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Accounting For Cryptocurrency Mining

Accounting For Cryptocurrency: How Does It Work?

Accounting For Cryptocurrency: How Does It Work?

Accounting for Cryptocurrency: How does it work? Bitcoin is the bubble that keeps on giving, and as the cryptocurrencys value continues to swell, more and more traders and businesses are being swept up in the excitement. As crypto-related queries continue to come through our door, our tax experts in London are fully up-to-speed on how accounting for cryptocurrency truly works. Try our Interactive Instant Quote tool and see how we can help you make the most of the cryptocurrency movement. As the first decentralised currency in history, there is no regulatory or legal status in place, and naturally, establishing said status is a difficult process. For now, we know that because of its complete uniqueness, Bitcoin is being treated as a different kettle of fish to any other investments or currency in circulation. While Bitcoin has been declared illegal in the likes of Bangladesh, Morocco, Pakistan, and Ecuador, to name a few, it remains legal in the UK. As long as the cryptocurrencys legality remains it will also have tax implications. When it comes to the likes of capital gains tax, corporation tax and income tax, the tax on transactions is based on the activity and parties involved. This follows the same process as a normal transaction with a standard currency. While there are no specific rules for these taxes with regards to Bitcoin, there are, however, some guidelines to follow. For corporation tax, the gains and losses on exchange movements between currencies, that also cover virtual currencies, are chargeable by the general rules of foreign exchange. The same rules apply for individuals who are assessed as a non-incorporated business. Finally, with regards to capital gains tax , if a profit or loss on a currency agreement is within the loan dealings rules, it will be Continue reading >>

Accounting For Cryptocurrency Mining Operations

Accounting For Cryptocurrency Mining Operations

Accounting for Cryptocurrency Mining Operations Messages sorted by: [ date ] [ thread ] [ subject ] [ author ] IIRC (from reading in 2014, so don't count on me as your accountant or lawyer, of which I am neither), according to the guidance linked in the post above, mined cryptocurrency is to be reported as regular income at its then current value, which becomes your cost basis for said cryptocurrency. Said cryptocurrency is considered an asset like a stock or commodity and should be tracked accordingly. Many cryptocurrency users don't like this because they want it treated like cash, but the tax laws on investment assets are very favorable vs the tax laws on investment currency (and especially non-investment currency, where you still must pay taxes on gains, but cannot claim losses).On 10/26/2017 12:01 PM, Adrien Monteleone wrote:> Definitely one for both a CPA and lawyer for anyone doing any actual mining. Im sure someone big somewhere is already blazing this trail, and it would be interesting to see how it is being handled on their books.>> Regards,> Adrien>>> On Oct 26, 2017, at 9:19 AM, John Ralls < jralls at ceridwen.us > wrote:>>>>>>>>> On Oct 26, 2017, at 4:19 AM, Jean-David Beyer < jeandavid8 at verizon.net > wrote:>>>>>> On 10/26/2017 12:21 AM, Rodney Elliott wrote:>>>> Hi All.>>>>>>>>>>>> If I were to purchase a cryptocurrency (say Bitcoin) with a fiat>>>> currency recognised by gnucash (say USD), then the procedure to>>>> record the transaction is clear - create an asset account of the type>>>> 'stock', associate it with a new security that uses the coin ticker>>>> (BTC) and the maximum number of significant figures supported by>>>> gnucash, etc.>>>>>>>>>>>>>>>> What to do in the case of mining a cryptocurrency is less clear. The>>>> BTC asset account would Continue reading >>

What You Need To Know About Bitcoin Mining Taxes - The Miners' Union

What You Need To Know About Bitcoin Mining Taxes - The Miners' Union

by Justin O'Connell 2 comments Info , Insights bitcoin , bitcoin mining , IRS , taxes Bitcoin mining is not a tax free exercise no matter if its a hobby or for business. Knowing how taxes play a role in your bottom line is key to realizing all the benefits of dedicating your expensive hardware to secure a decentralized cryptocurrency network. The IRS highlights the tax implications of bitcoin mining in Notice 2014-21, Q-9. The regulatory agency defines an individual who mines virtual currency as a trade or business subject to self-employment tax on the income derived from those activities. So long as not done by the taxpayer as an employee, Bitcoin received through mining for trade or business often constitutes self-employment income. Net earnings in self-employment is equal to gross income from trade or business, less allowable deductions. Individuals generally work as employee or independent contractor. On behalf of their employees, employers account for, and collect via payroll employment taxes. Individuals work as 1099 independent contractors and account for their own taxes. If you mined your bitcoins, as IRS Notice 2014-21 elaborates, miners have to recognize income for each bitcoin mined during the taxable year. The amount of income equals the market price of bitcoin on the day it is awarded on the blockchain, which is also then the miners basis in the bitcoin going forward and is used to calculate gain/loss in the future. The IRS illustrates an example for taxpayers. [A]ssume you mine 1 bitcoin in 2013, the government tax agency writes. On the day it was mined, the market price of bitcoin was $1,000. You have $1,000 of taxable income in 2013. Going forward, your basis in the bitcoin is $1,000. If you later sell the bitcoin for $1,200, you have a taxable gain of Continue reading >>

Cryptocurrency And Taxes: The Impact Of Mining, Spending And Trading

Cryptocurrency And Taxes: The Impact Of Mining, Spending And Trading

Cryptocurrency and Taxes: The Impact of Mining, Spending and Trading When it comes to cryptocurrency and taxes, ambiguity reigns. Bitcoin and Ethereum are still in the early stages of development, and their values are extremely volatile. As of early December 2017, one bitcoin was fluctuating between $15,000- $18,000 , and its value has changed dramatically over the past year alone. Cryptocurrencies are designed to be a more efficient and reliable form of decentralized currency that anyone can buy and sell through online exchanges. They can be digitally traded for or exchanged into U.S. dollars, euros or any other form of currency (real or virtual). With the right computers, they can also be mined using complex computerized algorithms to uncover new cryptocurrency value, much like mining gold. But as cryptocurrencies grow in popularity and value, what are the tax implications for mining, trading and spending? Whenever cryptocurrencies are mined, bought, sold, spent or traded, there are tax implications. Taxpayers who receive crypto as payment for goods or services must determine the fair market value in U.S. dollars when received. Taxpayers who mine coins are subject to tax on the fair market value on the day mined. Depending on the business structure of the miner, the income could also be subject to self-employment tax. Accounting for cryptocurrency is just as important as accounting for buying and selling stocks and bonds. In 2014, the IRS declared cryptocurrencies should be treated as property for U.S. federal tax purposes and follow the general tax principles applicable to property transactions. This means theyre subject to capital gains tax, similar to stocks and bonds or real estate. In some cases, you may be considered a trader and the net income from your tradin Continue reading >>

Tax Compliance - Bitcoin Wiki

Tax Compliance - Bitcoin Wiki

There may be tax liabilities encountered when transacting with or trading in bitcoins. Some of those that are possible might be described below. This page was created by those in the Bitcoin community to help in understanding tax compliance concerns. This is not legal advice nor accounting advice. For either for those consult your attorney or accountant. The general tax questions and answers were shared by forum member bitcoinaccountant [1] . Are bitcoins taxable if I earned them by doing a service for someone else, or received them in exchange for something? Anything that you receive as payment for goods or services is generally taxable income unless it is specifically exempted. That means, if you mow your neighbors lawn, it doesnt matter if he pays you $20 in cash, or $20 worth of bitcoins. (Or $20 worth of tomatoes for that matter) In many jurisdictions, you are still legally required to report that as income. When using Bitcoin for payment the taxing authorities may be less likely to be aware of the payments but try to mow 10,000 neighbors lawns and not report the income and you will be much more likely to get caught. Are my bitcoins taxed as income, or as capital gains? Income that is earned through the exchange of services with another person, whether in the form of bitcoins, dollars, or barter; is included in gross income, and would be subject to income tax at applicable rates. Also these bitcoins could be subject to self employment tax. In some jurisdictions, income earned through the process of buying and selling bitcoins would also be included in gross income, but would be treated as capital gains. Note: The above interpretation is based on the assumption bitcoins are treated as a store of value such as gold, or other such commodity. If instead they are treat Continue reading >>

Cryptocurrency Accounting

Cryptocurrency Accounting

With the advent and recent popularity and soaring prices of cryptocurrency, especially Bitcoin (BTC), theres a need for accounting for cryptocurrency especially in regard to taxes. ***Note I will use BTC and cryptocurrency interchangeably throughout this report. What applies to BTC applies to all cryptocurrencies.*** In March of 2014 the IRS released Notice 2014-21 that addressed some, not all, of the questions about how the IRS is going to treat cryptocurrency. The IRS will treat cryptocurrency as property, not currency. This means when you purchase or sell a cryptocurrency you need to record its cost basis in US Dollars (purchase price plus any fees) using its fair market value. When you sell BTC you need to calculate your short-term or long-term gain. For example, you purchased 2 BTC when it was $270.22 per coin on October 20, 2015, sold 1 BTC on September 20, 2016 for a short-term gain and sold 1 BTC on October 21, 2016 for a long-term gain. You would record the transactions as: This needs to be done for all transactions, not just an exchange. If you use BTC to purchase anything, you would create a transaction, like above, for the amount of BTC you used. This can become a cumbersome task. If you prefer not to do this process through an Excel worksheet, you can use one of the software programs to track your BTC transactions, or pay your accountant to manage it. My firm, Dollars & Sense Bookkeeping, offers BTC accounting services using software to track all your transactions and your gains/losses. You calculate the cost basis using the fair market value on the date you received the BTC. Not the time, the date (day). Since cryptocurrencies fluctuate by the second, this creates an interesting situation. Unless you have already converted the BTC into cash, you have choi Continue reading >>

Smart Tax Accounting Moves For Cryptocurrency Traders

Smart Tax Accounting Moves For Cryptocurrency Traders

Smart Tax Accounting Moves For Cryptocurrency Traders If you have multiple cryptocurrency (coin) trades, consider a trade accounting solution dedicated to coin transactions. The program should calculate taxable income and loss based on IRS rules for coin transactions. It should generate capital gains and losses reports to support Form 8949 and other income statements. The program needs to account for all coin transactions, including coin-to-currency trades, coin-to-coin trades, receipt of coin in a hard fork or split transaction, purchases of goods or services made with a coin, and mining revenue. I reviewed two coin accounting solutions that fit the bill: Bitcoin.Tax and CoinTracking.Info. Both programs provide options for different outcomes and in general, stick with the default method to stay clear of potential IRS trouble. (See How Cryptocurrency Investors Can Avert IRS Attack ). Coin exchanges do not provide taxable income reports Dont look to your coin exchange for much help with tax reporting. They dont keep cost-basis information and are unable to give the users online tax reports. A coin is not a covered security for Form 1099-B issuance, so coin investors and the IRS dont receive a 1099-B. Coin investors are responsible for generating their accounting and tax reports. With uncertainty on tax treatment due to lack of sufficient IRS guidance, many coin traders wind up under-reporting taxable income on coin transactions. In most cases, it may be inadvertent, but sometimes, its willful. Using accounting software shows an attempt to be compliant. The IRS served a John Doe summons (the worst kind) to the most significant coin exchange, Coinbase, to obtain its customer list for investors and traders with coin transactions worth more than $20,000. The IRS calculated Continue reading >>

4 Apps Helping Bitcoiners With Tax Compliance

4 Apps Helping Bitcoiners With Tax Compliance

4 Apps Helping Bitcoiners With Tax Compliance The U.S. is already well into tax season, and manybitcoin users will have capital gains to declare this year. To help them remain tax compliant, there are numerous software programs to help keep track of digital currency cost basis and profits over the course of ones mining, buying, trading or earning bitcoins. Related: IRS Asks to Postpone Hearing with Coinbase Bitcoiners often debate on online forums whether or not Bitcoin should be taxed, and former presidential-candidate Rand Paul has even suggested a laissez-faire approach to Bitcoin regulation. Bitcoin tax law, however, remains vague today. After the Internal Revenue Service (IRS) released their March 2014 guidance on Bitcoin tax responsibilities, San Jose State University professor Annette Nellen helped the American Institute of CPAs draft a request for further guidance on bitcoin tax law. The IRS never responded; that is, perhaps, until they sent Coinbase a John Doe summons requesting informationfrom the digital currency exchanges customers. Not much is certain when it comes to Bitcoin tax law. What is for sure: Bitcoin gains are taxable. Income, no matter if it is in national currency or digital currency, is taxable unless the IRS states differently. Indeed, U.S. citizens could be liable for taxes on their trading, holding, spending, mining, gifting, tipping, and donating of bitcoins. Bitcoin.com gathered information on services that can make paying Bitcoin-related taxes easier at least for those not living the PT lifestyle , of course. This solution works for businesses which deploy a cryptographic ledger, trade digital assets or simply experiment with smart contracts. Libra Enterprise , like other blockchain accounting solutions, support more than one cryptocurre Continue reading >>

Accounting In The World Of Cryptocurrency

Accounting In The World Of Cryptocurrency

Accounting in the World of Cryptocurrency Accounting in the World of Cryptocurrency It's a brave new cyber world that we live in, one where virtual currency exists to exchange and pay for things globally. Certainly, this throws a whole new monkey wrench into basic accounting platforms and raises a few questions. How is cryptocurrency handled by a bookkeeper, and just what in the world is it anyway? Here is the definition of cryptocurrency from Techopedia: Cryptocurrency is a type of digital currency that is based on cryptography. Cryptocurrency uses cryptography for security, making it difficult to counterfeit. In no way are Bitcoins the only cryptocurrency floating around on the Internet; in fact, there are dozens of other cyber-currencies, like Namecoin to Hashcoin, even Beertoken. However, Bitcoins are the most frequently used form of this new digital money, so we'll focus on it and how to handle accounting functions that involve them. Bitcoins are electronic currency -- digital public money -- and are created using complex mathematical equations, while being policed by millions of users called 'miners'. Basically, they are long strings of computer code that have a cash value, and completely bypass traditional banks. They are very controversial because they are unregulated and banks, governments and law enforcement agencies have not figured out what to do about them. Though Bitcoins and other cyber-currencies are used worldwide, some of the guidelines that the United States government put in place are useful. At this point, Bitcoins are passed from one online wallet to another, and stored on a computer, smartphone, or in the cloud. Since banks are not needed to move the money or to store it, they are more like gold nuggets than real money. They have an assigned valu Continue reading >>

Pwc Cn: Publications - Accounting For Cryptocurrencies

Pwc Cn: Publications - Accounting For Cryptocurrencies

A cryptocurrency refers to a form of exchange that does not exist in physical form but only digitally. It is not linked to any physical currency, nor is it backed by any government, central bank, legal entity, underlying asset or commodity. It is now used as a means to make payments for goods and services, to incentivize employees as well as simply held for investment purposes (legality-permitting or not). Cryptocurrencies are initially 'mined' but could subsequently be bought, exchanged, awarded, or granted. Mining cryptocurrencies is a specialized activity and the accounting for such activities warrant further research. This In depth discusses how cryptocurrencies could be accounted for from the non-miner-holders perspective. There are a number of potential options to account for them and each option will be discussed in brief, and/or dismissed, recognizing the fact that diversity has already emerged in practice. Continue reading >>

Blockchain Accounting Software For Bitcoin, Dash, And Litecoin | Node40 Balance

Blockchain Accounting Software For Bitcoin, Dash, And Litecoin | Node40 Balance

NODE40 Balance makes it easy to treat your blockchain assets just like any other asset you may have in your investment portfolio. Safely and securely upload your wallet transactions, and NODE40 Balance will analyze the blockchain to provide valuation data for every aspect of a transaction. Annotate your transactions, and modify valuations based on your real world experience. Not all transactions are taxable. View your income, gains, and losses. NODE40 Balance can even generate the necessary IRS Tax forms, making it easy to report your tax liability. Just like traditional portfolio services, you can use NODE40 Balance on a regular basis to see how your assets are performing. While most jurisdictions allow you to use digital currency to purchase goods and services, when it comes time to pay your taxes, digital currency is considered property. Transacting with property means that every purchase you make will incur a taxable gain or loss. The IRS is explicit in its treatment of digital currency as property. Data on the blockchain may be permanent and immutable, but reporting of real world transactions requires flexibility. NODE40 Balance allows you to define how you interacted with digital currency. NODE40 Balance will generate IRS form 8949 along with the required worksheets so you can easily reports your gains and losses. Not all digital currency is taxable. NODE40 Balance allows you to designate transactions as exempt from ordinary income reporting. If your transaction value differs from the daily average market valuation, you can make adjustments according to your records. Upload and manage ledgers for multiple wallets. I'm really excited about my digital currency investments, but I'm even happier knowing I'll be ahead of the curve with tax liabilities as those rules e Continue reading >>

Understanding The Tax Implications Of Cryptocurrency

Understanding The Tax Implications Of Cryptocurrency

Understanding the Tax Implications of Cryptocurrency by Scott Peterson , Senior Manager, and Jessica Campbell, Tax Staff, Private Clients Practice The IRS focuses on cryptocurrency for two primary reasons: trading cryptocurrency is a taxable event and converting cash into virtual currency is a way to launder money. This focus has resulted in the IRS releasing guidance on the reporting and taxation requirement for the sale, purchase, and trade of cryptocurrencybut some grey areas still remain. On March 25, 2014, the IRS issued Notice 2014-21, which, for the first time, set forth the IRS position on the taxation of virtual currencies, such as bitcoin.According to the notice, Virtual currency is treated as property for U.S. federal tax purposes. The notice further stated, General tax principles that apply to property transactions apply to transactions using virtual currency. In other words, the IRS is treating the income or gains from the sale of a virtual currency, such as bitcoin, as a capital asset thats subject to either short-term (ordinary income tax rates) or long term capital gains tax rates, if the asset is held for more than twelve months. If it is, its taxed at 15% or 20%, based on income. By treating bitcoins and other virtual currencies as property instead of currency, the IRS is able to impose extensive record-keeping rules and significant taxes on its use. For record keeping purposes an individuals cost basis is what they pay for the cryptocurrency and the spread is taxable when they use or sell the cryptocurrency, assuming its appreciated in value since purchase. IRS Notice 2014-36, IRS Virtual Currency Guidance, states that taxpayers earn taxable income when they receive a block reward of virtual convertible currency for successfully mining a new block on Continue reading >>

Lessons Learned From One Year Of Mining Cryptocurrency

Lessons Learned From One Year Of Mining Cryptocurrency

Living your best life, and owning it every step of the way. Thank you to contributor Sjonni for his generosity in sharing about his experience! Cryptocurrency miners tend to be incredibly secretive about their methods, because the more miners get in the game, the harder it becomes to mine. Thankfully, one miner Sjonni of Norway was willing to share his experience and methods so that others can learn from it and try their hand at crypto mining. Read on for his lessons learned from one year of mining cryptocurrency. Thanks, Sjonni! xo -Danni Almost a year ago, I got interested in cryptocurrency. I didnt have the funds to invest, however, I did have a decent computer. After doing some research, I found a coin that I could mine using the hard drive on my laptop and still be profitable Burst Coin. Getting started, I mostly used Google to learn how to get started. I utilized some YouTube tutorials as well. Later on, I found that cryptotubers are not all that reliable. Many of them get money by referral links, rather than mining, and almost all were a bit biased in their opinion, in favor or whichever company they were promoting. Mining methods in order of hashpower. (Image courtesy of tradeblock.com) Over time, I switched from hard drive mining on my laptop to utilizing some old Bitcoin miner machines I was able to get ahold of. I ran those for a few months and decided to try GPU mining. I sold the Bitcoin miners for the price I paid and bought 4 GPU cards. Today, I have started to buy & work with ASIC bitcoin miners again, as the profitability for GPU mining seems to be on the decline. In fact, Im waiting for two miners to come. Most of what Ive earned has been reinvested into mining equipment. In the time that I have been mining, I have been able to mine approximately: 20, Continue reading >>

What You Need To Know About Cryptocurrency

What You Need To Know About Cryptocurrency

What You Need to Know About Cryptocurrency Theyre exchanged on a worldwide peer-to-peer network, submitted as an entry on a global ledger called the blockchain , a ledger of every crypto transaction ever made. While this record is decentralized, it is shared between all users of cryptocurrency and can only be updated with the consensus of the majority. The result? A faster, cheaper and more secure way to complete transactions. Currently, the US treats cryptocurrency as property. The IRS requires that the value of cryptocurrency be reported in US dollars with the fair market value determined at the time of payment or receipt. This calls for specific record keeping requirements and a way to accurately calculate crypto gains and losses. If youve ever filed a personal tax return after buying and selling stock, you know that you must show what you bought the stock at and what you sold it at these same rules come into play for businesses transacting in crypto. Any time you pay or receive cryptocurrency, its like youre transacting in stock. The only difference is that theres a market of people that will take cryptocurrency in exchange for their services. So, lets say you paid $1,000 for an Apple stock that later appreciates to $2,500. When you go to pay someone with that $2,500 in Apple stock, youve actually gained $1,500 in value. On the flip side, if youre a business willing to accept cryptocurrency for the services you distribute, it should be treated like someone is paying you with shares of stock. So, if someone paid you 20 shares of Amazon, you would record that as revenue. Amazons stock price goes up and down and, at some point, youll probably choose to sell it or pay someone with it. Cryptocurrency functions in much the same way. Over the last few years, cryptocurrenc Continue reading >>

Three Methods For Simple Bitcoin Business Accounting

Three Methods For Simple Bitcoin Business Accounting

Within the context of modern accounting systems, examples of payment methods include cash, checks and credit cards. Very simply, they define the medium used to exchange money. Today, the most common business use for Bitcoin is to treat it as a payment method. Much of the reason for this is because a) the price is relatively volatile and b) acceptance by employees, suppliers and partners is relatively limited. Services such as BitPay or Coinbase have effectively made it easy to accept bitcoin in a business. Instead of the business actually receiving bitcoin during customer payment, these services deliver traditional government-issued (fiat) currency. Under this method, Bitcoin acceptance is easy to understand and it follows accounting practices widely used in business today (e.g., consider payment by services such as PayPal). Traditional accounting systems should have no problem under this practice. Generally, define a new payment method in the accounting software, relate it to the bank account that the funds will settle, and then follow the procedures that the Bitcoin service provider prescribes for accepting bitcoin in the business. The next adoption wave will happen if bitcoin price volatility stabilizes and it becomes more widely accepted. Some leading-edge businesses already work in this fashion. Under this method of accounting, bitcoin is treated as a foreign currency; just as one would treat accepting Euros in a USD-based organization. To do this well, the business accounting system will need to understand foreign currency and related exchange prices. Traditional accounting platforms are designed with currency data types to accommodate only two decimal places. I was one of the early advocates to logically shift the bitcoin decimal place to the right by six digits Continue reading >>

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