Taxes - Clearing up some Questions (USA ONLY)

investmentgroup wrote:In case anyone finds it helpful I've been using https://bitcoin.tax/ since 2013 and have found it extremely helpful. For mining, you are able to point at the wallet address to indicate that the activity is for mining. My first year mining I didn't separate out my mining income, now I keep wallets explicitly for mining deposits only and separate them from trading wallets and it makes reporting much easier. Nearly all of my income has come in the form of BTC/LTC payouts. They don't support a huge variety of coins, so depending on what you're getting paid in your mileage may vary. Your also able to import trading activity from many of the exchanges via API. In the end, I have a report that I give to my accountant that shows my income (from mining) and my capital gains/losses from trading. It's been a life saver for remaining compliant.

I've tested out this site and it seems interesting, i'm just not sure where to put on this website what coins were bought vs mining.

investmentgroup wrote:In case anyone finds it helpful I've been using https://bitcoin.tax/ since 2013 and have found it extremely helpful. For mining, you are able to point at the wallet address to indicate that the activity is for mining. My first year mining I didn't separate out my mining income, now I keep wallets explicitly for mining deposits only and separate them from trading wallets and it makes reporting much easier. Nearly all of my income has come in the form of BTC/LTC payouts. They don't support a huge variety of coins, so depending on what you're getting paid in your mileage may vary. Your also able to import trading activity from many of the exchanges via API. In the end, I have a report that I give to my accountant that shows my income (from mining) and my capital gains/losses from trading. It's been a life saver for remaining compliant.

I've tested out this site and it seems interesting, i'm just not sure where to put on this website what coins were bought vs mining.

Aura89 wrote:

investmentgroup wrote:In case anyone finds it helpful I've been using https://bitcoin.tax/ since 2013 and have found it extremely helpful. For mining, you are able to point at the wallet address to indicate that the activity is for mining. My first year mining I didn't separate out my mining income, now I keep wallets explicitly for mining deposits only and separate them from trading wallets and it makes reporting much easier. Nearly all of my income has come in the form of BTC/LTC payouts. They don't support a huge variety of coins, so depending on what you're getting paid in your mileage may vary. Your also able to import trading activity from many of the exchanges via API. In the end, I have a report that I give to my accountant that shows my income (from mining) and my capital gains/losses from trading. It's been a life saver for remaining compliant.

I've tested out this site and it seems interesting, i'm just not sure where to put on this website what coins were bought vs mining.

Purchased coins go under trading. Mining goes under Income. You report mined coins when you receive them as ordinary income. Any gains or loss from that point are capital gains or losses. Or that's my understanding.

3Moose wrote:Some people were posting on Taxes so I thought would answer the question:

This is not meant to cover every possible aspect of taxes, just to clear up some general questions. You should consult your CPA / tax attorney for further information. This post is not legal advice and no attorney client privilege is created.

Please do not send me e-mails about your specific tax questions. I will not answer them.

Now.....

Rules:


Per the IRS guidance of 2014, all coins are treated as property and are TAXABLE at the point of MINING.

Taxable means it MUST be included in your gross income. No exceptions.

This means that AS YOU MINE COINS on PH (or any site), you have your FIRST TAXABLE EVENT.

-------> I can't stress enough that It does not matter if you sell the coins <---------


Next:

Once you mine the coin, you have the "basis" for that coin.

As the price rises or falls, AND you sell your coin, you then have a SECOND TAXABLE EVENT known as Capital Gains or Capital Loss.

The capital gain / loss is the change in price AFTER you mine the coin post sale.

Capital gains and losses DO NOT offset the taxes originally owned from the initial taxable event.


Additionally:

If you mine coins, you are also likely subject to self employment tax. This is however very fact specific BUT know that the IRS will likely err on the side of saying you OWE the tax.

If you have 5+ machines .... and you plan on writing off the cost of electric and equipment ... you better be paying the self employment tax. If you plan on arguing you get to write off your expenses as a business then it will be very difficult (near impossible) to argue that you do not need to pay the self employment tax.

Deductions:

You can not deduct 100% of the machines from your business income as a business expense. Let's say your bought 10 machines in 2017. Machines and other capital equipment MUST be deducted over their useful life.

Unless you want to argue that the machines have no value after Jan 1, 2018, you can no take 100% of the purchase cost in 2017. Maybe you want to deduct 75% in 2017 and save 25% for 2018? That's your decision... but it must be justifiable in an audit.


Edit:

******* Example deleted as it appears to be causing more confusion than help **********




Here is the famous IRS guidance:

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

Digging up an old thread here I book marked ages ago...

So what rates are these events taxed at or is it contingent on amount earned in the first taxable event scenario? In the second scenario, on capital gains. I read somewhere this is 15%, you have any insight to this?

If you colocate, can you deduct 100% of the costs. if you mine at home, can you deduct 100% of the power costs?

I think it depends how big your miner is.
If its a HOBBY level then as far as I know, you can't deduct.
It has to be up to a level to warrant business I think.


As far as taxes.... https://bitcoin.tax/

Just plug in your sites you use to collect minings and sell coins, give the app permission to READ your data from the API codes, and it should import it all in, figure when they were made and when they were sold and do all the calculations for you.

If you live in the US and hodl the coins for over a year you should only have to pay half as much in taxes.
If you sell them within the year they were made I think you guys pay double.

Good Luck!

Btw, i ended up using https://bitcoin.tax/ to collect my data and http://tucsontaxteam.com/bitcoin/ (they do any crypto, not just bitcoin) to process the data and worked out really good. tucson tax team can do your taxes even if you don't live in arizona. Ofcourse, they charged me for their service, like anyone would, but i feel it was worth it, and they had good communication to make sure you were deducting all you could and getting the best return back as possible.

For me, it really helped ease my mind to make sure i was paying my taxes correctly.

Oh, and i the reason i chose tucson tax team was because on https://bitcoin.tax/ they have a list people who know how to do cryptocurrency taxes here: https://bitcoin.tax/cpa

And they were listed on there, and felt confident when i saw they also released this book: https://www.amazon.com/gp/product/B071KN15MT/ref=oh_aui_search_detailpage?ie=UTF8&psc=1

That they seem to want to know how to do it correctly.

There are other listings on https://bitcoin.tax/cpa and i'm sure you can choose whichever one you want, but some of them seemed.....outrageous, like:

http://www.globaltaxsolutionsforbitcoin.com/ which is only for people with 5 million or more in bitcoin.........

or

https://www.bitcointaxsolutions.com which charge $199 for 30 minutes of Crypto Tax Consultation.........................

The bitcoin.tax does do other coins.

Its free if you made under X money or had less than X transactions otherwise its like $30 usd or something cheap.
made for a very easy way to gather all my info into one form and have it ready to plug in.

Aura89 wrote:Btw, i ended up using https://bitcoin.tax/ to collect my data and http://tucsontaxteam.com/bitcoin/ (they do any crypto, not just bitcoin) to process the data and worked out really good. tucson tax team can do your taxes even if you don't live in arizona. Ofcourse, they charged me for their service, like anyone would, but i feel it was worth it, and they had good communication to make sure you were deducting all you could and getting the best return back as possible.

For me, it really helped ease my mind to make sure i was paying my taxes correctly.

Oh, and i the reason i chose tucson tax team was because on https://bitcoin.tax/ they have a list people who know how to do cryptocurrency taxes here: https://bitcoin.tax/cpa

And they were listed on there, and felt confident when i saw they also released this book: https://www.amazon.com/gp/product/B071KN15MT/ref=oh_aui_search_detailpage?ie=UTF8&psc=1

That they seem to want to know how to do it correctly.

There are other listings on https://bitcoin.tax/cpa and i'm sure you can choose whichever one you want, but some of them seemed.....outrageous, like:

http://www.globaltaxsolutionsforbitcoin.com/ which is only for people with 5 million or more in bitcoin.........

or

https://www.bitcointaxsolutions.com which charge $199 for 30 minutes of Crypto Tax Consultation.........................

Thanks for this suggestion, I will look into this further.