Taxpayers only need to pay the MINIMUM amount of tax required by law, not the maximum. If you are audited then we will tell you why you owe additional tax. No, you will not go to jail for paying less tax but upon audit you will be required to pay the deficiency or provide additional explanations/documents etc. Then you can introduce any counter arguments like you didn't know such a law exists, the tax code is ambiguous etc. Making these types of claims will help to provide case law to clarify it for others as well as for auditors.
I agree that the taxation of crypto related transaction is quite ambiguous when you start getting into the theoretical nature of how the transaction is conducted.
1) If one had used bitcoin as a currency (bought pizza, bubblegum, etc.), are these new "treatments" of cryptocurrency implying one has to report each of these purchases and the tax implication there in?
2) Lets say you are a miner and mine a bitcoin a month (I know not realistic but helps simplify question). Now, lets say you buy pizza with bitcoins from your wallet every month. What is the cost basis to use? The price is pretty volatile .. so what the heck are you supposed to do?
If you run a small business which grosses $X,000 per month, you will a) find that that is not that rare and b) benefit from keeping appropriate records of your expenses, including electricity and depreciation of expensive equipment, such that you can claim them on the tax return for your business each year.
You might choose to swap assets of the business directly for pizza but this is, in general, not a good decision relative to swapping them for money and money for pizza.
Your cost basis in intellectual property is typically the marginal cost to produce it. You can run the question of how exactly to bookkeep it past your accountant, but the profit of a mining businesses with $8k gross revenue and $2k of expenses per month should be $6k.
If you believe your mining business to have insurmountable challenges in bookkeeping at the scale you’re operating it at then maaaaaybe you should hire professional help or exit the business.
Apart from patio11's good advice I would add that it may be important (depending on your tax laws) to record the value of the asset (i.e. BTC or whatever) when you received it and the value when you sold it. The difference may be capital gains/losses and might be taxed differently. You also need to understand if the accounting is LIFO (the last BTC you received are sold first), FIFO (the first BTC you received are sold first) or cost averaged. Some countries require that you declare which system you are using before you do any transactions, so some caution is warranted. I don't know how the tax system works in your country so this is not advice. See paragraph 1 :-)
P.S. I've never bought nor sold crypto currencies, but my small consulting business is primarily overseas work, so I have to do a lot of FOREX.
Wish there was a dummies book on this. I do have an accountant btw but want to learn myself.
Republicans absolutely, unequivocally, believe in class. Better people have more money. Period. They can buy better products with that money - otherwise there's no point in being wealthier than others. Democrats are kinda sorta sometimes maybe occasionally OK with this but then abruptly not OK when the political winds change a bit. The party of ambiguous ethics are the Democrats. The aristocrats' party is the Republicans.
Directly asked, both party types lie. But if you look at a few dozen policy positions an individual policians has, with emphasis on the less conventional (the ones with ready talking points) ones, it's really easy to triangulate their positions and contradictions - for a political scientist.
edit: Let me be even more detailed. I had to have my accountant rework my taxes 3 times. Once because of a retroactive law change after the end of the tax year. Once because of the inconsistency I discovered in official documents. And once because ETrade's documents and my employer's conflicted. Both of the latter were prepared by professionals. That's pretty typical of my filings. If it's so complex that all of that is fairly routine, that IS the government's problem. I have no problem keeping track of my own records; in fact my own record keeping and fastidiousness led to the discovery of all 3 of those problems.
Does that mean it might be safer to be less fastidious so that no-one can uncover records that never existed?
Having a CPA doesn't help at all whatsoever to compensate for bad record keeping.
There are other ways to do this that would be simpler, e.g. tax equals 1-2% of the asset value per year, rather than taxing the income. This isn't fundamentally different from property tax computation.
So penalize everyone in down years when their stocks lose money, plus wipe out a ton of potential growth in 401k accounts? At least, that's what it sounds like to me.
Almost everyone does better with Roth versions of IRAs and 401(k)'s anyway. Pay the tax up front, no tax at the back end, and thus basis and record keeping isn't even relevant.
There's a bunch of ways to simplify this while also making it fair if it weren't for the greedy rich people who want regressive taxes, i.e. flat tax.
There are also tools like www.cointracker.io out there to simplify the complexity of these crypto taxation rules
Shouldn't that be "pay the minimum amount that (1) you can reasonably argue you believe is what you owe, and (2) is close enough to the maximum possible under the worst case scenario that you will not be subject to underpayment penalties if you are audited and they determine you owe the maximum"?
If the reporting requirements seem to be literally impossible to comply with, this doesn’t mean you conclude “so I don’t have to pay taxes”. It means you should conclude “I have to pay the maximum taxes possible under the worst case scenario because I don’t have the records to prove my version of events”.
It has nothing to do with crypto, lose basis in your stock and you assume no basis (obviously you make best guess and hope To not get audited, but once audited, you take no basis).