Tax implications for crypto

Discussion of all things crypto and blockchain.
User avatar
satosan
Turtle Supporter
Posts: 1225
Joined: Sun Mar 28, 2010
Location: Keepin an eye on you from my lair in the US
Contact:

Re: Tax implications for crypto

Postby satosan » Thu Dec 21, 2017

I'm trying to understand how I would be levied a tax by using crypt for goods and services. Am I supposed to keep all my receipts of the organic food I'm buying at the farmer's market with my smart phone?
http://www.satosanmetals.com "Limited Mintage Silver"
Accepting: Bitcoin(BTC), BitcoinCash(BCH), Etherum(ETH), LiteCoin(LTC), DASH, Dogecoin(DOGE), VertCoin(VTC).
ImageImageImage

User avatar
SilverDoge
Constitutional Supporter
Posts: 4536
Joined: Mon Apr 21, 2014
Location: Italy

Re: Tax implications for crypto

Postby SilverDoge » Thu Dec 21, 2017

satosan wrote:I'm trying to understand how I would be levied a tax by using crypt for goods and services. Am I supposed to keep all my receipts of the organic food I'm buying at the farmer's market with my smart phone?


There was talk about a law being passed where if/when you buy goods and services with your crypto and the purchase is under $600, then there are no tax consequences. I'm not sure if that was a part of the bill or not. It is a common-sense initiative so it therefore likely won't pass. Not sure where the $600 comes from either. That is arbitrary and quite a low amount.
Image

User avatar
skylersfriend
Gold Jester
Posts: 3337
Joined: Sat Mar 20, 2010
Location: THE MOON!!!

Re: Tax implications for crypto

Postby skylersfriend » Thu Dec 21, 2017

Ah , the real question finally emerges. Taxation...

If I sell a stock, any gains are taxable (except in some retirement accounts where the government is trying to encourage savings for retirement age). losses can only be written off against future profits for a short amount of time.

If I trade currencies, those profits any profits are taxable.

If I earn money through labor or sell goods and services at a profit that too is taxable (with certain minor exceptions).

I can't see why these events would not be taxable no matter what medium of exchange the transaction was used. Admittedly, some transactions are more easily hidden from taxing authorities than others.

For the government to fund itself and to hand out goodies to its citizens there must be some form of taxation.

As crypto currencies become more successful; the more Nation States , States and local governments will increase their diligence to get a piece of the pie.

Transactions will not allowed to become common place UNTIL governments figure out how to get their pound of flesh.

Seems to me that if Crypto currencies want to grow and prosper they should give the keys to the mining a bunch of the crypto currency to both political parties to buy some influence for tax policy...

The analysis may be all wrong but living in a high tax state (Oregon) it sure seems logical to me....
Don't think of me as a cynic; I am an optimist with experience!
Image


“In finance, everything that is agreeable is unsound and everything that is sound is disagreeable.” Winston Churchill

The year 2017: Where words and ideas are considered too hateful to be said,
while riots and assault are considered too peaceful to be prosecuted.

User avatar
SilverDoge
Constitutional Supporter
Posts: 4536
Joined: Mon Apr 21, 2014
Location: Italy

Re: Tax implications for crypto

Postby SilverDoge » Thu Dec 21, 2017

skylersfriend wrote:The analysis may be all wrong but living in a high tax state (Oregon) it sure seems logical to me....


The boiling frog of taxes has us so drugged up, we forget how crazy the system is. First I pay income taxes on all money I earn. Then I pay sales tax on everything I buy. Then I pay property tax on any land or real estate I own (and therefore I don't truly own it). Then after finally getting the tax man off my back, I manage to make a little bit of profit on an investment in after-tax dollars, and that needs to be taxed again too for some reason? Then I pay an inflation tax because everything is priced in dollars that are being constantly inflated against my will. Then if I am successful enough, I get to pay a death tax as well. Can you imagine our founding fathers thoughts on this? For shame.

Image

User avatar
bigjohn
Turtle Supporter
Posts: 4219
Joined: Wed Oct 21, 2015
Location: Western Washington

Re: Tax implications for crypto

Postby bigjohn » Fri Dec 22, 2017

Taxes are the price we pay (one of the prices) to reap the benefits of living in this great country. Unfortunately, almost all profits are taxed. If I buy a bunch of silver with my own money having already paid income taxes, then sell it on eBay at a profit, I get to pay a tax on that profit. Same with stocks, same with everything else. Figuring out how to track and report it will be a pain but, personally, I don’t mind paying income taxes on profit though I might bitch a little when writing that check lol. I could probably to move to Nigeria or Estonia or something and avoid those taxes
OPEN A COINBASE ACCOUNT AND BOTH OF US WILL GET $10
https://www.coinbase.com/join/593592a00b8e899741fd9dec

ImageImage Image

User avatar
SilverDoge
Constitutional Supporter
Posts: 4536
Joined: Mon Apr 21, 2014
Location: Italy

Re: Tax implications for crypto

Postby SilverDoge » Fri Dec 22, 2017

bigjohn wrote: I don’t mind paying income taxes on profit though


I wouldn't mind either if those taxes were spent responsibly, and our elected officials were actually responsible stewards of our money. On a macro level, the tax and monetary systems are set up to keep the rich, corrupt, and powerful at the top, and to keep the working pleebs at the bottom. At a micro level, the fact that my taxes go to people who murder innocent babies (abortion), to those living on generational welfare, to reward illegal immigration, and just the overall fraud, waste, and abuse that exists in Medicare, disability, and so many other government programs is an affront to everything good in this world.

So when the government heaps taxes upon taxes on my AFTER tax income, and I watch where it actually goes, and then I get to listen to those same recipients of the tax money wail about their victim status, it is enough to make a dude want to go Galt.
Image

User avatar
texmex66
Posts: 535
Joined: Tue Feb 02, 2016

Re: Tax implications for crypto

Postby texmex66 » Fri Dec 22, 2017

SilverDoge wrote:
bigjohn wrote: I don’t mind paying income taxes on profit though


I wouldn't mind either if those taxes were spent responsibly, and our elected officials were actually responsible stewards of our money. On a macro level, the tax and monetary systems are set up to keep the rich, corrupt, and powerful at the top, and to keep the working pleebs at the bottom. At a micro level, the fact that my taxes go to people who murder innocent babies (abortion), to those living on generational welfare, to reward illegal immigration, and just the overall fraud, waste, and abuse that exists in Medicare, disability, and so many other government programs is an affront to everything good in this world.

So when the government heaps taxes upon taxes on my AFTER tax income, and I watch where it actually goes, and then I get to listen to those same recipients of the tax money wail about their victim status, it is enough to make a dude want to go Galt.


+1

User avatar
SilverDoge
Constitutional Supporter
Posts: 4536
Joined: Mon Apr 21, 2014
Location: Italy

Re: Tax implications for crypto

Postby SilverDoge » Fri Dec 22, 2017

I need to look into how to be Amish, but still run my crypto rigs and do crypto trading on the side. I have no interest in facebook, twitter, or social media - but I still need to crypto. So perhaps if I can find a legal and Amish loophole so that I can still crypto, log into BS, and be Amish all at once - that might be the perfect trifecta.
Image

User avatar
bigjohn
Turtle Supporter
Posts: 4219
Joined: Wed Oct 21, 2015
Location: Western Washington

Re: Tax implications for crypto

Postby bigjohn » Fri Dec 22, 2017

SilverDoge wrote:
bigjohn wrote: I don’t mind paying income taxes on profit though


I wouldn't mind either if those taxes were spent responsibly, and our elected officials were actually responsible stewards of our money. On a macro level, the tax and monetary systems are set up to keep the rich, corrupt, and powerful at the top, and to keep the working pleebs at the bottom. At a micro level, the fact that my taxes go to people who murder innocent babies (abortion), to those living on generational welfare, to reward illegal immigration, and just the overall fraud, waste, and abuse that exists in Medicare, disability, and so many other government programs is an affront to everything good in this world.

So when the government heaps taxes upon taxes on my AFTER tax income, and I watch where it actually goes, and then I get to listen to those same recipients of the tax money wail about their victim status, it is enough to make a dude want to go Galt.

Oh I agree with that 100%, I am just saying that we all know our alternatives. Unfortunately, living in US and not paying taxes isn’t an alternative. Our government is eff’d up in a lot of ways and the system is undoubtedly broken but I’d still rather be here than anywhere else in the world
OPEN A COINBASE ACCOUNT AND BOTH OF US WILL GET $10
https://www.coinbase.com/join/593592a00b8e899741fd9dec

ImageImage Image

User avatar
SilverDoge
Constitutional Supporter
Posts: 4536
Joined: Mon Apr 21, 2014
Location: Italy

Re: Tax implications for crypto

Postby SilverDoge » Fri Dec 22, 2017

bigjohn wrote:Our government is eff’d up in a lot of ways and the system is undoubtedly broken but I’d still rather be here than anywhere else in the world


I used to say this same thing, until I got to see a bit more of the world. ;)

In reality, the more important aspect is the people you surround yourself with. This is why I both love and hate the military life. You get to be around such great people, but then you move every 2-3 years and start again. I'm so addicted to this, that I fear I won't be able to settle down once I get to a final spot. Maybe my old age will temper that enthusiasm down the line. Seriously considering the Live Free or Die state though.
Image

User avatar
texmex66
Posts: 535
Joined: Tue Feb 02, 2016

Re: Tax implications for crypto

Postby texmex66 » Thu Dec 28, 2017

Very informative and has tracking program for crypto trades. :D

https://www.youtube.com/watch?v=1N9eGrC4y1g

User avatar
Bucketeer
Bearish Supporter
Posts: 2640
Joined: Sat Aug 23, 2014
Location: Warily watching the herd.

Re: Tax implications for crypto

Postby Bucketeer » Thu Dec 28, 2017

It is my understanding you report gains and losses on Form D, and use the numbers as income or losses on 1040. The IRS states that Bitcoin is an asset (income). Do you really buy a cup of coffee with Bitcoin and record it?

That's why people don't use Bitcoin for minor transactions. Be a hodler.
Last edited by Bucketeer on Thu Dec 28, 2017, edited 1 time in total.
Gentlemen prefer Engelhard.

User avatar
Bucketeer
Bearish Supporter
Posts: 2640
Joined: Sat Aug 23, 2014
Location: Warily watching the herd.

Re: Tax implications for crypto

Postby Bucketeer » Thu Dec 28, 2017

skylersfriend wrote:Ah , the real question finally emerges. Taxation...

If I sell a stock, any gains are taxable (except in some retirement accounts where the government is trying to encourage savings for retirement age). losses can only be written off against future profits for a short amount of time.

If I trade currencies, those profits any profits are taxable.

If I earn money through labor or sell goods and services at a profit that too is taxable (with certain minor exceptions).

I can't see why these events would not be taxable no matter what medium of exchange the transaction was used. Admittedly, some transactions are more easily hidden from taxing authorities than others.

For the government to fund itself and to hand out goodies to its citizens there must be some form of taxation.

As crypto currencies become more successful; the more Nation States , States and local governments will increase their diligence to get a piece of the pie.

Transactions will not allowed to become common place UNTIL governments figure out how to get their pound of flesh.

Seems to me that if Crypto currencies want to grow and prosper they should give the keys to the mining a bunch of the crypto currency to both political parties to buy some influence for tax policy...

The analysis may be all wrong but living in a high tax state (Oregon) it sure seems logical to me....


+1 Good analogy
Gentlemen prefer Engelhard.

User avatar
Long John
Turtle Supporter
Posts: 3733
Joined: Sun Feb 14, 2016
Location: Northeast

Re: Tax implications for crypto

Postby Long John » Thu Feb 01, 2018

I received a 1099 from Coinbase. It shows "Gross amount of payment card/third party network transactions" and then divides it up by month. It simply adds up every time the customer took a cash payment. It does NOT reflect the cash that was put into crypto, whether at the outset or as part of your subsequent crypto transactions. If you cash out $1000 worth of Bitcoin and later that day put it right back into crypto, all the IRS will know about is the cashout.

If you put $30K into crypto and lose it all but $10K which you cash out, as far as IRS is concerned you made $10K. In fact, if you cash out several times and put it right back into crypto without ever removing it from Coinbase, CB will simply report to IRS that there were $90K (for example) in payments to you. It's up to you to prove your initial cost and subsequent expenditures.

Please correct me if this is wrong.

The form said for Mass. and Vt. residents (this would affect me and at least a couple others at BS, if they meet the $600 state threshold) the info is being provided to the state taxing authority but not to IRS. Not sure if it's also being provided to IRS if the other threshold, $20K, is met. Probably.

User avatar
Silvervein
Turtle Supporter
Posts: 718
Joined: Fri Feb 13, 2015
Location: SC

Re: Tax implications for crypto

Postby Silvervein » Thu Feb 01, 2018

Don’t forget to pay all of the tax from items you bought online through the year and did not pay sales tax on.... has anyone gone to jail for that?
NO!

Before Amazon had a facility built in my state they used to not charge sales tax and now it is hit or miss. Sometimes I’m charged, other times not. Depends on the item.

I’m sure we all pay our sales tax for items bought online, right?

Unless the tax code is clear, which for Crypto is certainly not and needs revision, do what makes you sleep well at night.
"Don't gain the world and lose your soul; wisdom is better than silver or gold."
- Bob Marley

User avatar
tdtwedt
Gold Supporter
Posts: 4383
Joined: Sat Nov 01, 2014
Location: South Mississippi

Re: Tax implications for crypto

Postby tdtwedt » Thu Feb 01, 2018

Silvervein wrote:Don’t forget to pay all of the tax from items you bought online through the year and did not pay sales tax on.... has anyone gone to jail for that?
NO!

Before Amazon had a facility built in my state they used to not charge sales tax and now it is hit or miss. Sometimes I’m charged, other times not. Depends on the item.

I’m sure we all pay our sales tax for items bought online, right?

Unless the tax code is clear, which for Crypto is certainly not and needs revision, do what makes you sleep well at night.


Coinbase could send the same info to the IRS....
There are more ways than one to skin a cat.

User avatar
Long John
Turtle Supporter
Posts: 3733
Joined: Sun Feb 14, 2016
Location: Northeast

Re: Tax implications for crypto

Postby Long John » Thu Feb 01, 2018

There are ways to make my life miserable, short of jail. :lol:

tdtwedt wrote:Coinbase could send the same info to the IRS....

Coinbase does send the info on a form 1099 to IRS. It's not a maybe thing, as far as I know.

User avatar
jcz1
Posts: 4697
Joined: Sat May 28, 2011
Location: USA

Re: Tax implications for crypto

Postby jcz1 » Thu Feb 01, 2018

Long John wrote:I received a 1099 from Coinbase. It shows "Gross amount of payment card/third party network transactions" and then divides it up by month. It simply adds up every time the customer took a cash payment. It does NOT reflect the cash that was put into crypto, whether at the outset or as part of your subsequent crypto transactions. If you cash out $1000 worth of Bitcoin and later that day put it right back into crypto, all the IRS will know about is the cashout.

If you put $30K into crypto and lose it all but $10K which you cash out, as far as IRS is concerned you made $10K. In fact, if you cash out several times and put it right back into crypto without ever removing it from Coinbase, CB will simply report to IRS that there were $90K (for example) in payments to you. It's up to you to prove your initial cost and subsequent expenditures.

Please correct me if this is wrong.

The form said for Mass. and Vt. residents (this would affect me and at least a couple others at BS, if they meet the $600 state threshold) the info is being provided to the state taxing authority but not to IRS. Not sure if it's also being provided to IRS if the other threshold, $20K, is met. Probably.


This is similar to stock sales. The 1099-B shows the proceeds you get, and on the tax form you provide the cost basis info for those proceeds, to determine the taxable amount.

I should note that in the last few years, brokerages have also provided cost basis if they know about it, but for stocks I moved from Vanguard to E-Trade, they have no such knowledge.

Coinbase might have cost basis knowledge for your proceeds, but it took years (decades?) for brokerages to get to the point of also providing cost basis. And it may have happened only because the IRS required them to do so:

The key changes to the form are: Starting in tax year 2011, brokers must report the adjusted basis and whether any gain or loss on a sale is classified as short-term or long-term from the sale of "covered securities" on Form 1099-B. "Covered securities" are generally shares of corporate stock acquired after 2010.Oct 26, 2017

https://www.irs.gov/businesses/small-bu ... rting-faqs
Dissenting voices have been silenced. BS is now a safe space.
Democracy Dies in Darkness

User avatar
jcz1
Posts: 4697
Joined: Sat May 28, 2011
Location: USA

Re: Tax implications for crypto

Postby jcz1 » Thu Feb 01, 2018

Some crypto questions are starting to show up at the forums for the tax software firms. Here's one answer about which form to use for reporting these proceeds, in case this is helpful for anyone:

Either section "1099-B Sale of stocks, bonds, mutual funds, and other securities " and "1099-S Sale of real estate...and other investment property," fills out the Form 8949 and Schedule D for you in the tax program. So, you can select either section to report these bitcoin sales.

However, it should be made aware that according to the Form 8949 itself, there is a spot on the Form 8949 that mentions "(C) Short-term transactions not reported to you on Form 1099-B" and "(F) Long-term transactions not reported on your Form 1099-B".

If these bitcoin transactions are not reported to you on a Form 1099-B, you can use the section in the tax program called "1099-S of real estate, collectibles, and other investment property" to enter the bitcoin sales there. After entering the bitcoin sales in the "1099-S Sale of real estate...and other investment property" section in the tax program, these bitcoin transactions will show up on the Form 8949 with the checkbox "(C) Short-term transactions not reported to you on Form 1099-B" checked off for any bitcoin sales bought and sold during 2017 and the checkbox "(F) Long-term transactions not reported to you on Form 1099-B" for any bitcoin sales purchased before 2017 and later sold in 2017.

On the other hand, if these bitcoin transactions are reported to you on Form 1099-B, then you can simply use the "1099-B Sale of stocks, mutual funds, and other securities" section in the tax program to report these bitcoin sales.
Dissenting voices have been silenced. BS is now a safe space.
Democracy Dies in Darkness

User avatar
Long John
Turtle Supporter
Posts: 3733
Joined: Sun Feb 14, 2016
Location: Northeast

Re: Tax implications for crypto

Postby Long John » Thu Feb 01, 2018

Coinbase / GDAX does keep a record of cash purchases, and it is fairly easy to access those and add them up. I am not sure what documentation IRS would require to support that.

The maneuverings on other exchanges are irrelevant, I believe, unless there is a cash payout at one of them. For most people the key numbers are total cash in and total payouts at Coinbase. Again correct me if I'm wrong, it appears there is no reporting to IRS if your total payouts are less than $20K in a year, and whether you report that is your business and at your risk.


Return to “Bitcoin/Crypto/Blockchain”

Who is online

Users browsing this forum: No registered users and 1 guest