This morning the price of Bitcoin VS USD is lower than it’s likely set to be over the next few days. As such, it’s a good time to trade your dollars for all the satoshi* you can hold. The big problem with what you’re about to do isn’t the cash exchange, it’s the taxation of said investments that might end up being applied retroactively in the near future.
Do I pay taxes on Bitcoin?
Whether you buy one full Bitcoin or a smallest fraction of a Bitcoin (one satoshi,) there’s a good chance you’ve got a potential for taxation. If you’re the sort of person that reports every monetary transaction to the Federal Government as you’re supposed to, you’ll want to tell them you’ve dropped some cash on Bitcoin, too. The potential for an audit if you fail to report an investment like this is real.
*DID YOU KNOW: You can buy a fraction of a bitcoin: Satoshi!
The idea still up for debate is whether trading USD for Bitcoin is an investment, or simply an exchange of funds. If you plan on trading massive amounts of cash for Bitcoin, the risk might just be too great to consider. The risk, that is, of finding yourself on the wrong side of the IRS.
OF IMPORTANT NOTE: Nothing above or below should be considered legal advice, tax advice, or investment advice. Anything you do before, during, or after reading this article is entirely of your own accord, and most certainly none of the business of the author or SlashGear. Be cautious, be safe, and be smart!
If you’re extremely, particularly fearful of any 3rd-party entity seeing your Bitcoin business, you’ll want to work with a VPN. Connecting to the web through your standard internet provider without a VPN includes the possibility that your website visits and actions are being tracked. It sucks, but it’s true.
If you use a VPN, there’s a greater chance that your actions and website visits will be private. Privatizing your wi-fi connection, using a VPN, and connecting with TOR might be your best combo at home, barring using the internet connection of some trusted, wired network other than your own. Even if you have all of these secure measures in place, there’s still a chance your Bitcoin investment might be seen – sort of.
Bank Account Investment
If you use a service like Coinbase, you’ll likely move money from your bank account to your Coinbase wallet, then trade it for Bitcoin. This in itself might not be enough evidence that you’ve made some sort of investment that needs to be taxed – but then again, it might.
There are other ways to buy Bitcoin – and other, multiple services which you can use to make your USD turn into Bitcoin without direct connection to your bank account. I’m not going to link you to those services here, not least of all because I’ve only tried a couple, and I don’t trust any service implicitly.
Just as important as keeping your trade of USD to BTC private is the privacy of BTC to USD. If you ever plan on going back to USD, that is to say. You might just want to keep Bitcoin for the rest of your life, up unto the point at which digital currencies are the only currencies on this planet worth working with. If that time ever comes!