Bitcoins experience

[vcoleiro1]

^ Cash can be hidden, but not as easy as bitcoins.  Bank accounts in Australia for example are monitored by the government.  ie if you say you earned x interest from your bank accounts on your tax return, the government checks that against what it really is via  your bank.  It cant do that with bitcoins at all.

If a govenrment is suspecting its missing out on tax revenue by the use of bitcoins it could act, it depends on how big bitcoins grows and whether the government decides its worth it.

Looking at bitcoins I see there value has risen from $10 USD to $237USD in the last 4 months.  It has risen from $198USD to $235 just in the last 24 hours.  

As I said , everyone I know that has mentioned bitcoins has talked about them investing in it, not using it as a currency exchange.  It's going through a bubble scenario at the moment.   Be carefull is all I can say.

 

[WizardStan]

If a store only accepts bitcoins and uses them and therfor never buys dollars , Whats stopping them not paying taxes at all, there's a reason bitcoins is seen as a black market currency.  Do you honestly believe governments will let that go on.

Like I said, if a company accepts payment in a jurisdiction where taxes are to be collected then even if they only ever deal in bitcoins they still need to add tax. If they sell something for 1 coin and there's 10% tax they need to charge 1.1 coins. That extra 0.1 coin is the property of the government, you're just holding onto it and sooner or later you'll have to hand it over, either as a bitcoin if the government accepts them, or converted into local currency. This is not a new problem, there are long established rules about accepting foreign currency and how to handle taxes. If the store is in a jurisdiction where taxes do not need to be collected then the question is entirely moot and the government shouldn't care. If the store is supposed to collect taxes but it does not then it is breaking the law, even if it is a non-domestic currency, and they will get heavily fined when they are audited.

Governments do provide their currency with legitimacy which is backed by their power to govern. Every economic article Ive read that talks about what gives currency it's backing and legitimacy talks about this.

Every economics article you've read dumbs it down for the average person. If the public truly understood what money really meant there would be chaos. There is nothing backing your money except momentum. The only reason that money has value is because people want it, and the only reason people want it is because it has value. There's no gold, there's no property, there is nothing.

 

[ekianjo]

I would even say that governments have, on the contrary, a strong incentive to inflate the monetary mass in order to finance their policies.

 

[vcoleiro1]

How is the government going to charge tax on bitcoins earned by a company . If the company keeps their currency in bitcoins, the US government cannot at the moment charge them tax.  What exchange rate would they use?. They don't see bitcoins as a valid currency or having any valid exchange rate in their eyes.

And the government  don't accept bitcoins as tax payment.  See the problem. If the company never converts the bitcoins to USD or any other recognised currency for example, they can never be charged tax.  The issue is that since they can use bitcoins to buy stuff, they never have to convert it to USD.

 It's this problem that if it gets bigger might cause the government to intervene. It all depends on how big it gets

In regards to how the US governs the economy and currency, see my post #69 in this thread.  That's how it backs the currency, and yes the US does have gold, land etc and wealth in that regard. It doesn't mean its used to guarantee the currency, but it can be used to stimulate the economy & currency as I outline in post #69

 

[WizardStan]

How is the government going to charge tax on bitcoins earned by a company .

A price is set. Tax is a percentage of the price, whether it is in domestic currency or bitcoins.

If the company keeps their currency in bitcoins, the US government cannot at the moment charge them tax.

The government doesn't charge tax, the store charges a percentage of the sale price to be turned over to the government at some point in the future.

What exchange rate would they use?.

I don't remember the exact details but I think it is the price at market open on the day of the sale. If 9am

They don't see bitcoins as a valid currency or having any valid exchange rate in their eyes.

What makes you say that? I can go to any number of exchange websites and get you a price.

And the government  don't accept bitcoins as tax payment.

Just like the US government doesn't accept Canadian dollars as tax payment, or Euros, or whatever.

See the problem.

Nope.

If the company never converts the bitcoins to USD for example, they can never be charged tax.

Why not? The tax is charged at time of sale. The store accepts extra bitcoins on behalf of the government. They are then required, by law, to turn that excess over to the government at some known point in the future. If the government doesn't take bitcoins then the store is required to convert it to a form the government will accept.I am telling you, again, for the third time, there is no problem here. Tax rules already exist for the handling of non-domestic currencies, regardless of where it comes from, including bartering of goods. A company can, in theory, deal entirely in gold and have the exact same problem you're imagining exists with bitcoins, except it isn't a problem because it's already been thought of and solved.

 

[vcoleiro1]

Thats not what Ive read about bitcoins and how the government views them.  They are not seen as a legal currency by the government.  The best Tax answer I saw was that they would be treated like stocks and only taxed when you cashed them for USD. ie the profit at the point  would be taxed much like stocks are.

As I said, if you don't cash them , how is the government going to get it's revenue from not just sales tax but all tax it would apply to a companies earnings of bitcoins.   It's a huge grey area , 

 

[WizardStan]

taxed when you cashed them for USD. ie the profit at the point  would be taxed much like stocks are.

That is correct and entirely irrelevant. You're talking about income vs sales. If I work for a store and the store pays me in bitcoins, that is income. If I take those bitcoins and buy something, that is sale. The government gets their cut of the income when I convert bitcoins to domestic currency, but sales tax is handled at time of sale and doesn't require any conversion. If a car dealership says "this car is $15000 or 10oz of gold" and must take 10% sales tax, then the final cost of that car is $16500 or 11oz of gold, with $1500 or 1oz of gold to be turned over to the government at the appointed time, or since the government doesn't accept gold it would need to be converted into USD based on an easily discoverable exchange rate. Bitcoins are identical. Whoever is telling you they are a problem doesn't understand money, taxes, or bartering.Actually, I just remembered, that's not true either. I have been paid in stocks. My last company my annual bonus was always paid as a volume of stock. I was charged income tax on the fair market open price of those stocks on the day of purchase, so yeah, that problem is solved as well. Whether it's income or sale, rules are already in place for the government to get their cut.

As I said, if you don't cash them , how is the government going to get it's revenue from not just sales tax but all tax it would apply to a companies earnings of bitcoins.   It's a huge grey area ,

Ok, let's try a different approach. Assume that every single bitcoin was mined and that every single one stayed within the system, all transactions occurred between owners and not a single coin was ever traded for domestic currency. Further assume that the current exchange rate is the stable value. Heck, let's quadruple it and bump it up to an even $1000 per coin. That's a total max value of $21 billion in so-called unregulated funds. The GDP of the USA is $15 trillion. You are talking about 1/714th of the total amount of money flowing around the United States. I can assure you that they don't care. It'd be like working at a job making $70 an hour, and spending all your time trying to save ten cents.The GDP of the entire world is $70 trillion USD. That'd be like working a job for $333 an hour and trying to save 10 cents. Nobody cares! Not only are there already systems in place to handle it, even if there weren't it is such a tiny amount (globally speaking) that it wouldn't make any sense to go after it.

The final amount would necessarily be even less than the $21 billion, as there are a lot of lost coins, not every coin will be used in a transaction every year, only a fraction of the number of coins actually used would count towards taxes, and some unknown (but certainly significant) portion of the population WILL be interested in buying and selling things with domestic currency. Let's assume that after all is taken into account, the governments of the world are losing out on $2 billion in taxes.

Whoop

dee

freaking

doo.

 

[vcoleiro1]

Well you maybe surprised WizardStan, but on your point above, I totally agree with you. At the moment bitcoins is way to small for the US to worry about.  Lets hope it stays that way. Oh and by the way, the point I mentioned earlier was about how company profits are taxed, not salary or sales tax. In regards to how tax can be avoided with bitcoins, here is a good article on how bitcoins inherently make it easy to avoid tax: http://www.bloomberg.com/news/2013-04-05/bitcoin-really-is-an-existential-threat-to-the-modern-liberal-state.html

The biggest worry I see at the moment is the bubble thats happening. 6 weeks ago bitcoins were $35, now they are $235.  All I have heard the last few days is people saying to get into these, they are going up, they are a great investment. It really worries me as I hate to see this end up being a bubble that bursts and people getting hurt. I have seen the devastation financial loss can do.

 

[WizardStan]

At the moment bitcoins is way to small for the US to worry about.  Lets hope it stays that way

There is no "at the moment". The number I posted is the hard cap. There is a physical limit to the number of bitcoins that can be mined and one day we will get all of them. And on that day, at $1000 per coin, they will still be way too small

The biggest worry I see at the moment is the bubble thats happening. 6 weeks ago bitcoins were $35, now they are $235.  All I have heard the last few days is people saying to get into these, they are going up, they are a great investment. It really worries me as I hate to see this end up being a bubble that bursts and people getting hurt. I have seen the devastation financial loss can do.

Good, embrace that worry. Bitcoins are a great investment right now if you have a lot of spare money and can get in and out quickly. If you aren't in a position to watch your investment like a hawk and pull out the instant there's even the slightest sign of trouble then it is the wrong plan for you because your worry is entirely founded: exponential growth is unsustainable and it absolutely will rebound. Not today, probably not tomorrow, maybe not for another month or two, but the bubble is going to eventually stop growing. At that point in time, the medium terms are going to decide they've had enough and cash out, and that's when the bubble is going to burst, and unlike a regulated stock exchange there is nothing in place to control that bursting bubble: it will be gone in a matter of hours. A lot of people will lose a lot of money.

 

[Franko]

That's the risk inherent within speculation...or "investment" or gambling.  There are no guarantees - no specific promises upon returns....heck, my money devalues all of the time...sometimes it (mildly) rebounds against a certain currency, but for my own sanity I choose to not monitor the money markets.  I used to be a day-trader (in the late 90's) and I made a semi-fortune, but then I lost almost all of it in the stock market crash of 2000...the bubble burst.  Maybe (probably) the bubble will burst with this newest thing - Bitcoins....but it's riding high right now.  So, who cares?  Just enjoy the ride, get out of the way, or know when to buy and when to get out.

 basically Ninja'd by Wizard Stan   h34r:  

I think that's how it goes.  I'm a relative newbie on these forums.  

 

[Franko]

Oooops.  My apologies, WizardStan...thought I was replying to vcoleiro.  Who is also very wise, but probably not 100% correct on this particular topic.

 

[vcoleiro1]

At the moment bitcoins is way to small for the US to worry about.  Lets hope it stays that way

There is no "at the moment". The number I posted is the hard cap. There is a physical limit to the number of bitcoins that can be mined and one day we will get all of them. And on that day, at $1000 per coin, they will still be way too small

>>The biggest worry I see at the moment is the bubble thats happening. 6 weeks ago bitcoins were $35, now they are $235.  All I have heard the last few days is people saying to get into these, they are going up, they are a great investment. It really worries me as I hate to see this end up being a bubble that bursts and people getting hurt. I have seen the devastation financial loss can do.

Good, embrace that worry. Bitcoins are a great investment right now if you have a lot of spare money and can get in and out quickly. If you aren't in a position to watch your investment like a hawk and pull out the instant there's even the slightest sign of trouble then it is the wrong plan for you because your worry is entirely founded: exponential growth is unsustainable and it absolutely will rebound. Not today, probably not tomorrow, maybe not for another month or two, but the bubble is going to eventually stop growing. At that point in time, the medium terms are going to decide they've had enough and cash out, and that's when the bubble is going to burst, and unlike a regulated stock exchange there is nothing in place to control that bursting bubble: it will be gone in a matter of hours. A lot of people will lose a lot of money.

Actually "at the moment" is correct , it is possible they may go upto $1000,000  or $1Billion per coin. That would make it large rather than small. So it is an "at the moment" proposition.

Yes bitcoins do seem like a bubble, I would concur with you Franko in saying it is probable thats what is happening with bitcoins.   

It's always a risky business commenting on bubbles.  You run the risk of talking people out of investing and having them get angry at you if they listen to you and miss out on gains.  Then on the other hand you feel guilty if you say nothing and it does burst and they get hurt.

 

[Franko]

^^^ Caveat Emptor, for sure.  That goes with just about ANY purchase from the beginning of time.

 

[Franko]

Also, @vcoleiro... I've enjoyed reading your posts for YEARS.  So, I'm kind of a fan, and I'm sorry if it seems like I'm butting in here and being harsh (which I might be)...but I've always wanted to converse with fellow forum members like yourself.  I just felt that before last week that I didn't have the right  because I didn't have a Pandora, OR had pre-ordered one at least.  Like I didn't have a "stake" in anything....which was sort of what I didn't get about Overgauss....WHY does he rail on so, when he doesn't want a Pandora, but he just likes to TALK...slap walls of text up?...anyway, I digress, but it's an interesting topic.  

 

[vcoleiro1]

Ahh cool, no worries at all.  It's always good to hear from others , so don't be a stranger.  

And yes , there are some who get really heated about the Pandora, but it's understandable given the wait .  The world is full of all sorts of people, one can only try and understand where others are coming from and show tolerance even if they come across as very angry.

 

[TrashyMG]

Bitcoins are neither bit nor coins, now talk now talk amongst yourselves..

 

[Franko]

I have eight dollhairs that I stole from my sister's Barbie doll.  I want to buy 8-bit coins to put into my Atari 800 so that I can mine some more.  Processor speed and Algorithms be damned....I'm going to live forever...

 

[Franko]

Hey, I really am talking amongst myself.

 

[klapse]

THEIR bitcoins have exchange value (measured in euros, dollars etc) so it is a theft of an item of value (like a car, necklace etc) covered by that nations' laws.

Can you elaborate a bit more?

I don't see what was unclear. There certainly can be problems proving a theft occurred, but theft itself is illegal in any country I can think of. It isn't necessary for bitcoin to be "legal tender" to be covered by laws against theft -- as far as my understanding goes, it is like any other property.

 

[klapse]

How is the government going to charge tax on bitcoins earned by a company . If the company keeps their currency in bitcoins, the US government cannot at the moment charge them tax. What exchange rate would they use?. They don't see bitcoins as a valid currency or having any valid exchange rate in their eyes.

You shouldn't pretend to be an authority on subjects you know nothing about:


"Already, US citizens are required to report any valuable assets that they obtain as income, whether it's dollars or euros or bricks of gold or valuable Beanie Babies.


Bitcoin, then, is already "taxed" by default. Regardless of its nature, it is already taxed today. Even though the IRS cannot ever know for sure how much Bitcoin a person has received, the reporting requirements are no different from cash itself. "

http://blog.bitinstant.com/blog/2012/11/12/bitcoin-and-taxes-not-that-complicated.html

http://www.businessinsider.com/do-you-have-to-pay-taxes-on-bitcoins-2013-4