be accounted for to be IRS compliant.

This alone makes bitcoins worthless as a form of payment unless you are trying to scam the system.

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it seems to me that this is comparable to a barter type of transaction where the exchange rate is always dynamic yet the irs allows these and accounts for them.

dyna mo · 03-20-2013, 08:15 AM

Quote:

Originally Posted by L-Pink

If you barter, you must report on your tax return the fair market value of the products or services you received.

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wouldn't that be the fair market value at the ~ time of transaction or is there another way to handle that?

L-Pink · 03-20-2013, 08:17 AM

Quote:

Originally Posted by dyna mo

my question was in regards to this comment by L

it seems to me that this is comparable to a barter type of transaction where the exchange rate is always dynamic yet the irs allows these and accounts for them.

Bartering comes down to declaring fair market value. Since bitcoins are cashed out at a specific dollar amount everyday current value is easy to pinpoint. So a payment for your services on a given day is declared in the dollar value of that days bitcoin.

Since the legal accounting of value is tied exactly to a dollar amount why bother getting paid in bitcoins? You owe the IRS in dollars.

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dyna mo · 03-20-2013, 08:23 AM

Quote:

Originally Posted by L-Pink

Bartering comes down to declaring fair market value. Since bitcoins are cashed out at a specific dollar amount everyday current value is easy to pinpoint. So a payment for your services on a given day is declared in the dollar value of that days bitcoin.

Since the legal accounting of value is tied exactly to a dollar amount why bother getting paid in bitcoins? You owe the IRS in dollars.

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isee. i am trying to reconcile your comment though, this one

Quote:

This alone makes bitcoins worthless as a form of payment unless you are trying to scam the system.

this seems extreme, based on the current info.

woj · 03-20-2013, 08:23 AM

Quote:

Originally Posted by dyna mo

wouldn't that be the fair market value at the ~ time of transaction or is there another way to handle that?

this is why good accountants get paid a fortune, there are probably multiple legal ways to do accounting with bitcoins... you could probably structure it all in such a way, that all income would legally be treated as capital gains...

dyna mo · 03-20-2013, 08:27 AM

Quote:

Originally Posted by woj

this is why good accountants get paid a fortune, there are probably multiple legal ways to do accounting with bitcoins... you could probably structure it all in such a way, that all income would legally be treated as capital gains...

it's all pretty fascinating to me, i am enjoying learning about it. can't wait to see how it all goes.

shake · 03-20-2013, 08:31 AM

Quote:

Originally Posted by L-Pink

As far as bitcoin payments for services rendered ? at the time of payment you would need to value the bitcoin income based on the dollars value that day. That is your taxable income amount for IRS purposes.

Again who in the hell is going to bother doing that? What a bookkeeping nightmare!

If your intention is to avoid IRS guidelines and be off the grid good luck. In the event of an audit almost every transaction can be viewed as tax evasion.

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It is a mess, I already have to do this. Just filed my corporate year end and you should see all the conversions back and forth from Canadian dollars to US dollars... exchange rate is different every minute. It's a mess.

slapass · 03-20-2013, 08:31 AM

Would you pay when you convert to cash. It is an exchange until you cash out.

L-Pink · 03-20-2013, 08:32 AM

dayn mo ….. Example; I pay you xxx in bitcoins. Based on the days bitcoin value to the dollar that's say $500.00. So your income is $500. Now if the bitcoins change in value before you cash them out or trade them to someone else you need to account for that change in value either as a gain or loss.

Again what an accounting nightmare. And a double nightmare if they lose value.

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L-Pink · 03-20-2013, 08:35 AM

Quote:

Originally Posted by slapass

Would you pay when you convert to cash. It is an exchange until you cash out.

It's a taxable exchange based on fair market value at the time of exchange. Any appreciation or depreciation when you go to convert is a separate accounting entry.

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BlackCrayon · 03-20-2013, 08:38 AM

Quote:

Originally Posted by shake

It is a mess, I already have to do this. Just filed my corporate year end and you should see all the conversions back and forth from Canadian dollars to US dollars... exchange rate is different every minute. It's a mess.

you're allowed to use an average for the exchange rate as far as i know.

dyna mo · 03-20-2013, 08:39 AM

Quote:

Originally Posted by L-Pink

dayn mo ?.. Example; I pay you xxx in bitcoins. Based on the days bitcoin value to the dollar that's say $500.00. So your income is $500. Now if the bitcoins change in value before you cash them out or trade them to someone else you need to account for that change in value either as a gain or loss.

Again what an accounting nightmare. And a double nightmare if they lose value.

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i hear ya, there's certainly a level of complexity.

but in your view, you decided bitcoins are worthless and to exchange them is a scam?

L-Pink · 03-20-2013, 08:45 AM

Quote:

Originally Posted by dyna mo

i hear ya, there's certainly a level of complexity.

but in your view, you decided bitcoins are worthless and to exchange them is a scam?

To me the accounting mess, volatility and internet funny money classification make them unattractive.

Most getting involved will never declare them as income for services or goods provided and will keep any appreciation as free money. A way to beat the system, so yea I view them as a scam and a tool for scammers. I'll bet the IRS will too.

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dyna mo · 03-20-2013, 08:48 AM

Quote:

Originally Posted by L-Pink

To me the accounting mess, volatility and internet funny money classification make them unattractive.

Most getting involved will never declare them as income for services or goods provided and will keep any appreciation as free money. A way to beat the system, so yea I view them as a scam and a tool for scammers. I'll bet the IRS will too.

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you could very well be right on the money.

L-Pink · 03-20-2013, 09:15 AM

Quote:

Originally Posted by shake

It is a mess, I already have to do this. Just filed my corporate year end and you should see all the conversions back and forth from Canadian dollars to US dollars... exchange rate is different every minute. It's a mess.

yep ……..
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- Jesus Christ - · 03-20-2013, 10:41 AM

Anyone who wants to steal my money... why don't you come do it yourself instead of trying to get some suit to do it for you?

I'll be waiting.

MrMaxwell · 03-20-2013, 12:58 PM

You don't have to come out ahead in order to be taxed by the irs

There is no such thing as scamming the IRS since the IRS IS A SCAM in the first place

Governments and bankers will find a way to get rid of bitcoins- the will not allow any freedom when it comes to currencies. Period.

epitome · 03-20-2013, 01:03 PM

Pretty sure the people using an anonymous "currency" such as bitcoins are not interested in reporting their activities.

Better just to stay away from them altogether. You don't want any of your gains to be quickly erased.

Kind of reminds me of how the weed shops in CA are not allowed to claim any deductions because the federal government and by extension, the IRS, consider their activities illegal.

epitome · 03-20-2013, 01:04 PM

Quote:

Originally Posted by MrMaxwell

You don't have to come out ahead in order to be taxed by the irs

There is no such thing as scamming the IRS since the IRS IS A SCAM in the first place

Governments and bankers will find a way to get rid of bitcoins- the will not allow any freedom when it comes to currencies. Period.

So if you make $0 for the year the IRS is still going to tax you?

jwerd · 03-20-2013, 01:08 PM

Quote:

Originally Posted by L-Pink

Most getting involved will never declare them as income for services or goods provided and will keep any appreciation as free money
.

Free money? Without informing the mafia? Sure. As farm animals to the tax farm, it'd be in our best interest to actually support something that gives us the freedom to trade without a gun pointed at us at all times. Just sayin'

MrMaxwell · 03-20-2013, 01:13 PM

Quote:

Originally Posted by epitome

So if you make $0 for the year the IRS is still going to tax you?

They sure as hell can
Some piece of trash from the IRS was very recently threatening 100M people with the AMT

L-Pink · 03-20-2013, 01:14 PM

Quote:

Originally Posted by jwerd

Free money? Without informing the mafia? Sure. As farm animals to the tax farm, it'd be in our best interest to actually support something that gives us the freedom to trade without a gun pointed at us at all times. Just sayin'

"Just sayin" ? Just saying what?

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BlackCrayon · 03-20-2013, 01:25 PM

Quote:

Originally Posted by L-Pink

"Just sayin" ? Just saying what?

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he's just sayin' he's more than willing to break the law.

Vapid - BANNED FOR LIFE · 03-20-2013, 01:33 PM

Quote:

Originally Posted by BlackCrayon

he's just sayin' he's more than willing to break the law.

http://en.wikipedia.org/wiki/Monopoly_on_violence
A monopoly of the legitimate use of physical force

adulttraffic · 03-20-2013, 01:36 PM

Quote:

Originally Posted by L-Pink

Correct you pay tax on the gain.

In a bitcoin transaction almost every transaction will be for a different amount value wise than the bitcoin was acquired for. This variance on a first in/first out value basis will need to be accounted for to be IRS compliant.

This alone makes bitcoins worthless as a form of payment unless you are trying to scam the system.

.

LOL I dont know about every state and can only comment on the state of XX. Their is a reason why their is a place on the auto title for sale price. This is so when you change title ownership you have to pay sales tax. Dosent matter how many times the car is sold. Everyone must pay tax. You are exactly correct.. you must pay the tax again.

L-Pink · 03-20-2013, 01:37 PM

Quote:

Originally Posted by BlackCrayon

he's just sayin' he's more than willing to break the law.

Which appears to be the only real benefit to using bitcoins. Tax avoidance. Non compliance with tax codes.

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adulttraffic · 03-20-2013, 01:41 PM

Quote:

Originally Posted by L-Pink

Which appears to be the only real benefit to using bitcoins. Tax avoidance. Non compliance with tax codes.

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Exactly, but what people seem to forget unless you get these bitcoins paid to some kind of debit card in a name thats not theirs then their is no way they can possibly avoid paying taxes with out future repercussions. Sure you can transfer this into your bank account and declare nothing. But if you ever get audited you will get caught.

Shedevils · 03-20-2013, 01:45 PM

Quote:

Originally Posted by dyna mo

if i sell my car for a profit, i don't have to claim that as income.

What country are you in?

Where I am the only thing, and I mean the only thing that is not taxed upon sale is your primary home residence.

dyna mo · 03-20-2013, 01:47 PM

Quote:

Originally Posted by Shedevils

What country are you in?

Where I am the only thing, and I mean the only thing that is not taxed upon sale is your primary home residence.

what difference does it make if i answer your question? you obviously by-passed the entire thread to point out my post.

thanks for the thread, L, very thought-provoking.

x-rate · 03-20-2013, 01:50 PM

Someone should try this (btw I don't know bitcoins but I like tax question and discuss)

Call IRS and say:

You: Last year I made 50k I had no expense.
(now assuming this person should be taxable at 30%)
You: I don't mind writing you a check for 15000$ but I also made 1000 bitcoins last year so where do I send the 300 bitcoins?
IRS:

03-20-2013, 06:30 AM	#1
L-Pink working on my tan Industry Role: Join Date: Mar 2005 Location: Florida/Kentucky Posts: 39,151	The IRS and bitcoins How do you have a currency, bitcoins, that can increase in value between the time you receive it for services rendered and when you spend it? How do you track and pay tax on the monetary gain of appreciating currency? To be legally compliant with the IRS any appreciation in a sold asset must be taxed. Who keeps track of this? Or is every bitcoin transaction an IRS violation? .

03-20-2013, 06:50 AM	#3
BlackCrayon Too lazy to set a custom title Join Date: Jun 2003 Location: Ottawa Posts: 19,631	bitcoin attracts people based on the premise that they don't have to pay taxes or report anything to the IRS and can circumvent government intervention. they somehow think they're gonna change the world or something. they're dreaming. i wonder who they will report to when their bitcoins get stolen from their computer. __________________ you don't know you're wearing a leash if you sit by the peg all day..

03-20-2013, 07:14 AM	#6
L-Pink working on my tan Industry Role: Join Date: Mar 2005 Location: Florida/Kentucky Posts: 39,151	To be IRS compliant with a bitcoin transaction you would have to state the value of the bitcoin when acquired, the value when sold, pay tax on the appreciation. Imagine making a rent payment with Apple stock, same thing. An accounting nightmare that is your responsibility to document on a "first in, first out" basis. . Last edited by L-Pink; 03-20-2013 at 07:18 AM..

03-20-2013, 10:41 AM	#36
- Jesus Christ - Confirmed User Industry Role: Join Date: Mar 2003 Location: ::::::::::::: :::::::::::\|\|::::::::::: :::::::::::\|\|::::::::::: :::::::::::\|\|::::::::::: :::::::::::\|\|::::::::::: :::::::::::\|\|::::::::::: ::::::\|\|\|\|\|\|\|\|\|\|\|\|:::::: :::::::::::\|\|::::::::::: :::::::::::\|\|::::::::::: :::::::::::::::::::::::: Posts: 7,197	Anyone who wants to steal my money... why don't you come do it yourself instead of trying to get some suit to do it for you? I'll be waiting. __________________ Amen

03-20-2013, 01:50 PM	#50
x-rate Confirmed User Industry Role: Join Date: Jun 2008 Location: Montreal Posts: 725	Someone should try this (btw I don't know bitcoins but I like tax question and discuss) Call IRS and say: You: Last year I made 50k I had no expense. (now assuming this person should be taxable at 30%) You: I don't mind writing you a check for 15000$ but I also made 1000 bitcoins last year so where do I send the 300 bitcoins? IRS: __________________ Have quality traffic? Make money with Crakrevenue Email: misterxmtl @ hotmail.com Skype: misterxmtl Last edited by x-rate; 03-20-2013 at 01:52 PM..

03-20-2013, 06:33 AM	#2
dyna mo The People's Post Industry Role: Join Date: Dec 2008 Location: invisible 7-11 Posts: 64,000	if i sell my car for a profit, i don't have to claim that as income.

03-20-2013, 07:28 AM	#8
dyna mo The People's Post Industry Role: Join Date: Dec 2008 Location: invisible 7-11 Posts: 64,000	apparently, i was misinformed when i sold my truck last year. 1st vehicle i sold for a gain.

03-20-2013, 07:33 AM	#9
dyna mo The People's Post Industry Role: Join Date: Dec 2008 Location: invisible 7-11 Posts: 64,000	When you sell your car, only the portion of the selling price that exceeds the adjusted basis of the car is taxable gain. For example, if your car has an adjusted basis of $5,000 and you sell the car for $6,000, you have a gain of $1,000. If your basis is less than or equal to what you paid for the car, you don't have to include the income from the sale on your tax return.

03-20-2013, 07:50 AM	#11
L-Pink working on my tan Industry Role: Join Date: Mar 2005 Location: Florida/Kentucky Posts: 39,151	As far as bitcoin payments for services rendered … at the time of payment you would need to value the bitcoin income based on the dollars value that day. That is your taxable income amount for IRS purposes. Again who in the hell is going to bother doing that? What a bookkeeping nightmare! If your intention is to avoid IRS guidelines and be off the grid good luck. In the event of an audit almost every transaction can be viewed as tax evasion. .

03-20-2013, 07:57 AM	#15
dyna mo The People's Post Industry Role: Join Date: Dec 2008 Location: invisible 7-11 Posts: 64,000	also, doesn't the irs account for bartering? wouldn't what you describe fall under this category of transactions? in bartering, the value of a thingie is dynamic right?

03-20-2013, 08:31 AM	#28
slapass Too lazy to set a custom title Join Date: Nov 2002 Location: Earth Posts: 14,622	Would you pay when you convert to cash. It is an exchange until you cash out.

03-20-2013, 08:32 AM	#29
L-Pink working on my tan Industry Role: Join Date: Mar 2005 Location: Florida/Kentucky Posts: 39,151	dayn mo ….. Example; I pay you xxx in bitcoins. Based on the days bitcoin value to the dollar that's say $500.00. So your income is $500. Now if the bitcoins change in value before you cash them out or trade them to someone else you need to account for that change in value either as a gain or loss. Again what an accounting nightmare. And a double nightmare if they lose value. .

03-20-2013, 12:58 PM	#37
MrMaxwell Too lazy to set a custom title Industry Role: Join Date: Jul 2005 Posts: 10,057	You don't have to come out ahead in order to be taxed by the irs There is no such thing as scamming the IRS since the IRS IS A SCAM in the first place Governments and bankers will find a way to get rid of bitcoins- the will not allow any freedom when it comes to currencies. Period.

03-20-2013, 01:03 PM	#38
epitome So Fucking Lame Industry Role: Join Date: Jun 2009 Location: St. Petersburg, FL Posts: 12,156	Pretty sure the people using an anonymous "currency" such as bitcoins are not interested in reporting their activities. Better just to stay away from them altogether. You don't want any of your gains to be quickly erased. Kind of reminds me of how the weed shops in CA are not allowed to claim any deductions because the federal government and by extension, the IRS, consider their activities illegal.