Death, Bitcoin, and Taxes

photo courtesy The Daily Beast

This is going to sound like a bummer, especially coming at you during the festive holiday season. But for all you crypto nerds and Bitcoin investors out there who think you’re pulling a fast one over the US Government and the IRS by hodling and/or trading the seemingly under-the-radar decentralized digital currency in the dark, I have some sober news for you. The IRS is onto you. Or should I say, they’re onto us, and they’re planning on taking their (un)fair share of our Bitcoin whether we like or not, or whether they recognize it as a viable income stream, or not.

Here’s how the IRS views Bitcoin and all other digital currencies. They consider it property, not a currency. What this means is, for any of us who’ve owned Bitcoin for more than a year, we’re going to be subject to a 15% tax on capital gains, or what you and I perceive as profits. Considering some of us buy and sell crypto several times per day, this whole notion of keeping track of how much we owe the government (or how much it might owe us) at the end of any given day, is a daunting task to say the least.  

So what’s the best way to make sure you’re keeping up with what you owe so that you can avoid a black sedan pulling up in your driveway and some poorly suited nerdy robotic still-not-over-all-the-beatings-I-took-in-high-school bureaucrat from knocking at your door? Here’s some ideas to help you keep up with the dreaded Tax Man. Forgive me, Tax Person…we live in a hyper PC culture these days, after all.

  

      Keep a record of every transaction and order be it a buy, a sell, or a transfer. I don’t have experience with all the trading platforms like Bitfinex and Bitmex. Not by a long shot. But I work with the more pedestrian ones like Coinbase and Robinhood. For certain these platforms keep records for you, so all you have to do is print them out at the end of the year and calculate what you owe.

2.     

          Not all transactions are considered equal. If you hold a position for say, half a day prior to dumping it, you’re only required to pay a tax rate according to your tax bracket. This is actually good news for me as a writer since my year to year income is never steady. In other words, I have years when I’m basically living just above the poverty line (living on savings, that is), as opposed to those very generous years I’m required to pay quarterly taxes (welcome to the writer’s life). However, the mean ole’ IRS doesn’t give a rats ass about positions you’ve held for more than a year. If you decide to sell them, you will be paying 15% if you make under $500K and 20% beyond that. 

3.      Keep special track of your losses. As a Bitcoin casual investor and enthusiast, I’m not dealing with big numbers here. But even if the amount of Bitcoin I own pales compared to Elon Musk’s stash, we both need to follow the same strategy at the end of the year. So what if he employs a team of accountants and I go to H & R Block? Try to offset your gains with as many loses as possible. Which leads me too…

4.      Keep up with your tax payments even before you receive a bill. Get ahead of the game by paying a certain amount forward to the Federal Government far ahead of the deadline. This will accomplish two things. It also keep you off their radar and it will prevent you from filing costly extensions. Naturally, investing in Roth IRAs or other tax saving products also helps a bunch. For writers like myself, I keep a detailed record of everything I spend, from toilet paper to breakfast cereal, by keeping a copy of every single receipt. Don’t take my word for it. My late ex-father in law, who was the New York State Tax Commissioner, once pulled me aside and said, “You didn’t hear this from me, but deduct everything. Just make sure you have a receipt for it.” Thanks Pop. Not everything is deductible naturally, but it’s best to play it safe when it comes to the IRS. If I should happen to get audited, I have the backup I need for every deductible I’ve claimed, and then some. And just imagine the expression on nerdy Tax Man’s face when you dump that pile of receipts in his lap (Crap, Tax Person…I just can’t get used to the PC culture).  

5.      Maintain a separate bank account just for your taxes. If you take a crypto profit of say, $100, get in the habit of automatically banking one-quarter of it. At the end of the year, this will be the account you tap into to pay Uncle Sam. Chances are you won’t have to use all of it.

Obviously this is by no means an exhaustive list. I keep repeating this like a broken record because it’s the truth, people: I’m not a financial advisor, nor am I an analyst. I’m just a big believer in the future of digital currency. Apparently, so is the US Gov, or digital currencies wouldn’t suddenly be showing up on their radar. Just make sure to do your own research on the matter.  

The government might be a slow, bloated, and inefficient money suck, but it’s not dumb by any means. It sees the direction Bitcoin is going and like a perpetually starving, scavenging, hairy beasts of prey, it has its good eye on the golden digital asset. Again, this not to sound like a bummer around the festive Holiday Season. But life is unpredictable at best, and terribly catastrophic at worst. One day you’re planning that Sandals all-inclusive vacation and the next, you’re hooked up to a dialysis machine. It’s our job to get ahead of anything that might mess up our plans or our bank accounts. So plan ahead because nothing in life is ever certain. In the final analysis, all we can be sure of is this: death, Bitcoin, and taxes. 

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Buy Bitcoin Now or Kick Your Own Butt Later On

chart courtesy of bircoin.top

I’ve been waxing poetically lately about the merits of investing in Bitcoin, not because I’m a financial analyst (which I most definitely am not, nor do I play one on my pathetic 55 member YouTube channel), but because I’m a full-time crime author who loves to bitch and moan about the peaks and valleys associated with my monthly and semi-annual royalties. So why the waxing? Bitcoin for me, has proven a store of value that has not only doubled in worth over the course of the past year when I first bought in at $3K or so, but because of its volatility, it makes for easy in-and-out trading. It has become a fairly steady income stream.  

Like I’ve written in the past, I keep two separate Bitcoin accounts. One for holding, or holdling as the crypto geeks like to say, and one for shorting. That is, selling and/or taking small profits. On average, I can make anywhere between $50-$100 per day on Bitcoin when it’s particularly volatile (right now it’s trading sideways which makes me nada). But there are expert traders out there…and yes, there are bots programmed to trade too…that can reap thousands per day even when the up and down action is slow. I don’t pretend to think I can beat the market, plus I’m terrible at math, so I keep things simple by taking whatever my daily profit might be, whether it’s $20 or $200. Like annual book sales, it’s all about averages in the end.

But why should you invest in Bitcoin now?

In just 165 days or so, the supply of Bitcoin will be halved. Unlike our dollar, or any other fiat currency for that matter, there is a limited supply of Bitcoin. In other words, Bitcoin cannot be devalued. However, it can lose it’s worth if there is a massive sell-off, such as the one that occurred last December/January when the price plummeted by more than 50%. But, and this is a big but, the price rallied not only because Bitcoin bulls were able to recognize a primo buying opportunity when they saw it, the long term thinkers had the 2020 halving in mind.

I’ll be honest, I had no idea what a halving was when I first bought in. I had no idea what a hodl was much less a short or a long. As for the Blockchain, I’m still not sure what it is. It took me forever to realize Bitcoin is a decentralized store of value, as opposed to a government run currency like USD (I know the Fed Reserve is said to be a privately run enterprise, but it’s not). Like I said, I’m not a Bitcoin expert (so take what I say with a pinch of salt and do your own research). I’m just an enthusiast and an investor who believes that the new crypto digital asset will act much like the Internet protocol of the past, and therefore one day establish itself as one of the dominant ways in which we create wealth and/or pay for goods and services. How’s that for a prediction from a mid-list hard-boiled mystery author?  

No one, not even the experts, know for certain that the halving will inflate Bitcoin’s price dramatically come April/May of 2020, but theoretically it looks really, really good. And like they say, if it smells like an orange, behaves like an orange, tastes like an orange, it’s probably an orange. But even if Bitcoin doesn’t rise in price dramatically, I will still continue to dollar cost average on a weekly basis in my first account, while shorting my profits in my second account. In the meantime, the digital asset will only continue to slowly but surely increase in value. It’s simply case of supply and demand (see the chart above).  

As a prolific novelist, I can’t think of a better time to be a writer. This was made possible by the Internet. As an investor, there’s no better time to be building individual wealth. This was made possible by the birth of digital currency. When will both come to definitive end? When somebody turns the power off. For good. 

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5 Reasons Why Every Fiction Writer Should Own at Least One Bitcoin

photo courtesy Daily Express

This is the article you won’t see anywhere else but here on Medium. The topic is, however, worth writing about because owning Bitcoin can be a very lucrative venture, however risky. On the other hand, you know what else is risky? Writing fiction on spec. I’ve hit a bunch of the bestseller lists and even had three separate titles hit either number one on the Overall Amazon Bestseller List or No. 2. One book stayed there for weeks. I’ve won the major awards and sold hundreds of thousands of books, and still, I can’t count on having a steady writing career going forward, anymore than I could count on it back when I started in the mid-1990s.   

Maintaining a successful writing career doesn’t only take talent, it takes a whole lot of luck. This is another way of saying, being a success is never a sure thing, even when you are a success (see what I did there?). I don’t know about you but when I get on a plane, I don’t count on making it to my destination because the pilot is currently going through a streak of good luck. I’m more comfortable with a sure thing.  

How do you guarantee success as a fiction writer? How do you bypass luck by inventing a sure thing? Creating and maintaining as many income streams as possible, that's how.

Enter Bitcoin. 

I’d first heard about the cryptocurrency back in 2015 or so, around the time it was starting to shoot up to great financial heights. Having started out at its inception ten years ago at a net worth of pennies per coin, it shot up to almost $20K in value in just seven short years. Of course, that high eventually fell to around $3K last December/January. That’s precisely when I got in, purchasing one full coin.

Since that time, my coin(s) has more than doubled in value. Despite its volatility, Bitcoin has most definitely proven its worth as an asset and not the Ponzi scheme so many people believe it to be. I’m such a believer in the new, decentralized, currency, I know in my bones that one day it will provide life changing wealth. I can’t say the same thing about writing crime thrillers, sadly.  

All that said, here’s why I invest in Bitcoin. And remember, I’m no financial analyst and this isn’t to be taken as financial advice. This is merely presented here as an FYI and something to be discussed in the comments below if you are so inclined.

1.      Volatility. You might assume that volatility is a bad thing for an investment. If it suddenly loses all its value, you can find yourself flat broke. But not with Bitcoin. The old adage of buy low, sell high has never been more applicable. I keep one account where I hold or hodl Bitcoin by dollar cost averaging a certain affordable amount once per week, and another where I sell my highs and buy the dips. It’s this latter account that often pays my monthly rent. It’s not unusual for me to make $100 per day on average, depending on the asset’s mood swings. 

2.      Decentralization. Although it’s important you pay your taxes on your gains, the government is slow on the draw when it comes to regulating the block chain and crypto. It’s the perfect asset if you wish to live off-grid since there’s no third party interference like banks. Sure, this might make it attractive to crooks, but crooks like cash too. 

3.      Limited Supply. Did you know that the dollar is worth 30% less than it was in the year 2000? That’s right. Since Tricky Dicky removed the dollar from the gold standard back in the early seventies, it has continually lost value on an annual basis. What this means is, just keeping money in the bank for a rainy day is a sure way to eventually go broke. Bitcoin on the other hand has no choice but to increase in value since it’s only available in limited supply. In April/May of 2020, the existing amount of the Bitcoin will be halved, and theoretically anyway, this should create a price spike.

    

4.      Access. Unlike traditional stocks/bonds, Bitcoin is traded day and night, 365 days per year. It doesn’t take Christmas off. If you’re in the mood to make a trade in the middle of the night, go for it. It doesn’t keep bankers hours either. Should your car suddenly need a $500 repair, you can sell some Bitcoin and, depending on your exchange, the asset can be converted into cash almost immediately. You can't say the same about selling stocks. 

5.      Wave of the future. In this author’s humble opinion, Bitcoin and a select few other cryptos will be the currency of the future while worthless fiat currencies gradually get phased out (see comment no. 3). The banks will fight it of course, and so will the government to a degree. But in my mind, at least, Bitcoin’s future is set in stone. Look at this way: who would have guessed that we could do our banking, watch a movie, read a book, take our blood pressure, find directions in a foreign city, create our own online TV show, trade stocks, and so much more from palm-sized device that fits in the pocket of our Levis just fifteen years ago.

Like I said, I’m no financial analyst and what I offer up here could be all wrong by next month. I still invest in gold, silver, and other more traditional assets. But from a personal perspective, I see Bitcoin and other cryptocurrencies like it, exploding in popularity once mainstream brokerages begin adopting it. But that will be a bit of a bummer too because it will mean that there will be less volatility in the cryptosphere.

So, if you’re an author who is always looking for ways to increase your bottom line without taking away from your writing time, check out Bitcoin. Do the research, and if it all looks good to you, dive right in. Think of it like the Internet back in the mid-1990s. Some people saw the enormous life changing potential in it, and yet many others thought of it as a fading fad.

“Who’s ever going to read a book or an article on a computer screen?” they laughed.

Me, I’m laughing, all the way to the bank (the digital banking app on my smartphone, that is).   

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