Bitcoin transactions and the irs

[dallasfan]

Uh oh.

https://www.yahoo.com/tech/coinbase-...235635616.html

Better watch out if you are taking a lot of bitcoin as payment.

[Crock]

Originally Posted by dallasfan

Uh oh.

https://www.yahoo.com/tech/coinbase-...235635616.html

Better watch out if you are taking a lot of bitcoin as payment.

Coinbase is an exchange. It's being told to turn over records of people who have bought and sold BTC and realized a gain from their transactions.

If you don't buy and sell your BTC at the same exchange, there's no proof of gains. If you transfer BTC into the exchange when it's worth $8000 and exchange it for dollars when it's $10,000, then you've definitely realized a gain. If you transfer BTC into the exchange and sell it immediately, there's no gain to be reported.

[Guest020720]

I'm slowly trying to understand a little more about bitcoin and cryptocurrency.

Originally Posted by Crock

Coinbase is an exchange. It's being told to turn over records of people who have bought and sold BTC and realized a gain from their transactions.

If you don't buy and sell your BTC at the same exchange, there's no proof of gains.
Question: So there is only proof if you buy BTC at the same exchange?


If you transfer BTC into the exchange when it's worth $8000 and exchange it for dollars when it's $10,000, then you've definitely realized a gain.
Obviously, but what is the point of saying this? This would have to be reported right? Or only if you take it out as cash?
If you transfer BTC into the exchange and sell it immediately, there's no gain to be reported.
Again, obviously. But what is the point? Do they still report this?
Why would they?

[pyramider]

Cause there is probably a law requiring it.

[Crock]

Putting your questions in the middle of my quote confused me for a second. I've tried to format this to be a bit easier to read:

Originally Posted by tntangie

I'm slowly trying to understand a little more about bitcoin and cryptocurrency.

Question: So there is only proof if you buy BTC at the same exchange?

Unless the IRS starts looking into multiple exchanges. An audit might screw you over if you're not reporting income in this manner.

Originally Posted by tntangie

Obviously, but what is the point of saying this? This would have to be reported right? Or only if you take it out as cash?

If you read the article, the IRS is demanding the info of accounts that have over $20,000 in annual transactions. Who knows what will happen later. I'm no accountant or tax law expert.

Originally Posted by tntangie

Again, obviously. But what is the point? Do they still report this?
Why would they?

Report what? To my knowledge, they haven't reported it in the past, but now, for the first time, they're demanding the exchange report accounts with over $20,000 in transactions.

Just think of bitcoin like any other currency, if you make a profit off the exchange of currency, that's income that must be reported once it meets a certain threshold.

[pyramider]

Capital Gains taxes should be interesting.

[justafantasy]

I invest in Bitcoin and a lot of the other cryptocurrencies and I was informed tody that Coinbase is required to turn over all records of people who have balances and made a profit of $20,000 or more. So if you use coinbase keep it under that amount. But if your investing for the long haul and dont day trade them like I do and want to keep them secure,safe and out of the IRS hands than either cold storage them or paper wallet or a brain wallet.

[dallasfan]

Originally Posted by Crock

If you transfer BTC into the exchange and sell it immediately, there's no gain to be reported.

Better think that one over again.

[Pistol Man]

Isn't this interesting!? I had a question yesterday from a client about the taxation of cryptocurrency gains and losses. Actually the question was, "am I an expert" in such. Anyone who says they are is (a) lying to you and (b) lying to themselves!

As the tax code is silent on cryptocurrency, specifically, I believe it falls into that category of investments taxed like stocks and bonds gains and losses. If you day trade it is ordinary income and if you hold for more than 12 months it is a long term capital gain or loss. If you want to protect yourself from the ever encroaching government, report and pay tax on the recognized gains and losses; it is much less expensive than "being caught". And trust me, George Orwell was correct, "big brother is watching".

But there is another issue that no one is talking about. If any of these accounts are "foreign accounts" then if the value is greater than $10,000 in the aggregate at any time during the year, it is required to file an FBAR with the treasury reporting the account. There's no tax involved, they just want to know about the account. This has been a requirement for at least the past 30 years I've been in the tax preparation business.

More importantly, if the balance at any time during the year exceeds $100,000 in the aggregate, it is probably necessary to file Form 8938 with your federal income tax return reporting same. The penalties for not doing so can exceed, in some cases, 50% or more of the balances not reported. The important issue here is (a) report the income from the account on the tax return and (b) the statute of limitations for audit does not commence until the form is filed. So if you should have and didn't, the return for that year is still open for audit; file an amended return with Form 8938 reporting the account and start the running of the statute. Unless, of course, you enjoy sleeping with one eye open!

These are simply my thoughts and ruminations concerning "rendering unto Caesar" your gains and losses in the emerging world of cryptocurrency investing and trading.

[Crock]

Originally Posted by dallasfan

Better think that one over again.

As I said, I'm no expert.

I didn't realize that exchanging $100,000 worth of one currency for $100,000 of US dollars was considered a gain. Exchanging currency, in and of itself, shouldn't indicate a gain.

But everything is up in the air, legally, when it comes to Bitcoin. The rules are being made up as we go.

The fact that the IRS is demanding reports on accounts with more than $20,000 in transactions makes it clear that they're interested, though.

[pyramider]

Originally Posted by Crock

As I said, I'm no expert.

I didn't realize that exchanging $100,000 worth of one currency for $100,000 of US dollars was considered a gain. Exchanging currency, in and of itself, shouldn't indicate a gain.

But if you read the post above you, Bitcoin is not considered currency. Its being treated as an investment. Or do whatever you want ... Deal with the IRS, and the Treasury Department, at a later date ... at their convenience.

[dallasfan]

Think this pretty much kills bitcoin’s ascent. Good luck cashing out. I’d be spending the fuck out of everything I had.

[Pistol Man]

if it is considered currency exchange, then disregard all that I said. The point is that no one seems to know!!

but the foreign account and asset reporting still applies

as an aside, if you do any on-line gambling then you have a foreign bank account; but I'm changing topics and don't mean to.

[Crock]

Originally Posted by pyramider

But if you read the post above you, Bitcoin is not considered currency. Its being treated as an investment. Or do whatever you want ... Deal with the IRS, and the Treasury Department, at a later date ... at their convenience.

The post above mine is assuming. I'm assuming. That's all we can do until more regulations are written, or a law is passed.

[DallasBella]

Originally Posted by justafantasy

But if your investing for the long haul and dont day trade them like I do and want to keep them secure,safe and out of the IRS hands than either cold storage them or paper wallet or a brain wallet.

How ?