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Declaring Bitcoin Income

Bitcoin Investors Beware: The Irs Wants Its Cut And You May Not Know It

Bitcoin Investors Beware: The Irs Wants Its Cut And You May Not Know It

Bitcoin investors beware: The IRS wants its cut and you may not know it Bitcoin and its brethren are viewed as property, not currency, by the IRS. A U.S. court has ordered Coinbase to turn over identifying information on 14,000 accounts. The onus is on investors to report gains to the IRS. If you're a bitcoin investor and have cashed in on your gains or made purchases using the cryptocurrency don't forget the Internal Revenue Service is entitled to a piece of the action. The value of one bitcoin has surged this year to more than $9,000 as of Thursday morning from $997 (and up from less than a dollar in 2010). There's a good chance if you have cashed out or paid for anything using it, you have capital gains to report to the IRS. Basically, the tax agency has ruled that bitcoin and other cryptocurrencies are viewed as property and not currency for tax purposes. And although you may not receive a Form 1099 from whatever exchange you trade on, you remain responsible for paying taxes on gains. (Click on chart below to enlarge.) "If you make a transaction, the onus will be on you to report it," said certified financial planner Samuel Boyd, senior vice president of Capital Asset Management Group in Washington, D.C. "Those transactions generate either short-term capital gains or losses or long-term capital gains or losses." For many investments, individuals generally receive a Form 1099 that shows their taxable gains. The form also is sent to the IRS, which gives the agency a way to identify any differences in what's reported between brokerages and taxpayers. The IRS has ruled that even if you get no official notice of your taxable gains, the agency wants its share. On Wednesday, a U.S. District Court judge in California ordered Coinbase, a popular platform for buying and sell Continue reading >>

How To File Tax Returns In India For Your Bitcoin Profits

How To File Tax Returns In India For Your Bitcoin Profits

How to File Tax Returns in India for Your Bitcoin Profits There are different ways to declare your income from Bitcoin investments.(Photo: The Quint) How to File Tax Returns in India for Your Bitcoin Profits Bitcoin is soaring in popularity and user adoption in India. It has been estimated that India now accounts for over 10 percent of the global Bitcoin trade. In the past 12 months, Bitcoin has witnessed a staggering growth of over 1,200 percent in value and remains a favorite among cryptocurrency enthusiasts pan-India. However, it would seem that most Indian cryptocurrency investors are unaware about their income tax liability arising from any gains or earnings from their Bitcoin cryptocurrency transactions . Bitcoin and other cryptocurrencies are an unregulated market in India. They are not illegal, but the RBI has on several occasions cautioned investors of inherent risks. The government of India is currently considering a framework on these digital currencies. But in the meantime, anyone who earns any income in Bitcoin, needs to declare their income and pay taxes. That seems fair enough. But this is also where things start getting confusing for most people. The fact is that, in the absence of any guidelines from CBDT, ICAI, RBI or the Income Tax Department, cryptocurrency investors from India are largely left to figure this out on our own. As an early adopter to crypto, I was perplexed with the subject of accounting my income in cryptocurrency from blogging and consulting. During my research into this subject, Ive interviewed professional tax consultants and an income tax official. He said: Any income generated from illegal or legal activities including these new-age digital or cryptocurrencies needs to be declared by the individual earning said income and he or s 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 >>

How To Report Bitcoin Cash And Avoid Irs Trouble

How To Report Bitcoin Cash And Avoid Irs Trouble

How To Report Bitcoin Cash And Avoid IRS Trouble {{article.article.images.featured.caption}} Opinions expressed by Forbes Contributors are their own. The author is a Forbes contributor. The opinions expressed are those of the writer. This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe In light of the Aug. 1 split of Bitcoin into two separate cryptocurrencies, Bitcoin and Bitcoin Cash, many questions remain.While the IRS has issued guidance on cryptocurrency labeling it an intangible asset for investors subject to capital gains and loss treatment using the realization method it has not issued guidance on cryptocurrency split or fork transactions.There are thousands of cryptocurrencies, and many formed in this type of division in the blockchain. Tax reporting for the receipt of Bitcoin Cash The initial market price of Bitcoin Cash was $266 per unit, which was 9.5% of the comparable Bitcoin unit price at that time of $2,801. Bitcoin holders were distributed one unit of Bitcoin Cash for each unit of Bitcoin, a separate financial instrument with a liquid market value. In the eyes of the IRS, thats taxable income. Bitcoin holders should report the receipt of Bitcoin Cash on their 2017 income tax returns . It does not qualify as dividend income on Schedule B since a cryptocurrency is not a security. Its also not considered interest income on a debt instrument or bank deposit. I suggest reporting the value received as Other Income on line 21 of Form 1040 a catchall category forincome that does not fit into a standard category. Some taxpayers might choose to use Form 8949 (Sales and Other Dispositions of Capital Assets) instead. The taxpayer reports the $266 value of Bitcoin Cash as proceeds and 9.5% of Bit Continue reading >>

Bitcoin And Taxes: How The Irs Handles Cryptocurency | Fortune

Bitcoin And Taxes: How The Irs Handles Cryptocurency | Fortune

The IRS is now receiving 2018 returns, giving taxpayers until April 27 to file and pay. The process wont be much different from last year, though if youre one of the millions of investors who jumped into the cryptocurrency craze, you may have extra work to do. Heres a plain English Q&A from Fortunes The Ledger on how the IRS handles profits and losses related to bitcoin and other types of digital money. This is not tax advicefor that go see an accountant or, better yet, a tax lawyerbut a quick overview of the main issues. I made money in 2017 selling cryptocurrency. Do I have to declare it? Yes, no matter what your Internet chat group might say about bitcoin being beyond government control, the reality is crypto profits are income and Uncle Sam expects his cut. Sure, only 802 Coinbase customers declared bitcoin income in 2015, but rest assured the IRS isnt letting this slideespecially since crypto assets rose so dramatically in 2018. In the eyes of the IRS, cryptocurrency is property like shares or physical assets. That means you pay the long-term capital rate (typically 20%) if you sold it after a year, or the ordinary income rate if you sold it before then. Given that the big crypto correction only really happened in 2018, most investors are unlikely to have sold for a loss in 2017. But if youre one of them, you can use those losses to offset capital gains or up to $3,000 of ordinary income. Also, you can carry losses forward to next year. What if I just sent some of my bitcoin (or Ethereum, etc) to a store or a friend? Tough luckany time you divest cryptocurrency, its a taxable event. The IRS doesnt care if you sold bitcoin for cash or bought a muffin with it; if it was worth more than you paid for it, you owe tax. What if I traded one type of cryptocurrency for ano Continue reading >>

Do You Know How Your Bitcoin Will Be Taxed?

Do You Know How Your Bitcoin Will Be Taxed?

Do you know how your Bitcoin will be taxed? Jumping on the Bitcoin bandwagon? The tax you pay will depend on whether you are a hobbyist or serious investor, experts warn. Bitcoin has enjoyed a meteoric rise and could be in for a similarly spectacular fall . Either way, trading in Bitcoin has tax consequences. And staying out of trouble with the Australian Tax Office means knowing whether you are a hobbyist or serious investor, advisers say. As far as the ATO is concerned , there are broadly two reasons for purchasing Bitcoin: personal consumption and speculative gain. How you are taxed will depend on which category you fall into and, most importantly, how the ATO will view your activity. Above all, every single transaction needs to be fully documented, including not only "what"' is purchased, but "why" it was purchased, Hall & Wilcox partner Anthony Bradica said. "If your intention in purchasing Bitcoin is to use it to buy goods or services for personal consumption, then any profit from resale will be assessable as a capital gain," he said. That is, any appreciation in the value of the capital will be taxable at marginal rates. The 50 per cent capital gains tax discount may also apply if the Bitcoin is held for at least 12 months, which means only half of the gain is taxed. But there is a helpful exception. If the original cost of the Bitcoin purchase was under $10,000, any gain made will be tax free because it is considered to be a "personal use asset". Mr Bradica gives the following example.Craig can't help but embrace technology and in 2013 he bought $4,000 of Bitcoin with the intention that, once it became more widely accepted, he would use it for everyday purchases. Four years on and he still has the original tranche of Bitcoin, only now it is worth $20,000. Over Continue reading >>

Are There Taxes On Bitcoins?

Are There Taxes On Bitcoins?

By Kushal Agarwal | April 5, 2015 1:02 PM EDT Bitcoin is a virtual currency that uses cryptographic encryption system to facilitate secure transfers and storage. Unlike a fiat currency , bitcoin is not printed by a central back, nor is it backed by any. Bitcoins are generated by what is called mininga process wherein high-powered computers, on a distributed network, use an open source mathematical formula to produce bitcoins. It takes real high-tech hardware and hours or even days to mine bitcoins. One can either mine bitcoins or buy them from someone by paying cash, using a credit card , or even a PayPal account. Bitcoins can be used like a fiat world currency to buy goods and services. Bitcoin is now listed on exchanges and has been paired with leading world currencies such as the US dollar and the euro . The US Federal Reserve acknowledged the growing importance of bitcoin when it announced that bitcoin-related transactions and investments cannot be deemed illegal. At the start bitcoin's attractiveness was attributed partly to the fact that it wasn't regulated and could be used in transactions to avoid tax obligations. The virtual nature ofbitcoinand its universality also make it harder to keep track of in cross-country transactions. In addition, government authorities around the world soon realized that bitcoinattracted black marketers who could make illegal deals. Naturally,it was impossible for bitcoin to escape the tax authorities ' radars for long. Around the world, tax authorities have tried to bring forth regulations on bitcoins . The US Internal Revenue Service (IRS)and its counterparts from other countries are mostly on the same page when it comes to treatment of bitcoins. The IRS said that the bitcoin should be treated as an asset or an intangible property Continue reading >>

You're Liable For Tax On Bitcoin Gains

You're Liable For Tax On Bitcoin Gains

Personal Finance /8 October 2017, 07:00am/Sizwe Dlamini Bitcoin is growing in popularity. The fact that leading retailer Pick n Pay gave the cryptocurrency a trial run a successful one, too is evidence that it has the potential to be adopted for regular trade. Bitcoin is just one of many cryptocurrencies that are unregulated. They are decentralised digital currencies that can be bought, sold and traded. The South African Reserve Bank (Sarb) does not consider cryptocurrencies as legal tender. But how does the South African Revenue Service (Sars) treat cryptocurrencies? Marcus Botha, the director, corporate tax consulting at public accounting, tax, consulting and business advisory firm BDO, says: Cryptocurrencies are not subject to the regulations of the Reserve Bank, as the position paper they released on virtual currencies states that the cryptocurrency does not have legal-tender status. Until further clarity and formal regulation, Sars will apply general tax principles and tax the income or capital gains that are received or accrued to a taxpayer. The taxman agrees. Transactions or speculation in Bitcoin is subject to the general principles of South African tax law and taxed accordingly, says Sars. Botha says that, although Bitcoin is not recognised as a legal tender, owning a cryptocurrency may be regarded as an asset. The Bitcoin regarded as an asset and in your possession will have to be valued and included in your tax return at the end of the year of assessment. If you use this asset to transact, the transaction may be regarded as a barter transaction or trading stock. In such a case, Botha says VAT on barter transactions should be considered. He says that, if you hold this asset as an investment, capital gains tax (CGT) may be applicable to the eventual disposal Continue reading >>

Are Bitcoin Profits Taxable?

Are Bitcoin Profits Taxable?

If you sell or dispose of bitcoin at a higher exchange rate than you acquired it for, you may owe the IRS a cut of the profits. Virtual currencies, such as bitcoin, are still in the relatively early stages of adoption, and many legal aspects of them aren't well understood. One big example is taxation -- that is, if you buy bitcoin or any other virtual currency and sell it for more than you paid, do you have to pay taxes on your profits? The short answer is "yes," but how much tax you'll have to pay depends on a few factors. Here's a rundown of how the IRS classifies bitcoin and what it means for your taxes. In 2014, the IRS labeled cryptocurrencies "intangible property." That means that all cryptocurrencies, including bitcoin, are subject to capital gains tax rules, just like when you sell a stock or other type of capital asset. Capital gains tax is calculated based on the difference in dollar value between when the asset was purchased (your cost basis ) and when the asset was disposed of (the sales price). The capital gains tax rate depends on your marginal tax bracket, and how much time passes between the purchase date and the sales date. Specifically, any capital asset that is sold at a profit within one year of the purchase date is considered a short-term capital gain and is taxed at your marginal tax rate, or tax bracket . In other words, if you're in the 25% tax bracket for 2017, any profitable sales of bitcoin that you held for a year or less in 2017 will be subject to tax at that rate. On the other hand, long-term capital gains are taxed at more favorable rates. Taxpayers in the 10% and 15% tax brackets pay no long-term capital gains tax, while taxpayers in the 25% through 35% tax brackets pay a 15% capital gains tax rate. Finally, taxpayers in the top 39.6% ta Continue reading >>

A Guide To Paying Taxes On Bitcoin Investments

A Guide To Paying Taxes On Bitcoin Investments

Making money on bitcoin, ethereum, and scores of other cryptoassets has been remarkably easy this year. But in the US, paying taxes on those gains could be a lot more complicated. Transactions that are routine to experienced crypto enthusiastslike hard forks, or swapping between coins at the tap of a buttonare fiendishly complicated when it comes to reporting to the Internal Revenue Service. And make no mistake: the agency is determined to make sure people pay what they owe. Over the course of bitcoins booms and busts, the IRS has noticed that tax returns arent lining up with the manic popularity of the cryptocurrency, according to Tech Crunch . Last month, a federal judge in San Francisco ruled that digital-asset exchange Coinbase must give the IRS information about users who made more than $20,000 in annual transactions in recent years. To help confused crypto investors, accountants like William Brock now specialize in the peculiarities of how the US tax code applies to these burgeoning assets. If youve made money on crypto this year, here are some pointers he says you should keep in mind. (Needless to say, this is not legal advice and its far from exhaustiveif you have specific questions, its best to consult with a tax professional.) People typically think about paying taxes on an investment after theyve sold it. But switching from one digital asset to another will trigger capital gains, even if you dont convert to dollars as an interim step. For example, trading ether for bitcoin and not reporting the gains on the ether will not pass muster with the IRS. A way around this relies on a like-kind exchange as described in Section 1031 of the tax code. (Are we having fun yet?) The rules on this can be ridiculously strict, Brock says. You cant use it for securities or to Continue reading >>

Warning: Bitcoin Profits Are Considered Taxable Income By The Irs

Warning: Bitcoin Profits Are Considered Taxable Income By The Irs

Warning: Bitcoin Profits Are Considered Taxable Income by the IRS It may not be welcome news, but Bitcoinprofits are taxable in many places around the world. And those profits have been plentiful, with its price increasing more than ten times since the beginning of the year. Back in August, The Street warned of heightened probes into cryptocurrency tax evasion and the importance of Bitcoin investors declaring profits . Cryptocurrencies are under scrutiny like never before. The Internal Revenue Service (IRS) recently won a lawsuit against Coinbase, one of the largest Bitcoin wallet and exchanges, requiring it to hand over records relating to users who conducted Bitcoin trades worth more than $20,000 dating from 2013 to 2015. The taxman is set to collect taxes from 14,355 accounts, which have accounted for nearly nine million transactions. Coinbase boasts nearly six million customers, but according to a government filing, fewer than 1,000 US citizens have reported cryptocurrency holdings on their taxes. So what do Bitcoin investors need to be aware of? Record-keeping is important. Investors must keep track of alltheirtransactions. Taxpayers will need to know the exact price at which they purchased and sold a given Bitcoin or fraction and specifically identify which Bitcoin was used for each transaction. New York-based Perry Woodin is the creator of Node40 Balance, a software platform that allows Bitcoin and Dash users to report their capital gains and losses to the IRS via a pre-approved Form 8949. Here, Woodin answers some important tax-related questions about bitcoin: How important it is for Crypto investors to set some aside some money for taxes? If you are investing in cryptocurrency, you really have to set aside money to pay your tax liability. It would be foolhardy Continue reading >>

Tax Tips For Bitcoin And Virtual Currency

Tax Tips For Bitcoin And Virtual Currency

Tax Tips for Bitcoin and Virtual Currency Tax Tips for Bitcoin and Virtual Currency Virtual currency like Bitcoin has shifted into the public eye in recent years. Some employees are paid with Bitcoin, more than a few retailers accept Bitcoin as payment, and others hold the e-currency as a capital asset. Recently, the Internal Revenue Service (IRS) clarified the tax treatment of Bitcoin and Bitcoin transactions. Convertible virtual currency is subject to tax by the IRS Bitcoin is the most widely circulated digital currency or e-currency as of 2017. It's called a convertible virtual currency because it has an equivalent value in real currency. The sale or exchange of a convertible virtual currencyincluding its use to pay for goods or serviceshas tax implications. The IRS answered some common questions about the tax treatment of Bitcoin transactions in its recent Notice 2014-21 . Tax treatment depends on how Bitcoins are held and used. Bitcoin used to pay for goods and services taxed as income If you are an employer paying with Bitcoin, you must report employee earnings to the IRS on W-2 forms . You must convert the Bitcoin value to U.S. dollars as of the date each payment is made and keep careful records. Wages paid in virtual currency are subject to withholding to the same extent as dollar wages. Employees must report their total W-2 wages in dollars, even if earned as Bitcoin. Self-employed individuals with Bitcoin gains or losses from sales transactions also must convert the virtual currency to dollars as of the day earned, and report the figures on their tax returns. Bitcoins held as capital assets are taxed as property If you hold Bitcoins as a capital asset, you must treat them as property for tax purposes . General tax principles applicable to property transaction Continue reading >>

How To File Your Income Taxes On Bitcoin In 2018

How To File Your Income Taxes On Bitcoin In 2018

How to file your income taxes on bitcoin in 2018 Tips, tricks, and hacks for the tech in your life. Its been a turbulent year for bitcoin, and now its time to talk about taxes. Most people who held on to bitcoin over the past year made money off of it, and as Americans prepare for income tax season, the IRS wants its cut of the profits. Amid unprecedented gains and unprecedented enforcement efforts this looks to be the year that tax collectors get serious about bitcoin earnings, which means its a very good time to make sure youre doing everything right. So lets get into what youre reporting and how to report it. To simplify things, were only talking about bitcoin here, but note that these general guidelines apply to other cryptocurrencies as well. Also, none of this is legal advice, so if you have specific questions, its best to consult with a tax lawyer or accountant. Were talking about income tax, so your goal is to figure out your income from bitcoin in 2017. For the purposes of the IRS, that means bitcoin assets that were converted into non-bitcoin assets like cash or goods and services. Your bitcoin holdings arent taxable (at least not yet), but any time you sold bitcoin or used it to buy something, you were accruing taxable income. Youve already got records of most of those transactions, either on the blockchain or from your wallet provider, but converting it to dollars can be a real hassle since youll need to run the bitcoin value against the price of bitcoin at the time of the transaction. (You can look up the historical price of bitcoin here .) First, youll want to download all transaction data from the exchanges you use, usually available as CSV files, suggests Vincenzo Villamena, managing partner at Online Taxman , an accounting firm that specializes in cryp Continue reading >>

Paying Taxes On Bitcoin Isn't Nearly As Hard As It Sounds

Paying Taxes On Bitcoin Isn't Nearly As Hard As It Sounds

Bitcoin has soared in value over the past year. Paying taxes on bitcoin may seem daunting to people selling off their investments. The reality is straightforward for most investors, based on how much you bought bitcoin for, how much you sold it for, and what you make in income. Bitcoin's incredible rise in value from just shy of $1,000 per bitcoin on January 1 to more than $19,000 on December 8 has likely caused many bitcoin owners to sell all or part of their investment. But as tax season approaches, it may not be immediately clear how the IRS imposes taxes on bitcoin: Are the gains considered income? Are they capital gains? Something else entirely? With some help from financial experts, Business Insider dug into the tax code to make the process of paying taxes on bitcoin as simple as possible. Before we get lost in a forest of jargon, here's a handy glossary for common tax terms, which in this case apply to buying and selling bitcoin: Capital asset: Basically anything you own, from a house to furniture to stocks and bonds - and bitcoin. Basis: The amount you paid to buy bitcoin (including any fees you paid). Realized capital gain or loss: The profit or loss you made when you sold bitcoin (i.e. the price you sold it for minus your basis). Losses can be deducted from your taxes (more on this below). Unrealized gain or loss: The profit or loss you have on paper but have not actually cashed in on. You do not pay taxes on unrealized gains until you sell, at which point it becomes a realized gain or loss. Short-term gain: Realized gain on bitcoin or any other investment held for one year or less before selling it. Long-term gain: Realized gain on bitcoin or any other investment held for longer than one year before selling it. Bitcoin investments are taxed as a capital asse Continue reading >>

Are Bitcoin Gains Taxable?

Are Bitcoin Gains Taxable?

Bitcoin has given a whopping return of 892 per cent over the last one year. Due to such extraordinary returns the currency has caught the attention of many in India. But there is a hitch involved. The currency is not recognised by the government and come under the purview of no authority. In simple terms when it comes to crypto currencies, there is no regulator. In such a case are the gains from Bitcoin taxable? Archit Gupta, Founder & CEO ClearTax, says, " Even though Bitcoins are not specifically mentioned in the income tax act, Bitcoins are assets which are usually owned so holder can gain from an increase in its value. In that sense, they acquire the definition of capital gains. Which is a wide definition as per the Income Tax Act." Accordingly these can be classified as long-term when held for more than 3 years and short-term when held for less than 3 years. In case of long-term gains indexation benefit must be allowed and gains taxed at 20 per cent. Short term gains will be taxed as per the applicable income tax slab. Saurabh Agrawal, CEO and Co-founder, Zebpay, a Bitcoin exchange, agrees, "One needs to pay tax on profits made from investing in Bitcoin. One should declare the income while filing taxes." The issue about taxability of Bitcoin, however, is not so simple. There has also been a debate about under which head income from crypto currency should fall. Gupta, says, "Where there are too many trades in Bitcoins the owner may be classified as a trader and income will have to be reported as income from a business. In the absence of specific guidance on the matter, some taxpayers may choose to report this income under the fifth head of income which is 'income from other sources'." It is the head where residual income, income which cannot be reported under salar Continue reading >>

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