The U.S. is already well into tax season, and many bitcoin users will have capital gains to declare this year. To help them remain tax compliant, there are numerous software programs to help keep track of digital currency cost basis and profits over the course of one’s mining, buying, trading or earning bitcoins.
Bitcoiners often debate on online forums whether or not Bitcoin should be taxed, and former presidential-candidate Rand Paul has even suggested a laissez-faire approach to Bitcoin regulation.
Bitcoin tax law, however, remains vague today. After the Internal Revenue Service (IRS) released their March 2014 guidance on Bitcoin tax responsibilities, San Jose State University professor Annette Nellen helped the American Institute of CPAs draft a request for further guidance on bitcoin tax law. The IRS never responded; that is, perhaps, until they sent Coinbase a John Doe summons requesting information from the digital currency exchange’s customers.
Not much is certain when it comes to Bitcoin tax law. What is for sure: Bitcoin gains are taxable. Income, no matter if it is in national currency or digital currency, is taxable unless the IRS states differently. Indeed, U.S. citizens could be liable for taxes on their trading, holding, spending, mining, gifting, tipping, and donating of bitcoins.
Bitcoin.com gathered information on services that can make paying Bitcoin-related taxes easier – at least for those not living the ‘PT’ lifestyle, of course.
This solution works for businesses which deploy a cryptographic ledger, trade digital assets or simply experiment with smart contracts. Libra Enterprise, like other blockchain accounting solutions, support more than one cryptocurrency.
Libra for individuals helps to calculate gains and losses for cryptocurrencies for Bitcoin users with an eye towards maintaining IRS compliant records.
Libra connects with BitPay, Coinbase and Circle and syncs transactions quickly. They allow data to be uploaded in a spreadsheet format so users can maintain a level of privacy.
Cointracking is an active participant in the Bitcoin community and quick to support its customers on online forums. Bitcoin tax specialist, CPA Kirk Phillips, likes the features offered in this Bitcoin accounting solution. “CoinTracking is a comprehensive feature rich finance, tax, accounting and strategic planning crypto dashboard,” he has stated.
Cointracking supports thousands of cryptocurrencies, including litecoins, namecoins, as well as more obscure digital currencies like terracoins and devcoins. The company maintains a persistent thread on Bitcointalk.
Bitcoin Transaction Coordinator
Bitcoin Transaction Coordinator is a full merchant solution for bitcoin that helps users maintain IRS-compliant records for tax purposes by generating a payment request and bitcoin receipts. As a solution for Netsuite, a cloud computing provider, Bitcoin Transaction Coordinator enables models for customer and bank deposits. The software license is free for 10 transactions per quarter, but asks for a subscription fee thereafter. Bitcoin Transaction Coordinator offers flexible options for configuring accounting practices.
There are still other options when it comes to finishing your taxes in a compliant manner. Bitcoin Taxes has designed an API for wallet providers and exchanges to keep track of transactions. There are also numerous accountants with knowledge about Bitcoin. They include Daniel Winters, Tyson Cross, Jason M. Tyra, Jon Hazell, Amy Wall, Jeff Vandrew Jr, Paul McCullum, Darren L Neuschwander, and Randy Tarpey to name a few.
If your income came from an employer, then you should receive a W2 with important bitcoin-related tax information included. If you received the income as a freelancer, then you will be responsible for determining the fair market value of bitcoins when you received them.
Images courtesy of Shutterstock, Libra Tech, Cointracking