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Posted on 04/03/2014 6:08:34 AM PDT by Errant
The US House of Representatives committee on small business held a hearing on 2nd April to discuss the growing use of bitcoin by the country’s small business owners (SMBs), and the pros and cons that using this technology as a payment option offers the demographic.
Entitled ‘Bitcoin: Examining the Benefits and Risks for Small Business’, a panel of experts spoke about the benefits and costs of the use of bitcoin by SMBs, while also touching on hot topics like Silk Road and the recent IRS decision on the tax treatment of digital currencies.
Committee Chairman Sam Graves noted in his opening remarks that a great deal of uncertainty remains for small businesses thinking about accepting bitcoin as a form of payment, but that the hearing was meant to increase information about the topic.
(Excerpt) Read more at coindesk.com ...
Later in the hearing, both Williams and Brito voiced support for the IRS decision to designate virtual currencies as a type of property for tax treatment.
Brito noted that the IRS looked at the characteristics of bitcoin and judged it as more of a commodity compared to a currency. Looking ahead, he suggested that Congress and federal regulators could create a special tax category for virtual currencies that takes into consideration the extraordinary aspects of bitcoin.
Adam White, Director of Business Development and sales at Coinbase, and L. Michael Couvillion, Associate Professor of Economics at Plymouth State University’s College of Business Administration, also addressed the committee.
Video of hearings at link above...
Related:
Remember when we wondered whether someone would develop a service to help you keep track of the capital gains on bitcoins? Well, now it turns out that someone has – or, at least, wants to. Libra is a new venture that claims it can help you to keep the IRS happy.
Launched by Jake Benson, a former SAP HCM Consultant for Cap Gemini specialising in US and Canadian payroll, the service wants to enable individuals, small businesses and large enterprises alike to comply with the new IRS regulations.
The IRS notice, announced March 25th, carries significant implications for people using bitcoin, even if they are regular users, rather than investors.
Under the guidance, people spending bitcoin are liable to declare capital gains on any increase in value on those coins. That means if you purchased one bitcoin in early October at $100 and spent it today at $440, then you’d be realising a capital gain of $340.
To add insult to injury, because you hadn’t held onto those bitcoins for more than a year and a day, that capital gains tax would be short term, making it equivalent to ordinary income tax. Investor holding onto their coins for longer than that period, however, will pay the long-term rate of 15%.
‘Critical issue’
Of course, people don’t always spend one whole bitcoin at a time. Instead, they’ll acquire and spend portions of a bitcoin over time. That means that technically, they have to keep track of lots of bitcoins that gained different amounts of value over different time periods.
Members of the bitcoin community are unhappy enough about the guidance to have filed a petition about the new guidance.
“Arguably, this is one of the most critical issues surrounding digital currencies,” Benson told CoinDesk. He added:
“When I noticed several months ago there was no comprehensive solution to address taxes, I knew it was an opportunity. Tax software might not be the sexiest business in the industry, but it is the most essential right now.”
Benson, who graduated from the University of Texas with a business degree in 2011, wants to cut through the whole tangled mess. Libra will start by obtaining transaction history for an individual, which he says can be done through automatic and manual means.
Simple solution
Then, the service will calculate the cost basis on a per-transaction level, before distinguishing between transactions subject to short-term or long-term capital gains.
Benson explained:
“Then, we output the calculated totals, and direct the user to which box to fill in on which tax form – we may even provide automatic form output for ultimate convenience.”
He is hoping to do the whole thing in a minimum of four to five clicks for tax novices, and longer term, wants to integrate with other tax software, including the big consumer titles, but also enterprise ERP systems.
The service will be able to handle book keeping retrospectively, so that people can refile for previous tax years if their bitcoin transactions extend back that far.
Extension ‘advisable’
The problem for bitcoin users today is that the tax filing deadline for the IRS is next Tuesday, and LibreTax won’t be launching its service until the third quarter.
Theoretically, this means that bitcoin users would have to do a lot of their paperwork themselves in the next few days, if they wanted to stay within the law by following the tax guidance. But Benson has an alternative, he said:
“Libra for individuals will be ready in the September timeframe. That will be right in time for the extended tax deadline, so we advise everyone to file for an extension this year.”
Future plans
In the meantime, Benson will be working with an initial round of seed capital from CrossCoin Ventures; his being the first company to be accepted by the Ripple Labs-funded accelerator program.
In time, he expects Libra to become a broader tax reporting tool, as many different stores of value from fiat through to cryptocurrencies become digitized.
Explained Benson:
“Imagine being able to automatically populate your income, itemized deductions, business expenses, etc, straight from the ledger – no matter what kind of currency was used! I see a tremendous amount of potential here.”
The service is purely for tax purposes and doesn’t include its own wallet yet, Benson concluded – although it would be a logical next step, he added.
http://www.coindesk.com/libra-bitcoin-tax-service-irs-guidance/
Congress is investigating benefits of bitcoin? DANGER WILL ROBINSON, Total bs. Congress will be investigating how to get their grubby little fingers regulating and taxing bitcoin. Even cash you can hide transactions. Bitcoins eventually have to go through the NSA monitored internet.
Failure to report more than $10,000 cash: felony under federal law [business/sef-employed for now]
That was one of my paranoic fears when I investigated bitcoin and its tracking of who has what and how much and every transaction has a history, etc.
If the government implemented this as the new “currency”,
we’re hosed.
Under the guidance, people spending bitcoin are liable to declare capital gains on any increase in value on those coins.
The government isn't subsidizing the process, the government is taking its cut out of any capital gains. In the case of a "loss" of some or all of you "capital", the government isn't going to be sending you a rebate...
If Freepers, "supposedly the cream of the crop" are dumbed down to think like this, I'm afraid we're doomed as a nation...
the government isn’t going to be sending you a rebate...
But govt does want to reduce their risk that is why they limit capital loss to only a 3,000 loss per year. But you don’t lose it, just carry it forward against future gains and years.
The government isn’t subsidizing the process,
I am not an anarchist . Government has a purpose but it has overgrown itself. I don’t have a moral position on this, which you seem to have taken. I am just reporting the obvious. The government shares in my gains as well as my losses via the tax structure which is only fair. But they do stack the deck in restricting my losses.
My major point regarding bit coin is no one wants to talk about losses and there will be some. The politicians only see gains to be taxed, They don’t want to talk about the losses. So in their minds, they only see the REVENUE, not the NET.
“A subsidy is a form of financial or in kind support extended to an economic sector (or institution, business, or individual) generally with the aim of promoting economic and social policy.[1] Although commonly extended from Government, the term subsidy can relate to any type of support - for example from NGOs or implicit subsidies. Subsidies come in various forms including: direct (cash grants, interest-free loans) and indirect (tax breaks, insurance, low-interest loans, depreciation write-offs, rent rebates).[2] Furthermore, they can be broad or narrow, legal or illegal, ethical or unethical. The most common forms of subsidies are those to the producer or the consumer. Producer/Production subsidies ensure producers are better off by either supplying market price support, direct support, or payments to factors of production.[1] Consumer/Consumption subsidies commonly reduce the price of goods and services to the consumer. For example, in the US at one time it was cheaper to buy gasoline than bottled water.[3]
Whether subsidies are positive or negative is typically a normative judgment. As a form of economic intervention, subsidies are inherently contrary to the market’s demands. Thus, they are commonly used by governments to promote general welfare (eg. housing, tuition, sustenance). However, they can also be used as tools of political and corporate cronyism.”
https://en.wikipedia.org/wiki/Subsidy
I have gotten many a client a refund based on losses...............
Respectfully friend, you need to loose the mindset that your benevolent government is sharing in your losses. It isn't either philosophically or practically.
Well, thankfully that's settled.
I will try one more time.
I have a $100,000 to invest but I have a rich uncle who thinks it is good to invest so he tells me that if I lose it, he will cover $30,000 of the loss. I lose the $100,000 so uncle writes me a check. So that tells me I am only risking $70,000 of my money. In my mind that is a subsidy.....................................
Now you are going to say that uncle wants 30% of my profits, but that is a SEPARATE issue.
Now, it is good business management to manage my risk. Given the choice, I would rather risk $70,000 than $100,00. Now you may have a moral or emotional opinion of this, that is fine but it does not change what it is.
Why would you assume that I think I have benevolent govt?
Since you appear to be a big player in Bit Coin and since you have philosophical and practical issues here, I will assume the you will not be writing off losses regarding Bit Coin on your tax return? You will only report profits, not losses? Am I correct?
Of course I am probably wrong in assuming there will losses regarding Bit Coin.
Others are worth a tad more. I'll probably file an extension and wait at least until October for software in development that will pull in the data and perform the calculations automatically. Who knows, the IRS may even issue updated guidelines and offer payments/refunds in BTC by then! Currently, preliminary back of the napkin calculations indicate treasury owes me a "refund"! :-D
Well, I just hope the IRS doesn't find out about the $100K your rich uncle has given you to blow on foolhardy investments and that you haven't paid the gift taxes on that much money. If they do, you'll probably have to cough up about $50K in back taxes plus penalties and interest! After they're done with you, you'll be lucky if you can purchase a "monster (or whatever they call them)" CD.
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