So I’ve got a bunch of bitcoins from mining and buying ages ago. The issue? I didn’t keep track of the transactions or the cost basis. I shifted wallets a few times and the last I moved was in 2018 to my current hardware wallet. What happens if I sell? Can I declare a cost basis of 0 for tax purposes and just pay on the full amount? Seems like a loophole, right?
Where are you located? It matters a lot.
If you made under a certain income from mining when you got the coins, you might not even need to report it. In the UK, for example, if it’s below £1000, you’re good.
I’m in the US now, and if I sell soon, I’ll have to deal with the IRS. I was living in Italy when I got the coins, and their value was under 1k EUR back then.
Not a tax lawyer here, but I think declaring a cost basis of $0 is okay. IRS might not care since you’re technically overstating your taxes. They’ll assume it's $0 if you don’t give any contrary info.
Just a heads up, not a tax expert. I believe if you can establish the coins' value when mined, you have options for capital gains tax when selling. Otherwise, it counts as 'Other Income' which could hit you with tax rates around 35-40%.
Thanks for the insights!
This amount is significant for me, so I want to get it right. Declaring it as ‘other income’? Not gonna risk it looking like I’m laundering money. I’m fine paying taxes on the whole amount ($0 basis), since it won’t hit me hard.
Oh yeah, mining income is taxed when you receive it, based on fair market value. It’s treated like self-employment income. Selling it later triggers another taxable event for capital gains.
I don’t know much about Italy, but some places in Europe have income thresholds where you don’t have to report small amounts. Like Austria or Germany have around 700-800 euros. If you were taxed while in Italy and the value was under 1k EUR, you might be in the clear.
So if I move to the US in 2021 and sell my bitcoins, I’m supposed to say I bought them between 2015 and 2020? Under Russian law, crypto wasn't taxed back then. Will they really make me declare and pay taxes on them?
If you got bitcoins as income in a country with a tax treaty with the US, you shouldn’t get taxed twice on the same income. That was in response to someone else thinking you’d get double taxed.
Not a tax expert either, but you usually report your purchase price and sales price. Tax is on the profit, right? And I doubt Russian laws come into play.
Got it, so the double tax issue doesn’t apply the same way in the US. In Russia, we pay income tax but no capital gains tax. If I bought btc for $10k and sold for $15k, tax is on the profit. But for mined coins, it’s taxed as income.
The tax office probably looks at the tax return date, so they’ll base it on current market price. You should calculate everything before reaching out to them. Pay the right amount, but not more than necessary.
If you’re trying to dodge taxes, sell it on P2P exchanges or directly for cash. That way, it’s just a personal deal with no taxes involved. If you're worried, use XMR or a mixer.
If you don't want to pay taxes, sell your coins on a P2P exchanges or sell it personally with cold hard cash, that way you don't have any problem with paying taxes as you have paid it directly from the person. You can use XMR or a mixer if you worry that much.