How I Paid My Bitcoin Taxes
News April 15, 2014 Comments Off on How I Paid My Bitcoin Taxes 15The IRS guidance isn’t actually that complicated, but the record-keeping it makes necessary is. You have to keep track of how expensive your Bitcoin is when acquired — whether you bought it or “mined” it by making your computer a slave to the Bitcoin network — and then declare capital gains or losses based on the increase or decrease of its value when cashed in or spent. Luckily for me, I used Coinbase and Blockchain for my Bitcoin spending, not Mt. Gox. The Tokyo-based exchange MtGox imploded this year, “and no one has been able to access their trade history,” laments Bitcointaxes.info, advising people “to file an extension and hope that MtGox gives access to their historical records before October 2014.” Even if Coinbase and Blockchain went the way of Gox, I had made a detailed expense report that included what I spent on Bitcoin that week and its value when I spent it. And I’m glad I did, because Coinbase doesn’t track Bitcoin’s value at the time it’s transferred though Blockchain does.My record-keeping made my accountant’s job much easier, but there were multiple entries as we calculated my gains and losses on each day of spending. Like the day I spent .59 BTC or $56 on mini-cupcakes: Bitcoin was worth $96 that day; I’d bought it at $125, so I took a $17 capital loss. As I bombarded him with numbers Bitcoin’s value when I bought it, the date I spent it, how much I spent, and the underlying value at the time, he muttered, “The government’s going to kill Bitcoin by taxing it to death.”
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