4 ms·

They profited or earned money and it wasn't declared when doing their taxes. People who should be worried are those that didn't follow the rules. What makes it

They profited or earned money and it wasn't declared when doing their taxes. People who should be worried are those that didn't follow the rules. What makes it interesting is that cryptocurrencies are very new and it might not have been obvious if taxes should have been declared at the time (you probably should have). If they declared or can show that they tried to declare then it's no big deal...

DINKDINK 9y ago
>They profited or earned money and it wasn't declared when doing their taxes. Speculation -- how can any conclusion about whether a tax violation occurred, if the IRS doesn't even have the information about the people who even sold bitcoins? This effort is the start of that determination.
- bastawhiz 9y ago
  Couldn't the IRS look at the blockchain and ask for details about users associated with transaction IDs of substantial volume?
  - williamscales 9y ago
    I imagine this is exactly what the IRS will do if it feels it has to.
  - deleted 9y ago
    [deleted]
protomyth 9y ago
https://www.irs.gov/newsroom/irs-virtual-currency-guidance https://www.irs.gov/newsroom/irs-virtual-currency-guidance pointing to https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf With the big question first: Q-1: How is virtual currency treated for federal tax purposes? A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.
- czep 9y ago
  Yes, but the memo you quote is fairly recent. Before that, the prevailing guidance seemed to be that bitcoin should be treated as currency, not property. So as of what date does this rule take hold?
  - adventured 9y ago
    The IRS specification on Bitcoin has been set for five tax years now, including for 2013. https://www.coindesk.com/internal-revenue-service-treat-digital-currencies-property/ https://www.coindesk.com/internal-revenue-service-treat-digi...
dawnerd 9y ago
I wonder what the threshold is for the IRS. If I sold some coin and only made a couple dollars, is it even worth the effort? What about 100 dollars?
- kossae 9y ago
  Pure speculation and IANATL, but it seems like ~$1000 is where the IRS starts caring about fraudulent activity.
- electricslpnsld 9y ago
  I've had friends audited for not declaring cents of interest they earned when their landlords placed security deposits in savings accounts...
  - dawnerd 9y ago
    Wonder if there was something else that triggered it. Doesn't seem like it would be worth their time over that little, but then again IRS is kinda weird like that.
    - kefka59 9y ago
      yeah, seems very strange. That said banks do report interest income from saving accounts usually. So maybe the total amount from their W2/1099s + interest income didn't match up and that triggered an automatic audit. They probably were in a fairly high income bracket too I imagine.
  - pishpash 9y ago
    I call BS. Anything under 50¢ is rounded down to $0 by IRS's own accounting.
    - jkaplowitz 9y ago
      They give taxpayers two rounding options of which a given filing must consistently pick one or the other. The first is to put whole dollar amounts on all the lines on all the forms, and to round those as you say. Even that one doesn't round all intermediate numbers used in calculations, only the lines on the form. The other is to be precise to the penny. Both are allowed by the official instructions, even if software like TurboTax Online always picks the first.
verelo 9y ago
How does one even correctly report these earnings: In Canada there is a form called a T1135, i was filling mine out today :) This form asks for a few key things related to any securities you hold in foreign countries: 1) Max Fair Market Value, Current Fair Market Value, Grioss Income (I.e. rents extracted before expenses), Gain (loss) of any depositions. Which country do I hold my asset in if I purchase bitcoins? Are they Canadian or foreign? Does it depend where they are kept? It doesn't in the case of stocks, even those on the NYSE but for Canadian corps do not fall under this reporting requirement, and inversely those on the TSX for US companies do fall under this requirement! So what nationality are bitcoins and all other crypto for that instance? You need to fill this out if you have > $100,000 CAD worth of foreign assets, once for each country you hold assets in (regardless of purchase price, we're talking max fair market value). The fee for not filing this form is a flat $2,500 + interest of any taxes owed. The question this raises for me, if someone bought $1000 worth of bitcoin in 2012 and retained them until today, they easily have over this limit. I am sure there are a fair few people that will get messed up here. I'd love for governments to provide clearer guidance here to prevent upsets later. Also, T1135's are almost impossible to file correctly. Seriously, they're a stupid form. IMO the CRA should just ask for a report of all your trades and the relevant countries (assuming we can answer the country question, i suppose?) and leave it there - and they do in the form of a T5008 or you can report it under the Capital Gain / Loss section (I think it's called Schedule 3). I guess what I'm saying is this: It's effing hard to report correctly, even when you try. In my life, I've spent more on tax lawyers than I have on cars. I feel like I do everything I can, I feel like I've been good...but i sometimes get kept up late at night worried I messed up and no one will believe it was an honest mistake.
- shaki-dora 9y ago
  It’s the same as any other profit you might make through currency speculation. If you can’t figure out the relevant corns, maybe you shouldn’t be trading in these markets in the first place?
  - verelo 9y ago
    well good news isn’t i don’t haha! I guess that makes more sense, but even in currency speculation there is a clear relationship to a country. If that doesn’t impact it, then i guess that is reasonable...i still hate t1135s!

DINKDINK 9y ago

>They profited or earned money and it wasn't declared when doing their taxes. Speculation -- how can any conclusion about whether a tax violation occurred, if the IRS doesn't even have the information about the people who even sold bitcoins? This effort is the start of that determination.

bastawhiz 9y ago
Couldn't the IRS look at the blockchain and ask for details about users associated with transaction IDs of substantial volume?
- williamscales 9y ago
  I imagine this is exactly what the IRS will do if it feels it has to.
- deleted 9y ago
  [deleted]

protomyth 9y ago

https://www.irs.gov/newsroom/irs-virtual-currency-guidance https://www.irs.gov/newsroom/irs-virtual-currency-guidance pointing to https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf With the big question first: Q-1: How is virtual currency treated for federal tax purposes? A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.

czep 9y ago
Yes, but the memo you quote is fairly recent. Before that, the prevailing guidance seemed to be that bitcoin should be treated as currency, not property. So as of what date does this rule take hold?
- adventured 9y ago
  The IRS specification on Bitcoin has been set for five tax years now, including for 2013. https://www.coindesk.com/internal-revenue-service-treat-digital-currencies-property/ https://www.coindesk.com/internal-revenue-service-treat-digi...

dawnerd 9y ago

I wonder what the threshold is for the IRS. If I sold some coin and only made a couple dollars, is it even worth the effort? What about 100 dollars?

kossae 9y ago
Pure speculation and IANATL, but it seems like ~$1000 is where the IRS starts caring about fraudulent activity.
electricslpnsld 9y ago
I've had friends audited for not declaring cents of interest they earned when their landlords placed security deposits in savings accounts...
- dawnerd 9y ago
  Wonder if there was something else that triggered it. Doesn't seem like it would be worth their time over that little, but then again IRS is kinda weird like that.
  - kefka59 9y ago
    yeah, seems very strange. That said banks do report interest income from saving accounts usually. So maybe the total amount from their W2/1099s + interest income didn't match up and that triggered an automatic audit. They probably were in a fairly high income bracket too I imagine.
- pishpash 9y ago
  I call BS. Anything under 50¢ is rounded down to $0 by IRS's own accounting.
  - jkaplowitz 9y ago
    They give taxpayers two rounding options of which a given filing must consistently pick one or the other. The first is to put whole dollar amounts on all the lines on all the forms, and to round those as you say. Even that one doesn't round all intermediate numbers used in calculations, only the lines on the form. The other is to be precise to the penny. Both are allowed by the official instructions, even if software like TurboTax Online always picks the first.

verelo 9y ago

How does one even correctly report these earnings: In Canada there is a form called a T1135, i was filling mine out today :) This form asks for a few key things related to any securities you hold in foreign countries: 1) Max Fair Market Value, Current Fair Market Value, Grioss Income (I.e. rents extracted before expenses), Gain (loss) of any depositions. Which country do I hold my asset in if I purchase bitcoins? Are they Canadian or foreign? Does it depend where they are kept? It doesn't in the case of stocks, even those on the NYSE but for Canadian corps do not fall under this reporting requirement, and inversely those on the TSX for US companies do fall under this requirement! So what nationality are bitcoins and all other crypto for that instance? You need to fill this out if you have > $100,000 CAD worth of foreign assets, once for each country you hold assets in (regardless of purchase price, we're talking max fair market value). The fee for not filing this form is a flat $2,500 + interest of any taxes owed. The question this raises for me, if someone bought $1000 worth of bitcoin in 2012 and retained them until today, they easily have over this limit. I am sure there are a fair few people that will get messed up here. I'd love for governments to provide clearer guidance here to prevent upsets later. Also, T1135's are almost impossible to file correctly. Seriously, they're a stupid form. IMO the CRA should just ask for a report of all your trades and the relevant countries (assuming we can answer the country question, i suppose?) and leave it there - and they do in the form of a T5008 or you can report it under the Capital Gain / Loss section (I think it's called Schedule 3). I guess what I'm saying is this: It's effing hard to report correctly, even when you try. In my life, I've spent more on tax lawyers than I have on cars. I feel like I do everything I can, I feel like I've been good...but i sometimes get kept up late at night worried I messed up and no one will believe it was an honest mistake.

shaki-dora 9y ago
It’s the same as any other profit you might make through currency speculation. If you can’t figure out the relevant corns, maybe you shouldn’t be trading in these markets in the first place?
- verelo 9y ago
  well good news isn’t i don’t haha! I guess that makes more sense, but even in currency speculation there is a clear relationship to a country. If that doesn’t impact it, then i guess that is reasonable...i still hate t1135s!