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I justing a site to sell my computer processing power and…

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I justing a site...

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?

Accountant's Assistant: The expert will know how to help. Is there anything else important you think the expert should know?

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: 1 year ago.Category: Tax
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Customer reply replied 1 year 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 1 year ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,668
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

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Customer reply replied 1 year ago
Please talk down to me. I don't know what that means.
Tax Professional: Robin D., Senior Tax Advisor 4 replied 1 year ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,219
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.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 1 year ago

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

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Customer reply replied 1 year 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 1 year ago

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

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 year ago

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

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

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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.

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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.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 year 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.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 1 year ago

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

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 year 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

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