Getting ready for tax season

What’s the process for filing taxes if I’ve been making money with crypto like bitcoin, litecoin, DASH, and so on?

Already everything is taking place anonymously. Now whats the need to file for taxes. If you do trade face to face there won't be any transaction history, so no need of adding such income for preparation of taxes.

What if I start mining for bitcoins for example, do I have to report the coins earned as income?

I don't think so ,I mean you will be paying the bills for electricity (produced by that miner) , that should be enough

Depends how much you earn and how you use it.... if its a hobby it doesn't have to be declared, if your earning BTC for a living like 50+ a month and withdrawing to your bank, then maybe you do have to do declare.

I've never declared taxes for my BTCs. Does that get me into trouble?

If its a hobby no. I am sure you will be fine. as long as its not your main income. I once made 20k on BTC, withdrew to bank, didn't say a thing. But this is UK, I guess it depends what country your in and how close they monitor your finances.

What if mining does become the main source of income, do I still need to file for taxes?

That solely depend on the laws regarding income, taxes and Crypto in your country. In Canada, its not legal tender, so i have to declare capital gains regarding it. For instance if i buy 100 Bitcoin over the course of a year for 40000 and sell for a total of 40500$ then i have a 500$ that i should declare as an "Other Income".

same as here. If a profit is made on it then that is taxed. otherwise i look at bitcoin the same as buying stocks its not money till its cashed out or sold.

i would avoid declaring anythign if you deal with crypto and not converting in fiat, yes i know you actually need to be taxed anyway, but good luck for them searching what you bought with monero for example... for bitcoin it is seen as a property in the usa so treat it like that and fill the field where property are taxed

I pay capitol gains on the appreciation in value that is realized when spending. For example if I payed $10,000 for some bitcoin then a year or so later I used it to buy gold for $20,000 because the value has doubled, I would have seen a $10,000 gain that is taxable. In my current tax bracket I would owe about 10% or $1,000. It's true that most transactions are beyond the IRS's ability to discover. However, if they did find out then you will have no defense and will pay the principal + fines + interest. You may even do a little time in jail. You should take that into consideration before choosing to cheat your neighbors by sticking them with your tax bill.

What if I convert from one virtual currency to another, is there another tax included in the conversion?

That is an interesting case. I'm not sure? I would think that you could argue that you have not realized any gain yet. You, me, and the IRS are going to need years to figure all this out. The good news is that capitol gains tax is a lot less than the tax on the money you worked your ass off to get. Capitol gains are a rich persons tax, and as such is low. NOTE: You can also claim a loss if the price drops below what you paid and you "cash out".

Ok. First it depends where you live. Different countries have different rules, but mostly, if you make any money it's going to be taxable income. The question then becomes about thresholds, deductibles and rates. So, let's assume you're in the US. File your taxes as normal. Any profits you made from Selling BTC (or any coin) is capital gains. You also have to treat spending as selling, since your are bartering your coins for something with a fair value. So, again, calculate any gains. All this goes in 1040 Schedule D. While the IRS hasn't confirmed one way or the another, they see a transfer of property as a tax event. Therefore you need to work out any potential gains. Think of it as selling ABC into USD and then buying XYZ with that USD. The alternative would be that you're treating digital currencies as like-kind exchanges, but they would likely fail this test. Appeal if you get an audit and let me know how it goes Mining is income. The value of the income is the market value of those mined coins when you received them. Doesn't matter if you keep them, sell them or lose them, you still have that value as ordinary income. When you do come to sell/spend those coins, you use that value as the costs basis to work out capital gains. Doesn't really matter that it's Bitcoin, still tax fraud. You could make the same argument for earning cash and not declaring it. Will you get into trouble? Yes, if you are caught. The IRS will calculate your taxes for you, which you'll pay with interest, plus any appropriate fines and civil penalties. With taxes, you are guilty until proven innocent. So KEEP RECORDS. The burden is always on you. If you can't show where and how you got that money, the IRS will tax it at the maximum value. If you need help calculating your Bitcoin taxes, we've been doing it for everyone for years: https://bitcoin.tax Here are some top 10 tips about taxation that also might explain a few things. https://bitcoin.tax/blog/bitcoin-taxes-things-to-remember/

What if I receive a small amount of bitcoins (even if it's just a few cents worth)  from a bitcoin faucet, does that also count as  income?

*roll eyes* In Canada no, until you convert it to Fiat. In some places yes. But its not like you can declare that you received 0.0001$. You can add 0.01$ to your "Other income" field if it would make you feel better. Are you trolling?

I'm not trolling, I am being serious and i'm sorry for sounding like an idiot.

You can sound all you want It just didnt seem like a serious question. Its a bit like asking if you should declare the Penny you found on the ground. I guess you could technically count it as income. Anyways. I think in the US, you're suppose to declare your total in and out of BTC, but when they said that, i'm not sure they understood how BTC work. Sure its "possible" but its hardly trackable because no private address is solely attributed to one identity. I think we have a long time before BTC gets regulated that much.

First, tax regulations differ for each country around the world, so how Bitcoin is taxed in one country may not be the same elsewhere. Please look into the tax laws of your own country to find the specific details. What is pretty much global, is that buying Bitcoin or any other crypto-currency is not in itself taxable. However, you are likely to be taxed when you sell or even spend those coins and make a profit. How much depends on the amount of gains, how long you owned the coins and if and how your country taxes capital gains. You may find there aren't too many bitcoin knowledgeable accountants around just yet, so we recommend talking to Tyson Cross, a tax attorney and member of the Bitcoin Foundation. There is more information on his website,www.bitcointaxsolutions.com, and he is likely able to answer any specific questions you have, as well as offering tax planning and preparation services.