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At the beginning of 2017, the Bitcoin was trading at $ 968. During the year it reached a maximum of $ 19,783. The news has raised many questions, "Should I invest in Bitcoin?" More recently The price of Bitcoin it had dropped back to $ 6.511 and interest has declined.
For some users, Bitcoin is a way to avoid government intrusion and illegally evade taxes paid. Most Bitcoin owners, however, want to comply with the IRS regulations.
The IRS classifies all cryptocurrencies as properties. The purchase of Bitcoin is not a taxable event. But using Bitcoin to buy something else is considered a Bitcoin sale and selling property for more than what you bought is a taxable event. If you "sell" some Bitcoins with a profit that you have purchased in the last year, you will need to report short-term capital gains on your tax return and pay the ordinary income tax rates. If you sell a commercial lot that you held for at least a year, you only need to report long-term capital gains that are taxed at a lower rate.
Bitcoin bulk sales will generate short or long-term capital losses that can be used to offset capital gains. But the purchase of any Bitcoin within 30 days before or after selling Bitcoin for a loss can generate a wash sale and therefore the loss must be folded back into the purchase.
The IRS relies on the tax payer to track and properly pay taxes on Bitcoin and other crypto currencies. Even if the IRS is not aware of Bitcoin's activities, you are still responsible for compliance with the tax code.
Therefore, if you bought Bitcoin, it is important that you kept track of every Bitcoin purchase. Every purchase is considered a commercial lot. And when you sell Bitcoins (or use them to buy a good), it's important for you to keep track of which of the commercial lots include the sale.
There are credit cards linked to Bitcoin accounts in which each credit card sells a small amount of Bitcoin to pay for the purchase. But every time you use this card it's a taxable event that needs to be monitored. Other credit cards offer Bitcoin as a reward for using the card. Again, each discount creates a purchased commercial lot that must be tracked for tax purchases.
Being paid in Bitcoin is even more confusing. If you accept Bitcoin for services, you've earned an income. You must have ordinary income taxes. You also have taxes on self-employment. The same is true if you are bypassing Bitcoin. The extracted Bitcoin must be valued as income at fair market value on the day it is drawn. Once the Bitcoin is extracted and you have paid the income tax, enter your inventory as your commercial lot. Any subsequent gains are taxed at long-term or short-term capital gains tax rates.
You can imagine the confusion if you were to be an extraction Bitcoin, accept it as payment and receive it as a credit card reward. And the added confusion if you also used it daily to buy your groceries and other expenses. Almost every transaction is both taxable and potentially a washing sale.
For a simple and easy money-making currency, IRS regulations make a nightmare of compliance problems.
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At the beginning of 2017, the Bitcoin was trading at $ 968. During the year it reached a maximum of $ 19,783. The news has prompted many to ask, "Should I invest in Bitcoin?" More recently, the price of Bitcoin has dropped to $ 6.511 and interest has declined.
For some users, Bitcoin is a way to avoid government intrusion and illegally evade taxes paid. Most Bitcoin owners, however, want to comply with the IRS regulations.
The IRS classifies all cryptocurrencies as properties. The purchase of Bitcoin is not a taxable event. But using Bitcoin to buy something else is considered a Bitcoin sale and selling property for more than what you bought is a taxable event. If you "sell" some Bitcoins with a profit you have purchased in the last year, you will need to report short-term capital gains on your tax return and pay the ordinary income tax rates. If you sell a commercial lot that you held for at least a year, you only need to report long-term capital gains that are taxed at a lower rate.
Bitcoin bulk sales will generate short or long-term capital losses that can be used to offset capital gains. But the purchase of any Bitcoin within 30 days before or after selling Bitcoin for a loss can generate a wash sale and therefore the loss must be folded back into the purchase.
The IRS relies on the tax payer to track and properly pay taxes on Bitcoin and other crypto currencies. Even if the IRS is not aware of Bitcoin's activities, you are still responsible for compliance with the tax code.
Therefore, if you bought Bitcoin, it is important that you kept track of every Bitcoin purchase. Every purchase is considered a commercial lot. And when you sell Bitcoins (or use them to buy a good), it's important for you to keep track of which of the commercial lots include the sale.
There are credit cards linked to Bitcoin accounts in which each credit card sells a small amount of Bitcoin to pay for the purchase. But every time you use this card it's a taxable event that needs to be monitored. Other credit cards offer Bitcoin as a reward for using the card. Again, each discount creates a purchased commercial lot that must be tracked for tax purchases.
Being paid in Bitcoin is even more confusing. If you accept Bitcoin for services, you've earned an income. You must have ordinary income taxes. You also have taxes on self-employment. The same is true if you are bypassing Bitcoin. The extracted Bitcoin must be valued as income at fair market value on the day it is drawn. Once the Bitcoin is extracted and you have paid the income tax, enter your inventory as your commercial lot. Any subsequent gains are taxed at long-term or short-term capital gains tax rates.
You can imagine the confusion if you were to be an extraction Bitcoin, accept it as payment and receive it as a credit card reward. And the added confusion if you also used it daily to buy your groceries and other expenses. Almost every transaction is both taxable and potentially a washing sale.
For a simple and easy money-making currency, IRS regulations make a nightmare of compliance problems.
