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Theoretical question:
If I make $1000, which gets deposited into my bank account, and then I deposit that $1000 into a bitcoin wallet the next day, and just sit on it for one tax year, do I have to pay income tax on that $1000? Can the gov't track me down and get me to pay tax?
Thanks.
According to the guidelines currently provided by the IRS, you are only required to pay taxes if you sell those bitcoin and have made a profit on them. If you are holding, or made nothing, or lost money, you are not required to pay taxes on them. If you lost money, you may claim those losses when you file your taxes, if you wish. It is not practical for the IRS to track the bitcoin of every US citizen who owns some, and becoming increasingly difficult to do so, given the continuing advancement in bitcoin privacy enhancements. It is one of those categories where the IRS relies mostly on self-reporting. However, if you have been moving a ton of bitcoin and not paying taxes on it, then you get audited, this is something that could come up in a detailed investigation into your finances.
