The meteoric rise of Bitcoin in 2013 was a modern day gold rush for many with huge gains and easy money filling pockets everywhere. But that all changed in 2014 when Bitcoin’s price fell through the floor and the IRS issued guidance on how Bitcoin would be taxed and classified. You see, if you’re a Bitcoin miner, any mining reward is taxed as income immediately when it’s awarded. This is potentially a big problem for many miners every time they receive a mining reward.
Why? Because if a Bitcoin miner doesn’t immediately convert the bitcoins they’re awarded into dollars the day they receive them, and the price of Bitcoin goes down the next day, or a lot a month later, they’re out of pocket whatever their percentage loss was between when they received the reward plus whatever the tax liability was for the value of Bitcoin on the day they were awarded it – ouch!
For a lot of Bitcoin Miners who have to report Bitcoin mining income in 2014, this is a harsh reality. Especially with the current Bitcoin price hovering around $225. This is because many miners have accumulated large amounts of Bitcoin and are now selling them at a loss to cover their overhead expenses (e.g. electricity) to continue running their facilities. To add even more fuel to the fire, as tax time approaches, miners have to determine each and every price Bitcoin was awarded to them at in 2014 in order to compliantly calculate their tax liability. This could take days.
We think this is a huge problem so we made LibraTax. LibraTax can automatically import and calculate hundreds, or even thousands, of mining awards and transactions in minutes, taking nearly all of the headache out of tax preparation for Bitcoin miners. Once the tax liability is calculated, we also offer several different reporting options that compliantly minimize reportable gains, thereby reducing overall tax liability and maximize reportable losses, effectively increasing allowable write-offs.
Are you a miner or did you receive a mining reward in 2014? Whether it was one, hundreds or thousands, we take care of helping you compliantly report them, on-demand. We’ll even automatically prepare the tax form to give to your CPA to include with your return. Prefer to remain anonymous? No problem. You can easily calculate your liability without us knowing anything personably identifiable about you.