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IRS Requests Bitcoin Buyer Records in Broad Tax Evasion Case
- overcast 10y agoThis should be a good one.
- pjc50 10y agoWell, that was kind of inevitable.
- chollida1 10y agoI think this is a pretty reasonable request if they only want Americans who traded bitcoin. The IRS and SEC have the power to compel brokerages to turn over trading records for people who bought/sold stocks on the stock market so the precedent is not only set but well established long, long, long ago. I mean if you traded bitcoin but didn't claim the income on your taxes, then you just blatantly and almost certainly knowingly/intentionally lied on your taxes. I'm not certain what there is to argue about or push back on here. It's not like you can create something new like bitcoin and then with a straight face claim that its not an equity or currency so the law doesn't apply to you. Capital gains are taxable, full stop, unless there is a specific law to override that, like selling your primary residence. Can someone make the case that this isn't just a cut and dry issue?
- tyingq 10y agoConflating coinbase with a brokerage seems a stretch to me. Many people used it more like Paypal, a conduit to make or receive payments for sales of goods or services. With the conversion of bitcoin to regular currency happening very quickly. No buy/hold/trade activity, etc.
- criley2 10y agoIf you made money on ebay, deposited to your PayPal, and then spent elsewhere, and did not claim that money on your American taxes, you would be evading taxes by not reporting taxable income. Same here.
- tyingq 10y agoBut the IRS has not asked for Paypal to dump their entire database of all payments and customers.
- unreal37 10y agoIn fact they do. "Since 2011, PayPal has been required by the IRS to report the sales of goods and services for customers who, in a single year receive: More than $20,000 USD, AND 200 or more payments." [1] https://www.paypal.com/us/selfhelp/article/How-does-PayPal-report-my-sales-to-the-IRS-Will-I-receive-a-1099-tax-statement-FAQ729 https://www.paypal.com/us/selfhelp/article/How-does-PayPal-r...
- tyingq 10y agoThat is a significantly smaller subset than "all US customers and all US transactions". The point is that it's a fishing expedition.
- criley2 10y agoWell sure, they don't need to fish in USD, but they do need to fish in bitcoin. It is what it is, but if I dealt in bitcoin over that period of time, and my returns didn't reflect it, I would be talking to tax attorneys and filing amended returns BEFORE the IRS letters started, not after.
- derekp7 10y agoHow does it work if you sold a service for bitcoin, and the value of the bitcoin changed befor converting to cash? I would think that regular taxes (income) would be owed on the initial cash value, then capital gains tax would be owed on the float. Same as selling something in a foreign currency?
- tyingq 10y agoThat's exactly the attraction coinbase had for many sellers (avoiding the volatility): https://www.coinbase.com/instant-exchange https://www.coinbase.com/instant-exchange
- optimuspaul 10y agoWell it is a currency exchange and does broker currency transactions. Seems like a brokerage to me.
- chollida1 10y ago> Many people used it more like Paypal, a conduit to make or receive payments for sales of goods or services. With the conversion of bitcoin to regular currency happening very quickly. No buy/hold/trade activity, etc. I'm glad you brought this up because it just strengthens my point. Paypal reports US account transactions to the IRS once they go over a certain size. https://www.paypal.com/us/webapps/mpp/irs6050w https://www.paypal.com/us/webapps/mpp/irs6050w
- tyingq 10y agoSo does coinbase.
- mhluongo 10y agoThe IRS isn't supposed to use these powers to go on "fishing expeditions", according to its own manual[1]. Requesting info on millions of users without particular suspicion is more broad than necessary. [1] - http://www.forbes.com/sites/kellyphillipserb/2016/11/21/irs-wants-court-authority-to-identify-bitcoin-users-transactions-at-coinbase/#7e2c86e40d11 http://www.forbes.com/sites/kellyphillipserb/2016/11/21/irs-...
- ryanackley 10y agoThis was just a matter of time. Welcome to the reality of being involved in the money business in the USA. Coinbase is concerned with the breadth of the request. That is actually kind of cute considering that your bank has to report any transaction over $10000 to the US Dept of Treasury and people are actively prosecuted on suspicion of making transactions under this threshold to avoid reporting requirements [1]. Whenever I hear someone talk about the dream of anonymous currency. I kind of laugh to myself because I know how far the government currently goes to monitor every little piece of your financial life to make sure you are paying what you owe in taxes. [1] https://www.washingtonpost.com/news/the-watch/wp/2014/03/24/the-federal-structuring-laws-are-smurfin-ridiculous/?utm_term=.40575f1e297f https://www.washingtonpost.com/news/the-watch/wp/2014/03/24/...
- mhluongo 10y agoCoinbase has to report SARs, as well- they're a fully licensed money transmitter in the US- so maybe tone down the condescension. This is an overreach of a different type and by a different government body, and would be precedent-setting AFAIK.
- ryanackley 10y agoSARs only apply to suspicious activity. CTRs are what your bank has to file for every transaction over $10000. Also, it's all the Dept. of Treasury. The IRS is essentially the collection agency of the Dept. of Treasury. It's listed as a bureau on the U.S. Treasury's website. https://www.treasury.gov/about/organizational-structure/bureaus/Pages/default.aspx https://www.treasury.gov/about/organizational-structure/bure...
- mhluongo 10y agoMy point stands. Coinbase already has bank-level scrutiny, both directly and from its banking partners ("know your customer's customer"). I completely agree that anonymity in finance is at odds with many of the government's methods to enforce taxation, and that this is only the beginning. But Coinbase has been the white knight in this space in the US dealing with the regulations, and I don't think they're naive to push back on this. It might be a losing battle over the next decade, but that doesn't mean it's not a worthwhile cause today.
- perlpimp 10y agothats why on some level it is better to run your own wallet.
- mhluongo 10y agoYou still have to buy your bitcoin somewhere, unless you earn it or mine. This is about Coinbase's brokerage activities, not its wallet services.
- mirimir 10y agoOK, so you earn Bitcoin online, as an anonymous consultant. Cashing out is a risk. But at least, you can fund your anonymous online activity. Long term, I suppose that you could drop it somewhere as gold or real estate, and then emigrate. But that's also risky.
- dewyatt 10y agoYou could buy fairly anonymously via certain methods on localbitcoins.com (or in person, etc).
- ulkesh 10y agoI made a whole $50 on Coinbase. I expected some tax form to arrive, and it never came. Honestly I completely forgot about it until I saw this. I wonder if that $50 will end up being hundreds owed in some kind of late fees/etc.
- drcode 10y agoI'm pretty sure they'll be overwhelmed by going after larger fish and nothing will ever come of it for such a small amount.
- lettergram 10y agoThey will probably not go after anyone who made less than like $500. Remember each time they go after someone it costs them money too.
- thfuran 10y agoThe IRS is kind of strapped for money. I suspect the threshold is way over $500.
- eco 10y agoWe had a couple of agents show up at our door over something like $17. They weren't even from the nearest IRS office (50 miles away instead of 10 miles). Our theory is that they needed an excuse to drive up and try the new In-N-Out that just opened up in the state.
- module0000 10y agoIt's really tempting to say that the IRS won't be able to do anything - you can't prove I spent/received this for <x> type of activity.... but that's not how the IRS works. Once the IRS decides to audit, you are guilty until proven innocent. They will be elbow-deep into your figurative financial rectum, and you will (almost always) lose.
- wbl 10y agoThat's because they are very good at picking who to audit. If you can document all your deductions, and have all your sources of income declared, and stored it all together an audit consists of hitting print, handing the scanned copies to them, and waiting.
- cloakandswagger 10y agoUS tax law is so dense and complicated that they can effectively implicate anyone they choose. Having worked with numerous small businesses in the past, do you know how many of them could readily provide carbon copy receipts for every single deduction they claimed in the last X years? I think there is a valuable discussion to be had about the power of a federal agency that can so easily zero their sights on anyone they choose, especially when that same agency has admitted to targeting for political purposes in the past.
- Amezarak 10y ago> do you know how many of them could readily provide carbon copy receipts for every single deduction they claimed in the last X years? So on what basis did they take those deductions in the first place, if they didn't have the documentation to figure out what their deduction was in the first place? Did they just guess? Or are you saying they had it for one tax season and then destroyed it?
- cloakandswagger 10y agoEither they had it and destroyed it, lost it or did what lots of small businesses do and had a credit card or checking account only used for business, then referred against the statements to determine deductions (sans receipts)
- brentm 10y agoI would bet that unless you're a person who willfully hid large capital gains in bitcoin or faked some kind of large tax deductible expenses by purchase of Bitcoin you probably will have anything to worry about. If you are among those two group then you've probably been worrying anyway.
- cableshaft 10y agoI buy a small amount (about $20 worth) every paycheck, so I'm really not sure how to even report that reasonably. With such a volatile price, I don't really know how much it's gone up or down without some serious calculations. I'm not really sure what to do about that. I was just about to sell some of it too, to help cover some recent expenses.
- tedd4u 10y agoThe note from the IRS about Bitcoin I read on CoinBase's site said it's similar to a security. So until you trade it out (sell it) you don't realize a gain. When you do your gains are considered similar to capital gains / capital losses (if you held for more than 1 year). Otherwise considered income.
- cableshaft 10y agoWell again, I was about to sell some, and figuring out exactly how much I 'gained' from so many tiny buy transactions I imagine would be difficult (but might not be, I'm not sure).
- jdmichal 10y agoIt shouldn't be difficult, unless you don't have access to the proper information. The bitcoins you are selling need to be tied to specific bitcoins that were bought. Once you do that, then you have a cost basis for your sale. Subtract the amount you sold them for from your cost basis and that's your gains. If the source transaction was older than a year, it's capital gains. Otherwise, it's income. (This is for the US.)
- marvin 10y agoIs there a "first bought, first sold" clause in US tax law regarding securities, or is it the average purchase value of your total holdings during a sale that counts? E.g. I buy 10 BTC for $1 and then buy 10 BTC for $50 and then sell 10 BTC for $100: I have to pay tax on ($100-$1)
- Kinnard 10y agoI wonder if this in response to the recent launch of zcash: http://z.cash http://z.cash
- ChemicalWarfare 10y agoWhat's interesting here is that bitcoin is both an "investment" and "currency" (since you can pay for [some] goods and services with btc directly). From the "currency" point of view - exchange rate (FX) gains/losses technically only apply to officially recognized foreign currencies. So that is an interesting can of worms. If I buy bitcoin at price point X, it goes up to X+Y, but instead of selling it I use that Y to pay for something - was that Y a taxable gain?
- mhluongo 10y agoThe IRS has already released guidance on this [1]. It might be interesting to think about, but right now it's straightforward in practice. IANAL, etc. Edit: Well, for some definition of straightforward :) [1] - https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidan...
- GrinningFool 10y agoThe IRS views crypto currency as property. In that context, they provided this recently: https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidan... Which links to: https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf TL;DR - it's not currency, it's property, and as taxed as such in all ways (including recognizing gain/loss). Specifically re: your question: > Q-6: Does a taxpayer have gain or loss upon an exchange of virtual currency for other property? > A-6: Yes. If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain.
- VLM 10y agoThey can be an income source if you mine, too. Even more fun, if you mine back in the old days when difficulty was 3-digits, and then sell years later, they can be a long term capital gain.
- omouse 10y agoCanadian govt apparently treats bitcoin as an asset. I wonder how that affects your taxes if the price goes lower than you bought it for; do you treat it as a depreciation in assets and are allowed to pay less tax?
- thrillgore 10y agoI have always reported my virtual currency earnings by providing my deposits to Coinbase at tax time. Then again, I use Coinbase strictly to buy things with bitcoin, not as an investment tool.
- emddudley 10y agoPurchasing something with bitcoin can trigger capital gains/loss. If you buy 1 BTC at $700, it increases to $800, and you pay 1 BTC for something worth $800, then you have to report and pay taxes on $100 capital gains.
- 627467 10y agoMay be unrelated... but what happens when I purchase goods with a foreign currency which I had bought before (and reported the purchase) and said foreign currency value had increased 15% since the moment I reported its purchase?
- snark42 10y agoTechnically you have to report and pay capital gains if the change in value is more than $200. In your case 15% gain is probably not more than $200 so you wouldn't have to report it. However if you're talking about $100,000 initial FX transaction you would have to report the $15,000 as a long or short term capital gain.
- mr_spothawk 10y agoremembering that time, we saw BTC spoke to the ~1000$us mark. my thoughts about his at the time was that the price spike was largely driven by Chinese demand for BTC. Note that the price crashed after Beijing halted BTC exchanges with their state banks. It could be part of some larger plan to leverage info against the sorts of folks who have enough RMB to help drive the price of BTC to +$1000.
- mirimir 10y agoI've read that Mt Gox, or someone who compromised it, caused the Nov-13 to Dec-14 bubble.
- deleted 10y ago[deleted]
- crshstsh 10y agoI wonder how they will be able to differentiate bitcoins you were paid vs bitcoins you transferred from your other wallets over to Coinbase.