Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

I justing a site to sell my computer processing power and

Customer Question
they are paying me in...
I justing a site to sell my computer processing power and they are paying me in bitcoin. I sent the coins to a site that buy's them and they pay me by PayPal. I would like to keep things legal. Thoughts?
JA: The expert will know how to help. Is there anything else important you think the expert should know?
Customer: This seems to be a bit of a gray area. I was thinking of open a small business. I was hoping this would let me right off my equipment and power.
Submitted: 6 months ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Customer reply replied 6 months ago
I'm not looking to hold them to grow value. I just want to get paid for my efforts.
Answered in 7 minutes by:
6/15/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 6 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,003
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi. I can help you here.

...

IRS has actually provided guidance here, They say that bitcoin is to be treated as property, more specifically, as currency. See this:

...

"The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:

  • Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
  • Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
  • The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
  • A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. "

...

So yes ANY ordinary and necessary expense (whether paid in bitcoin or other monies) is deductible under IRC §162

Ask Your Own Tax Question
Customer reply replied 6 months ago
Please talk down to me. I don't know what that means.
Tax Professional: Robin D., Senior Tax Advisor 4 replied 6 months ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,992
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified

In simpler terms, the IRS is going to see the payment in Bitcoin as money. This means that you still report as if you received the payment in cash. You can deduct your equipment and expenses for your business even if you are paid in Bitcoin.

You have to report the income too in the same way. Virtual coin or real, the Treasury Department expects to see the income reported by you and your expenses for business are also allowed.

Ask Your Own Tax Question
Tax Professional: Robin D., Senior Tax Advisor 4 replied 6 months ago

Please rate in a positive way or tell me what else you need to know.

Ask Your Own Tax Question
Customer reply replied 6 months ago
I should start an llc and get ein? I'll give you a good review.
Tax Professional: Robin D., Senior Tax Advisor 4 replied 6 months ago

YOu do not have to do that. As a sole proprietor you can do the same with out the cost of an LLC

Ask Your Own Tax Question
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 6 months ago

This is your original expert. I disagree. You should form the LLC for the liability protection provided, ESPECIALLY, given what you're doing.

...

And I apologize, I was explaining what the information i pasted directly from IRS said when you opted out.

...

It simply means that bitcoin is money. and writing things off (whether paid with bitcoin or other money) depends on whether they're business expenses or personal expenses.

...

But again, YES, ALWAYS fom the LLC. I's only $100 of so in each state, and the liability protection it provides is MORE than worth it.

Ask Your Own Tax Question
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 6 months ago

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

I hope that you’ll rate me based on my accuracy and thoroughness, rather than any good news/bad news content.

That’s the only way JustAnswer.com will credit me for the work here.

Thanks,

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice on three continents since 1986.

Ask Your Own Tax Question
Tax Professional: Robin D., Senior Tax Advisor 4 replied 6 months ago

I am going to opt out now so you can deal with only one person.

Ask Your Own Tax Question
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 6 months ago

Please let me know if I can help further.

...

But, if this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit") ... That's the only way we'll be credited for the work here.

...

But again, if you need more here, let me know.

...

Lane

Ask Your Own Tax Question
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,003
13,003 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,336 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

15,992 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis). I need to know if I can deduct the finance expense tied to a line of credit for my LLC from income. I generally understand that … read more
Robin D.
Robin D.
Senior Tax Advisor 4
15,992 satisfied customers
If you are a sole proprietor llc and contributing to a SEP
If you are a sole proprietor llc and contributing to a SEP should it be contributed from a personal account or business account? I would think personal since on your tax return it is deducted on the 1… read more
abci168
abci168
Principal
27 satisfied customers
Tax law.FICA Tax law. W-4 and W-2 payroll tax withholding
tax law.FICA Tax law. W-4 and W-2 payroll tax withholding from wages and salaries.gross pay and take home pay. number of hours measured direct work assigned by W-4 and W-2 forms. for Medicare eligibil… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
FICA payroll employer tax withholding tax forms W-4 and W-2
FICA payroll employer tax withholding tax forms W-4 and W-2 forms. The accountant for the man I worked for from1976-1984 did not provide me with W-4 forms to complete and return to him or W-2 forms to… read more
Robin D.
Robin D.
Senior Tax Advisor 4
15,992 satisfied customers
I have not paid payroll taxes this year on 2 peopl3 that
I have not paid payroll taxes this year on 2 peopl3 that work for me I always used a pro in the past but stopped because of the high fees and time has got away from me and I want to fix it. Can I show… read more
abci168
abci168
Principal
27 satisfied customers
I am a physician working as an independent contractor for a
I am a physician working as an independent contractor for a telemedicine company. all of my income is form 1099. Can I incorporate in such a way to qualify for the (possible) pass-through tax changes?… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
What rate of withholding is applicable for a domestic
What rate of withholding is applicable for a domestic partnership with 2 foreign partners upon the selling of a rental property in US. … read more
Lane
Lane
JD, CFP, MBA, CRPS
13,003 satisfied customers
I have 2 salaried jobs, 1 independent contractor position
I have 2 salaried jobs, 1 independent contractor position and real estate income. My husband has a salaried job. We underpay taxes every year. Last year we owed 30K and a penalty. I haven't paid any e… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,252 satisfied customers
I had some self employment income where I was paid in
I had some self employment income where I was paid in bitcoin. I also made some bitcoin payments to a couple of businesses for what would be considered commissions. Would I report the income and expen… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
872 satisfied customers
I have a client that was a Sole Proprietor. He formed an LLC
I have a client that was a Sole Proprietor. He formed an LLC and elected to be taxed as an S-corp on 8/1/17. He purchased a $39k vehicle in his sole proprietorship in 2015 and deducted Sec 179 and A/D… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Two questions on federal tax deductibility: 1. We personally
Two questions on federal tax deductibility: 1. We personally paid legal fees for our manufacturer C Corp. The fees were for assistance in preparing a Research & Development tax credit application. Can… read more
Lane
Lane
JD, CFP, MBA, CRPS
13,003 satisfied customers
If an owner took a draw from the business (sole proprietor
If an owner took a draw from the business (sole proprietor llc) and the business is showing a loss excluding that draw then I assume no income or self employment taxes will be paid since there is a lo… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,592 satisfied customers
Income from the leasing of cars...is it self employment
Income from the leasing of cars...is it self employment income? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
A sole proprietor with a tentative loss may deduct which of
a sole proprietor with a tentative loss may deduct which of the following for qualified business-use-of-home expenses:mortgage interest depreciation rent utilities… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,252 satisfied customers
As an independent contractor (1099) should I form an LLC? Do
As an independent contractor (1099) should I form an LLC? Do I need to? … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
872 satisfied customers
If I work as an independent contractor under a foreign LLC
If I work as an independent contractor under a foreign LLC partnership in California, do I need to register as a foreign LLC in CA? The gross income from CA this year would be less than 50K. CA is NOT… read more
taxmanrog
taxmanrog
Master\u0027s Degree
722 satisfied customers
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2 FROM HER EMPLOYER WITH A TYPO IN THE SOCIAL SECURITY NUMBER. TO DATE THE EMPLOYER HAS NOT PROVIDED A "CORRECTED" FORM W-2. IS THERE AN IRS "… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,252 satisfied customers
My daughter-in-law receives a W-2 form from her employer,
My daughter-in-law receives a W-2 form from her employer, this is her only income. The Medicare income is $53,903 but her NJ State income is $60,053. How is that possible? No investment or interest in… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x