BitCoin Mining, Other Virtual Activity Taxable Under US Law 239
chicksdaddy writes "Beware you barons of BitCoin – you World of Warcraft one-percenters: the long arm of the Internal Revenue Service may soon be reaching into your treasure hoard to extract Uncle Sam's fair share of your virtual wealth. A new Government Accountability Office (GAO) report on virtual economies finds that many types of transactions in virtual economies – including Bitcoin mining and virtual transactions that result in real-world profit – are likely taxable under current U.S. law, but that the IRS does a poor job of tracking such business activity and informing buyers and sellers of their duty to pay taxes on virtual earnings. The report, 'Virtual Economies and Currencies: Additional IRS Guidance Could Reduce Tax Compliance Risks' found that the growing use of virtual currencies like BitCoin and virtual game currencies warrants the U.S.'s tax collection agency to mitigate the risks. Those include efforts to educate taxpayers and the publication of basic tax reporting requirements for transactions using virtual currencies, The Security Ledger reports."
tax on capital gains only (Score:5, Informative)
Nobody seems to get this (Score:4, Informative)
It's taxes on transactions involving dollars only. If you buy WoW gold by selling in-game items, there's no expectation of taxation. If you buy WoW gold with dollars, there's a legit reason to tax that transaction.
Re:Bitcoin mining is not capital gains (Score:4, Informative)
Re:Bitcoin mining is not capital gains (Score:5, Informative)
Mod parent up. It’s depreciation expense. Depreciation would either reduce your operating income if you sold the bitcoins the same year you mined them or would increase your cost basis of your bitcoin (thus decreasing your capital gains tax) it you held your bitcoins for more than a year.
Be warned, the IRS makes this stuff complicated fast.
Re:Bitcoin mining is not capital gains (Score:5, Informative)
The key words here are: "financial assets" and "intangible assets". Bitcoin mining is both of these.
from Capital gain's Wikipedia article:
The gain is the difference between a higher selling price and a lower purchase price.
The gain is the difference between 1) the selling price of the financial asset after the mathematics (or after WoW achievement) and 2) the purchase price of the intangible asset before the mathematics (or before the WoW achievement).
Re:Eh.. (Score:2, Informative)
Only in your world is trying to minimize your taxes a "leech". Leeches and moochers receive checks from the government for being part of a politically favored group. Taxes are mostly the consequence of being part of politically disfavored group.
Sure, some small percentage of tax money goes to build roads and other useful stuff, but mostly the government moves money from one group to another. Sadly more and more we're taking money from generations yet unborn, as our debt approaches $150,000 per taxpayer and just keeps rising.