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[GIZ] IRS Declares Bitcoin Is Property and Must Be Taxed As Such - Page 6

post #51 of 199
http://www.irs.gov/uac/Newsroom/IRS-Virtual-Currency-Guidance
Quote:
IR-2014-36, March. 25, 2014
WASHINGTON — The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.
In some environments, virtual currency operates like “real” currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction.
The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:
Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.

http://www.irs.gov/pub/irs-drop/n-14-21.pdf
Quote:
Q-12: Is a payment made using virtual currency subject to information reporting?
A-12: A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. For example, a person who in the course of a trade or business makes a payment of fixed and determinable income using virtual currency with a value of $600 or more to a U.S. non-exempt recipient in a taxable year is required to report the payment to the IRS and to the payee. Examples of payments of fixed and determinable income include rent, salaries, wages, premiums, annuities, and compensation.

poor coinbase
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post #52 of 199
I'm not reading posts, and I'm not going to check replies. As soon as I'm done here, I'm unsubbing from this. I also need to find my flame retardant clothing.

I understand. This is crypto-currency we are dealing with. It is a type of currency, and as always... taxes on currency.
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post #53 of 199
Quote:
Originally Posted by AcEsSalvation View Post

I'm not reading posts, and I'm not going to check replies. As soon as I'm done here, I'm unsubbing from this. I also need to find my flame retardant clothing.

I understand. This is crypto-currency we are dealing with. It is a type of currency, and as always... taxes on currency.

Just because someone says it is a currency does not make it a currency.

You could call chicken thighs currency if you wanted, but the IRS would still treat them as property.
post #54 of 199
Can someone explain to me the issues unforeseen here? The US government has been wanting to tax online sales and transactions for a while now due to amount of could be tax revenue.

If Bitcoins wanna be a completely legal currency and all then its gonna be taxed.
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post #55 of 199
Quote:
Originally Posted by Dyson Poindexter View Post

And how are they going to prove you have any Bitcoins? What about the altcoins?

You don't sell Alt Coins for standard currency. You sell Alt Coins for Bit coins which are then sold for standard currency.
So this should only apply to BitCoin as that is the tender used for cold hard $$$.
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post #56 of 199
That does clear things up quite a bit, thank you for the link.

"This notice addresses only the U.S. federal tax consequences of transactions in, or transactions that use, convertible virtual currency, and the term “virtual currency” as used in Section 4 refers only to convertible virtual currency. No inference should be drawn with respect to virtual currencies not described in this notice."

I can admit when I am proven wrong. Mea culpa.
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post #57 of 199
Quote:
Originally Posted by Chakravant View Post

It is talking about how you determine the XXXXX USD amount, giving guidance on how to determine it for virtual currencies that have no exchange rate value. All Bitcoin style virtual currencies have exchange rates, so this explanation would only be necessary if the law applied to more than just Bitcoin like virtual currencies. This is also expanded on later in the QA, when it addresses taxation on payments made in property.

"Payments made using virtual currency are subject to backup withholding to the same extent as other payments made in property. Therefore, payors making reportable payments using virtual currency must solicit a taxpayer identification number (TIN) from the payee."

The virtual currency doesn't need a market value or presence. It never needs to be converted from property into real world currency. Just accumulating it as property is subject to taxation in this case.

If you cannot put a value on it how the heck do you tax it? It absolutely needs to have a value in USD for the IRS to tax it. The way they tax it is adding it to your gross income, which is in US dollars. If get paid in bit coins for painting your wall, I need to keep track of the value of the coins when I got them so that I can put them on my return. If I get paid in some weird virtual currency that has no real exchange or value I'm an idiot because I'm not going to be able to use it for anything. Your statement there makes zero sense how do you tax something that doesn't have a value?
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post #58 of 199
Quote:
Originally Posted by Milestailsprowe View Post

Can someone explain to me the issues unforeseen here?
There really isn't one. Anyone with a clue knew that income was taxable and that bitcoin gains would be taxable. The main thing this clears up is what rules under which the taxes should be filed (as property).

There will of course remain crazy people who don't want to pay and will avoid paying taxes till the IRS comes knocking, but those people existed before bitcoin.
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post #59 of 199
Quote:
Originally Posted by Xeio View Post

There really isn't one. Anyone with a clue knew that income was taxable and that bitcoin gains would be taxable. The main thing this clears up is what rules under which the taxes should be filed (as property).

There will of course remain crazy people who don't want to pay and will avoid paying taxes till the IRS comes knocking, but those people existed before bitcoin.

Very well said
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post #60 of 199
Always good to se the government of other countries doing their jobs right. Rock on IRS.
Yes I'm serious.
 
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