4 ms·

You can't omit Bitcoin transactions from your tax return just because they seem anonymous. Concealment is the very definition of tax evasion, "Evasion... involv

You can't omit Bitcoin transactions from your tax return just because they seem anonymous. Concealment is the very definition of tax evasion, "Evasion... involves deceit, subterfuge, camouflage, concealment, some attempt to color or obscure events or to make things seem other than they are" Quoting in full since its among the most misunderstood yet important distinctions in tax: http://www.irs.gov/irm/part9/irm_09-001-003.html http://www.irs.gov/irm/part9/irm_09-001-003.html 9.1.3.3.2.1 (05-15-2008) 26 USC §7201 – Avoidance Distinguished from Evasion 1. Avoidance of taxes is not a criminal offense. Any attempt to reduce, avoid, minimize, or alleviate taxes by legitimate means is permissible. The distinction between avoidance and evasion is fine, yet definite. One who avoids tax does not conceal or misrepresent. He/she shapes events to reduce or eliminate tax liability and, upon the happening of the events, makes a complete disclosure. Evasion, on the other hand, involves deceit, subterfuge, camouflage, concealment, some attempt to color or obscure events or to make things seem other than they are.

Fluxenein 10y ago
So, if an individual buys BitCoin with some capital to not pay taxes for said amount of capital ,is he evading or avoiding?
- paulsutter 10y ago
  IANAL but example taxable transactions might be to sell bitcoins for a gain, or to use appreciated bitcoins in a barter transaction. Losses are also taxable transactions, but in a good way. Mining is awkward, since I believe mined coins are taxed as income on the day they are mined, even if you don't transact. Best to talk to an accountant, of course, and not rely on the advice of a random HN commenter like me.
  - justin66 10y ago
    > Mining is awkward, since I believe mined coins are taxed as income on the day they are mined, even if you don't transact. The IRS has indicated that bitcoins are property and taxed as such, so that seems unlikely. Do you have a source for this?
    - paulsutter 10y ago
      https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf
      - justin66 10y ago
        (Q-8 is the relevant FAQ on that doc) Thanks.
  - Fluxenein 10y ago
    Thanks, that helped. GNU Taler will be something to look forward to now.
- Daishiman 10y ago
  If they're reporting it, sure. Companies defer profits all the time to do this within the bounds of what is legally acceptable. What's not fine is if the numbers only add up if you're not reporting.
- ksherlock 10y ago
  Neither because buying bitcoins doesn't help you not pay taxes. If you have legitimate money that's reported to the IRS and taxed, what you do with it is largely irrelevant. If you have illegitimate money (selling drugs, working under the table, etc) then you're not paying taxes on it to begin with. Buying bitcoin doesn't change that. (And if you're paid in bitcoin, that's bartering and you either report it or you evade it.)
EthanHeilman 10y ago
It would be hard to argue that Bitcoin transactions are concealment since they are completely public and very hard to transact, purchase or redeem without linking a great deal of personal information to your identity. There are ways of buying and selling Bitcoins that do not require you give all your personal information (for instance localbitcoins) but you will likely pay a markup (33% was a number that someone quoted to me) far greater than your taxes and you will only be able to move small amounts of money.
tyingq 10y ago
>You can't omit Bitcoin transactions from your tax return just because they seem anonymous I agree if this is trading, where there are net gains (or losses) from fluctuations in value. I assume, though, that a notable number of bitcoin transactions are just buying and/or selling merchandise. Buyers convert existing money that's already reported to the IRS (like their salary) into bitcoin, and buy something. Sellers get the money, convert it to dollars, and then deposit into their regular bank account, which then flows into their company books as revenue (again, reported to the IRS). I'd be curious to know how much of the activity on coinbase was this sort of thing, versus buy/hold/trade speculation.
- pc86 10y ago
  In both of the above cases isn't it trivially easy to prove the income was already taxed?
- eeeeeeeeeeeee 10y ago
  Yep, this is how I use Coinbase. So it's pretty annoying to be automatically lumped in with this.

Fluxenein 10y ago

So, if an individual buys BitCoin with some capital to not pay taxes for said amount of capital ,is he evading or avoiding?

paulsutter 10y ago
IANAL but example taxable transactions might be to sell bitcoins for a gain, or to use appreciated bitcoins in a barter transaction. Losses are also taxable transactions, but in a good way. Mining is awkward, since I believe mined coins are taxed as income on the day they are mined, even if you don't transact. Best to talk to an accountant, of course, and not rely on the advice of a random HN commenter like me.
- justin66 10y ago
  > Mining is awkward, since I believe mined coins are taxed as income on the day they are mined, even if you don't transact. The IRS has indicated that bitcoins are property and taxed as such, so that seems unlikely. Do you have a source for this?
  - paulsutter 10y ago
    https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf
    - justin66 10y ago
      (Q-8 is the relevant FAQ on that doc) Thanks.
- Fluxenein 10y ago
  Thanks, that helped. GNU Taler will be something to look forward to now.
Daishiman 10y ago
If they're reporting it, sure. Companies defer profits all the time to do this within the bounds of what is legally acceptable. What's not fine is if the numbers only add up if you're not reporting.
ksherlock 10y ago
Neither because buying bitcoins doesn't help you not pay taxes. If you have legitimate money that's reported to the IRS and taxed, what you do with it is largely irrelevant. If you have illegitimate money (selling drugs, working under the table, etc) then you're not paying taxes on it to begin with. Buying bitcoin doesn't change that. (And if you're paid in bitcoin, that's bartering and you either report it or you evade it.)

EthanHeilman 10y ago

It would be hard to argue that Bitcoin transactions are concealment since they are completely public and very hard to transact, purchase or redeem without linking a great deal of personal information to your identity. There are ways of buying and selling Bitcoins that do not require you give all your personal information (for instance localbitcoins) but you will likely pay a markup (33% was a number that someone quoted to me) far greater than your taxes and you will only be able to move small amounts of money.

tyingq 10y ago

>You can't omit Bitcoin transactions from your tax return just because they seem anonymous I agree if this is trading, where there are net gains (or losses) from fluctuations in value. I assume, though, that a notable number of bitcoin transactions are just buying and/or selling merchandise. Buyers convert existing money that's already reported to the IRS (like their salary) into bitcoin, and buy something. Sellers get the money, convert it to dollars, and then deposit into their regular bank account, which then flows into their company books as revenue (again, reported to the IRS). I'd be curious to know how much of the activity on coinbase was this sort of thing, versus buy/hold/trade speculation.

pc86 10y ago
In both of the above cases isn't it trivially easy to prove the income was already taxed?
eeeeeeeeeeeee 10y ago
Yep, this is how I use Coinbase. So it's pretty annoying to be automatically lumped in with this.