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IRS sends warning letters to more than 10k cryptocurrency holders

• dev_dull 7y ago
  The math behind crypto doesn’t magically make you immune to government oversight. All they have to do is ask, and you better not lie.
  • harlanji 7y ago
    Exactly. I am happy to say I’ve 0 crypto currency. Waiting until that is more tested. Meanwhile other investments are under-valued.
    • deleted 7y ago
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    • bb88 7y ago
      It's not the current holdings -- it's the past sales of crypto-currency that will get you. You don't typically pay taxes on stocks you currently own. You pay taxes on capital gains from the sales.
  • mtw 7y ago
    It depends where you do your transactions. If you do it on CoinBase, yes, you are going to be tracked. There are many other options though where you don't have to provide ID.
    • jedberg 7y ago
      Right now it's pretty hard to live on cryptocurrency alone. Which means at some point you will need dollars (or Euros or whatever), and that transaction is almost always traceable to a person.
      • mtw 7y ago
        I don't know a lot of people who only have cryptocurrency income. Most people have a regular job, but then decide to put a % of their savings into crypto. You can use your job income to pay for transactions. If there are any cryptocurrency income, it's then up to you how to manage that. Put that into traditional finance (then declare it), hold (not selling, so there are no capital gains, so no tax), or use crypto to buy products that are outside traditional finance
        • jedberg 7y ago
          This is true with cash too. You can take part of your income into cash and make anonymous transactions with cash, and maybe even profit from them in an untraceable way. But you better hope it is truly untraceable, and that no one else involved in that transaction makes it traceable, otherwise the IRS will come for you. Same with crypto, except it is a lot easier for someone else to make you traceable since all the transactions can be traced to their origin on the blockchain. If someone you transacted with files US taxes, it's not that hard for the IRS to trace that back and ask who the BTC came from. It would only take one person turning on you for you to get caught. It's really not worth it.
        • jrumbut 7y ago
          I'm not a lawyer or accountant but I'm fairly sure if someone pays you in cryptocurrency (or beer or gift cards or frozen shrimp or anything else) you owe taxes on the dollar value of that cryptocurrency in the year that you earn it, and of course if no withholding was taken out of it by the one who paid you you also probably owe quarterly estimated taxes. I can't tell if you're acknowledging this, or if I am mistaken about this but I don't think you can legally avoid income taxes by being paid in kind. My understanding is if you're a US citizen you have to pay Uncle Sam on everything you earn not just every dollar. Otherwise we'd all just take our paychecks in krugerands.
    • starbugs 7y ago
      From my experience, it's not really a matter of getting tracked. It's a matter of whether you can explain your income conclusively, which isn't easy if you don't report all transactions.
    • deleted 7y ago
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    • fred_is_fred 7y ago
      Just because you're not tracked doesn't mean it's not tax fraud.
      • mtw 7y ago
        I did not state that it was not tax fraud. I was just replying to the person above who states that the government will find you whatever you do. There are multiple ways so the government is not aware of what you are doing in cryptocurrency.
    • deleted 7y ago
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  • dsfyu404ed 7y ago
    Obviously no, the math doesn't prevent them from shooting your dog and carting you away to a jail cell but your assumptions about enforcement are naive. The typical MO for tax evasion is to just not report your side gig (crypto or otherwise), hope you don't get caught and play dumb and pay up if you do get caught. This doesn't change whether it's crypto or doing under the table work which is the point I'm trying to make here. You either pay up front the right way or have a chance of not paying at all (tax evasion) but if you get caught doing that you pay slightly more for not paying up front. Anyone who is being charged with tax evasion is doing something very stupid. It should be obvious but the people who've revived these letter should play dumb (if applicable) and pay up at this point since clearly the IRS knows that they owe more than they've paid.
    • avocado4 7y ago
      Failing to report income is federal crime. It's not more complicated than that.
      • dsfyu404ed 7y ago
        How does that change anything about what I said? The people intentionally not paying taxes know full well that it's a crime.
        • Kalium 7y ago
          The IRS doesn't need to show intent to show you failed to pay substantial taxes you owe.
          • dsfyu404ed 7y ago
            Unless you're a crypomillionare with little other income (most of whom are probably smart enough not to risk it) the paying up part shouldn't be too hard. I can't stress how common this is with cash only side gigs. People hope they don't get caught and if they get caught they play dumb and agree to pay X per month to settle the bill. They need to show intent or get you to lie to them if they want to put you in prison (which they don't because they want your money instead).
  • Alex3917 7y ago
    > The math behind crypto doesn’t magically make you immune to government oversight. Not legally, but the math always gives you a stronger presumption of innocence than you'd otherwise have. The economics are the same as gold mining, where what gives gold value is the fact that the expected returns from mining it are always negative. With gold, the concept is basically just that different types of sand have different weights, so due to a quirk in physics if you shake up sand the the heavier types of grains go to the bottom of your bucket. The fact that you can't ever reverse entropy like this (predictably) profitably is what secures its value. Similarly, with crypto what secures its value is that electricity cost of mining always outweighs the expected value of the crypto mined. Anyway because the expected returns are always negative, it's much harder than it would otherwise be to identify people who have actually beat the odds to make money. Maybe not with Bitcoin due to the design of the ledger, but certainly with other cryptocurrencies. If you Google for people who have made the money money mining gold, there are literally zero results. Why? Because the expected negative value makes it exceedingly difficult for the IRS to convict folks who are cheating on their taxes.
  • gcbw2 7y ago
    > All they have to do is ask, and you better not lie. because asking everyone how much they have in offshore tax havens is working so well. heck, not even when the information is given to the IRS anything happens: https://en.wikipedia.org/wiki/Panama_Papers#United_States https://en.wikipedia.org/wiki/Panama_Papers#United_States
    • fooey 7y ago
      Offshore tax havens don't turn over their records to the IRS US based coin exchanges like Coinbase do
      • wrong_variable 7y ago
        What prevents Coinbase to go offshore then ?
        • lallysingh 7y ago
          Plenty of offshore exchanges. People use coinbase because it's working within the US system.
          • kentm 7y ago
            Exactly this. From a consumer perspective, being subject to the US legal system is a big advantage.
        • makosharky 7y ago
          A desire to interface with the US banking system.
        • bdcravens 7y ago
          The fact that they have a ton of VC they're already beholden to that is here in the US, and who aren't interested in IRS scrutiny themselves.
          • 7y ago
  • duxup 7y ago
    The bitcoin / crptyo currency... ethos? (not sure what word to use there) seems to continuously collide into the reality of living in a society. That doesn't make them incompatible, but it does perhaps provide some lessons for everyone on why financial systems are the way they are as it is, and how you can't just jump on a technology and escape. At the very least it has all been an interesting thing to learn from.
    • jeffk_teh_haxor 7y ago
      At the very worst it is a blight on the environment. 27kWh of energy burned per transaction, with a maximum scaling limit on the order of 5 or 6 transactions per second. If everybody in the world used Bitcoin, then you'd be entitled to your one transaction every few decades.
      • duxup 7y ago
        Yeah the scams and environmental type stuff is a huge downside. A costly lesson, interesting, but costly.
      • whatshisface 7y ago
        If cryptocurrencies saw serious use, Bitcoin would self-limit at a sustainable level and new currencies would be invented to deal with those issues. The biggest problem with cryptocurrencies is that US dollars are actually pretty good.
        • duxup 7y ago
          >and new currencies would be invented to deal with those issues That seems like a pretty big hassle.
          • whatshisface 7y ago
            That's what the research is now, and many partial solutions already exist.
      • 7y ago
  • crispsquirrel 7y ago
    Well technically it does. Just not if you buy from coinbase where they need a lot of your personal information plus you'll be most likely buying with a debit/credit card. If you pay someone for cryptocurrency in cash and they send to a wallet you have set up by yourself there is not really any way to prove that it's yours.
• mtgx 7y ago
  It's not sustainable to tax regular Joe for each and every cryptocurrency transaction due to the nature of cryptocurrencies, especially in the US where people have to do all of their taxes on their own. I believe Canada has something like 20% tax on the profits you get out of cryptocurrencies for the year, which I think is a much simpler system that makes much more sense.
  • LannisterDebt 7y ago
    > I believe Canada has something like 20% tax on the profits you get out of cryptocurrencies for the year, which I think is a much simpler system that makes much more sense. This is wrong. Canada is taxed very similarly to USA meaning if it's an investment it may be capital gains and if it's a business then it's income.
    • jeromegv 7y ago
      I'm always impressed by how people make up statements online without any kind of research that would take less than 30 seconds. No Canada has no special tax rate for cryptocurrency, what kind of non-sense is that.
    • aianus 7y ago
      In Canada, capital gains are taxed at 50% of ordinary income, unlike the US where short term capital gains are taxed as if they were 100% ordinary income.
  • keltex 7y ago
    The U.S. works the same way. You are taxed on the net short or long term capital gains not on every transaction. So if you made $1000 on one trade and lost $500 on another you would only be taxes on the net $500 profit.
    • nostrademons 7y ago
      You're taxed only on the gain from the transaction, but you have to report every transaction (at least in theory - I'd bet that drug dealers being paid in crypto aren't reporting them, but if you're going to break the law, you're breaking the law). The issue isn't the tax bill, it's the amount of work you have to do to track the dollar value of the cryptocurrencies involved (which may not even be well-defined, since many cryptos aren't available for U.S. dollars) when you make a transaction.
• fortran77 7y ago
  This is no different from any other profit or gain. The Government isn't specifically targeting these people; it just wants them to make sure they realize it's like any other investment.
  • umvi 7y ago
    I hate that people treat currencies as an "investment". In my mind, crypto concurrency is the perfect value-store (like gold used to be), not an appreciating asset. Yet because people treat it like stocks, it behaves like stocks.
    • fortran77 7y ago
      If I bought and sold gold or British Pounds, I'd still be subject to taxes on my gains. I'm not sure I see your point.
      • jobigoud 7y ago
        TIL when you convert back and forth foreign currency, you have to declare capital gains. I'm not sure a lot of people realize it either.
        • fortran77 7y ago
          I think people who trade foreign money as an investment strategy realize this.
          • jobigoud 7y ago
            Probably, yes. But everyone else is still subject to this law. For example the UK pound may or may not go down in value in case of hard brexit, if a brit had some euros stashed and the pound crashed, they would have to pay capital gains when exchanging their euros back into pounds.
            • 7y ago
• ilovecaching 7y ago
  So under the current laws does a person only pay taxes when converting to and from fiat to crypto, or does it apply to crypto transactions of any kind?
  • lgeorget 7y ago
    At least, if I understood correctly the article, it's considered like stocks. What's the law on that?
    • PKop 7y ago
      That you pay taxes on capital gains. There are also taxes on dividend income in the case of stocks.
    • PeterisP 7y ago
      The law on stocks is that if you'd barter one stock for another, then that's a taxable event and you'd have to declare capital gains on the stock you traded away - which is the same for a BTC->ETH trade.
  • nostrademons 7y ago
    Applies to crypto transactions of any kind. This is a major impediment to use of crypto for its intended purpose, and there are bills currently proposed in Congress to reverse this.
    • PKop 7y ago
      > to use of crypto for its intended purpose Its intended purpose is debatable. Certainly this is an impediment to using it as a currency, or day to day spending money vs long term store of value, like gold, which also requires paying capital gains taxes.
  • mtw 7y ago
    It applies if there are gains. What's not clear if you have to report the value of the gain when you did your transaction, or the current value. Crypto prices change a lot
• hcurtiss 7y ago
  I'm sure there's a lot to know about this topic, but it's odd to me that they'd treat a "currency" as an appreciating asset. If I'm given a dollar (or peso) as change, and if between the time I receive the dollar and the time I spend it the currency purchasing power increases, I do not pay taxes on that gain. I can just buy more stuff with that dollar (including other currencies). In this instance, where it's increasingly true that bitcoin can be used as currency to purchase goods and services, it's odd to me that those are realizing events that require you calculate gain. I get it that shares of stock work that way, but I can't buy a hamburger with shares of stock.
  • mikeash 7y ago
    Regular foreign currency also gets taxed if you make a profit trading it.
    • hcurtiss 7y ago
      Fair enough, but if I convert a bunch of dollars to pesos and then the value of a peso increases and it allows me to buy a nicer car (in pesos) than I could have when I received the peso, is that taxable? If it is, is the dollar the only exception to this rule? Because I know for a fact nobody pays taxes (or carries forward losses) on the increased purchasing power of their cash held in dollars.
      • arcticbull 7y ago
        Yes, because you as a US person track your gains/losses relative to the USD so if you buy Pesos and the value of the Peso changes relative to the US Dollar over the time period you held them that is in fact a capital gain and reportable to the IRS for tax purposes. Every country that taxes capital gains operates the same way to the best of my knowledge. > Because I know for a fact nobody pays taxes (or carries forward losses) on the increased purchasing power of their cash held in dollars. Increased purchasing power of the cash relative to their home currency is what's taxable, and reportable at disposition.
        • 7y ago
• rolltiide 7y ago
  Having talked to many people I do believe there is low tax compliance, but having read how the IRS rationalized the Coinbase subpoena to the judge I realize they have no idea to tell if they have compliance or not. They merely did a search string for 2015 for "bitcoin" in tax filings and found 800 people filed that way. So I checked my 2015 tax filings and saw I had manually entered "LTC" for closing a litecoin trade to US dollars. Hm okay, so one of the most compliant US citizens isn't counted as one of the 800 people, got it. So then Coinbase's compliance with the subpoena now has them automatically sending Schedule D information to the IRS and to users based on a net value of any holdings in their account. But Coinbase doesn't know what any of the holdings or transactions represent, just like your bank doesn't know what your deposits and transfers represent. A third party is now assuming that its users are on the hook for capital gains, causing a filed accounting discrepancy for everyone. Fascinatingly incompetent.
  • amerine 7y ago
    > Fascinatingly incompetent. Wonderfully said, haha! ️
  • deleted 7y ago
    [deleted]
  • VLM 7y ago
    "Coinbase doesn't know what any of the holdings or transactions represent" I had a KYC interview with Coinbase wondering where my coins came from. (I mined them in the 2009 to 2010 era when they were worthless, mined before the famous 10000 bitcoin pizza delivery, LOL). So they have a statement from me, which is probably now on file with the IRS. Now here's a puzzler... I got my 6174-A and so I verified my coinbase register and old tax form reported cap gains from sales match to the penny. Which they do. So now what do I do, just sweat I guess.
    • rolltiide 7y ago
      perhaps. The IRS enforcement division is a disproportionately large but small part of what the IRS does. The other parts basically extend privileges to you. like when you do 475 elections, or 83(b) elections, or 501(c)3 elections etc etc. Basically all the cool stuff that makes you not have to pay taxes and only comes up if you run for office. The enforcement division can be overzealous and ruin their own cases just from always thinking they have a smoking gun. If you reported and paid them you'll be fine.
• todipa 7y ago
  Chuck Rettig, the new IRS commissioner comes from a tax litigation background. He's got a lot of experience and is preparing for one of the next big tax battles which is how to bring crypto under compliance with the current tax regime. I still think they lack the technical knowledge to understand crypto and as a result, you'll start to see an increase in information being requested. In any case, I willing to bet that you'll have a couple of court cases that will really bring crypto into compliance in a way that makes sense for 80% of the people.
  • pcwalton 7y ago
    > I still think they lack the technical knowledge to understand crypto and as a result, you'll start to see an increase in information being requested. On the contrary, I think that the IRS knows cryptocurrency very well. The reason why the IRS requests information is that they want to prove to a court that they went out of their way to give taxpayers the benefit of the doubt. They want to be able to tell a judge "we gave this person ample opportunity to explain the situation and correct any misunderstandings before taking enforcement action". The IRS will go through the motions of requesting information even if—especially if—they know full well that fraud has occurred, just to strengthen their case.
• dawhizkid 7y ago
  So long as this is the case how can it possibly make sense to use bitcoin to actually transact e.g. fulfill the vision of bitcoin as "digital money" if every time you buy a cup of coffee with bitcoin the expectation is that you'd have to calculate capital gains and report every year?
  • zcrackerz 7y ago
    It's not buying a cup of coffee that's the issue. The issue is in converting between currencies, which is no different than investing in foreign currencies. If you exchange USD for EUR, wait a while, then exchange back to USD and you've made a profit, it's taxable.
    • dawhizkid 7y ago
      It is, though. Transacting with bitcoin is a taxable event just like converting between bitcoin and fiat. It's no different from the IRS's perspective.
    • PKop 7y ago
      Every taxable event is something you have to keep track of. And spending appreciated crypto, even on coffee, or anything else, is a taxable event. So the point stands that using crypto as "spending money" vs purposefully saving it as store of value is going to be a real pain, for all of the technical reasons but also the tax complexity. To see why this is the case, imagine someone saved BTC as store of value, then years later exchanged it for a house. They didn't sell if for $. But they used its appreciated value to buy something. There is a capital gain involved, and so taxes as well.
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  • zielmicha 7y ago
    I think it shouldn't be hard to do that automatically in software - you only need to know exchange rates at time of every transaction.
• Causality1 7y ago
  Crypto trading is so casual it's very easy to not realize you have legal responsibilities. That's what got Chris Boden of The Geek Group arrested.
• deleted 7y ago
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• modeless 7y ago
  > One version of the letter recently uploaded to the IRS website asks recipients who believe they have followed the law to sign a statement Does anyone have a link to the letters? It drives me mad that journalists refuse to link to primary sources.
  • fooey 7y ago
    According to the IRS news release, and posts in r/bitcoin, what they're getting are Letter 6173, Letter 6174 or Letter 6174-A https://www.irs.gov/newsroom/irs-has-begun-sending-letters-to-virtual-currency-owners-advising-them-to-pay-back-taxes-file-amended-returns-part-of-agencys-larger-efforts https://www.irs.gov/newsroom/irs-has-begun-sending-letters-t... https://www.reddit.com/r/Bitcoin/comments/chupoe/irs_we_have_information_that_you_have_or_had_one/ https://www.reddit.com/r/Bitcoin/comments/chupoe/irs_we_have... https://www.irsmind.com/audits/irs-begins-targeting-taxpayers-who-misreport-virtual-currency-transactions/ https://www.irsmind.com/audits/irs-begins-targeting-taxpayer... > Letter 6174– this is a soft notice informing the taxpayer that there is a likelihood that they did not report their virtual currency transactions. The notice asks them to check their return and, if necessary, file an amended return to correct the misreporting. The taxpayer is not required to respond to the notice and the IRS intends not to follow up on these notices. In short, this is information only to the taxpayer and education on how they comply. > Letter 6174-A– this is a “not so soft notice” from the IRS. As in Letter 6174, this letter tells the taxpayer that there is potential misreporting of virtual currency transactions. However, this notices states that the IRS may follow-up with future enforcement action. Again, no response is required if the taxpayer believes that they are in compliance. Taxpayers who receive this notice should be aware that they have been put on “notice” that they have been identified as a noncompliant taxpayer for potential future enforcement. > The last notice requires a response – Letter 6173. This notice requests a response from the taxpayer about the alleged noncompliance. The letter provides instructions on responding to the IRS. The IRS intends to follow up on these responses to determine if the taxpayer is in compliance.
    • deleted 7y ago
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    • 7y ago
• donclark 7y ago
  So why do we have to file? Why cant the IRS just tell us every year if we owe or not and how much?
  • dmitrygr 7y ago
    Because intuit lobbie$ hard for that. They make Lot$ of money on you having to file your own taxe$
  • yellowstuff 7y ago
    Two reasons: * H&R Block and Intuit have good lobbyists who prevent it from happening. * Republicans want to make filing taxes difficult so that people won't like taxes. In particular Grover Norquist has managed to get essentially all federal level Republican politicians to sign a pledge not to raise taxes, and Norquist considers making filing simpler to be effectively raising taxes. https://www.politico.com/agenda/story/2018/07/18/tax-filing-congress-irs-000683 https://www.politico.com/agenda/story/2018/07/18/tax-filing-...
    • buzzert 7y ago
      I'm sure those aren't the only reasons. Quite a lot of people get away with tax fraud. If the IRS really knew everything and filing taxes was just a pointless exercise, why is fraud so prevalent?
      • deleted 7y ago
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      • seren 7y ago
        Speaking from a European country, employers are reporting salaries to the revenue service. The banks are reporting capitial gains from taxable accounts. So basically the only reasons for filing taxes are for exotic revenues (for example crypto !) or to ask for exemptions. Free lancers still have report their revenue themselves but I would say that for a very very vast majority of people, they already have all the information needed. Actually we receive our forms with some fields (salary for example) pre filled, you only have to check if this is correct. The tax form is just some kind of confirmation, most of the time.
• bb88 7y ago
  This is a question I don't know. And I was wondering if HN could shed some light on this. The IRS treats bitcoin as an investment property. What happens when one trades investment property for a car, or a boat, say?
  • AlexandrB 7y ago
    I’m not an accountant, but based on what I know about stocks you would get taxed on you financial gains (if any) based on the market value of the bitcoin at the time you trade it for the car.
    • bb88 7y ago
      So that would probably hold true with bitcoin since the IRS sees bitcoin as an "investment property" more akin to stocks and bonds.
      • beefalo 7y ago
        It is the same as using anything other than USD to trade for something. Wether that is Stocks, Euros, GBP, goats, if you bought it at one price and traded it for something else based on a different price, you owe taxes for your capital gains from holding that asset.
  • pault 7y ago
    You are taxed as if you sold the BTC and immediately bought your boat with the proceeds of the BTC sale.
• Scoundreller 7y ago
  So how does BitCoin Cash distribution get handled in USA? Is it like a dividend? A stock split? A spin-off? What about all of these airdropped tokens? Are they dividends, with tax payable even if you didn’t “collect” them in some way? Or splits? Can you deduct the Day1 value of the new token from the capital gain on the first token? Or do you assume the cost of the new token was $0 and any sale is a total capital gain?
  • bb88 7y ago
    My understanding is they're still investment property. So probably more like a stock split. IOW, there wasn't a sale and a re-buy. You had 1000 shares of bitcoin and now you have 2000 shares, some of which are in bitcoin-A and some of with are in bitcoin-B. As to the cost you would probably assume the Day-1 value after the split for the new coins. The price of the split of the old coins should have been reflected in the price.
    • Scoundreller 7y ago
      Ah, the other word I was looking for was “spin-off”, but usually paperwork needs to be filed with the government for it to be considered a tax-free distribution, instead of a dividend. Like HP becoming 2 separate companies. With coins, there’s no central issuing authority filing this kind of paperwork, so I always wondered if these spinoffs were taxable distributions.
  • pilingual 7y ago
    I'm not sure the burden is on the individual unless they recognize receipt of the cryptocurrency. If someone mails you $100 and you discard it I don't think you owe taxes on it. Same for air drops and forks like Bitcoin gold. Bitcoin cash, if you acknowledged receipt of it, is exactly like earning $266 and must be reported, at least that's what tax experts noted at the time: https://www.forbes.com/sites/greatspeculations/2017/08/04/how-to-report-bitcoin-cash-and-avoid-irs-trouble/ https://www.forbes.com/sites/greatspeculations/2017/08/04/ho...
    • Scoundreller 7y ago
• AznHisoka 7y ago
  For what it's worth, Gemini doesn't report everything to the IRS. This is the response I got from them when I asked last year: "Gemini is required to report gross proceeds paid to US customers from bitcoin or ether sales on the Gemini exchange on IRS Forms 1099-K when applicable reporting thresholds are met. Typically, Form 1099-K reporting will be required by Gemini where the number of bitcoin or ether sales transactions on the exchange exceeds 200 transactions per year AND the total sales proceeds from all sales transactions exceeds $20,000 per year."
  • x3n0ph3n3 7y ago
    Coinbase didn't "report" these account holders, they were given a subpoena to turn it over.
• pard68 7y ago
  So the real question is, what exchange can I use as an American that doesn't report to the IRS?
  • pcwalton 7y ago
    That isn't the "real question". Pay your taxes like everyone else.
  • JudgeWapner 7y ago
    No, the real question is how much is it to set up a "trust" or some other bullshit entity in the US Virgin Islands and do all your trading that way - completely legal, completely tax-free, just like the 1%.
    • caymanjim 7y ago
      It's not legal for Americans to completely avoid taxes simply by operating in a jurisdiction with different tax laws. You still have to report your foreign income to the IRS, you still have to pay taxes to the IRS. If you try to take the extreme step of acquiring a citizenship elsewhere and then renouncing your US citizenship, you even have to pay taxes to do that. The notion that "tax shelter" countries are a way to get around personal tax obligations is simply wrong. There are tax benefits, and plenty of people try to hide money this way, but it's not some magical solution that legally removes your tax obligation.
      • rphlx 7y ago
        > It's not legal for Americans to completely avoid taxes simply by operating in a jurisdiction with different tax laws. This is not correct, and pretty much all of the US Elite, above a certain wealth level, have some offshore structure(s), because there actually are major, legal benefits - including ones that can zero out the US individual tax liability for that activity, at least in some years. As a result it's only the legally- & financially- relatively unsophisticated middle classes, and perhaps the lower-upper-class, that has literally every single transaction subject to US taxation.
  • 7y ago
• a_bitcoin 7y ago
  Sure, it makes sense to tax earnings from cryptocurrency trading. But aren't there bigger fish to fry, richer people more flagrantly evading taxes? Let's sort that out first, k
  • roywiggins 7y ago
    We've underfunded the IRS, and investigating the rich is really hard, because the rich can pay for armies of tax lawyers. You can't go after them without substantial resources, and anti-government extremists have teamed up with pro-business extremists to throttle the IRS' enforcement capabilities. https://www.propublica.org/article/how-the-irs-was-gutted https://www.propublica.org/article/how-the-irs-was-gutted
    • a_bitcoin 7y ago
      The alliance between individualists and corporatists is the most bizarre thing about the US to me.
      • roywiggins 7y ago
        The corporations have the money and the "individualists" have the rhetoric that can persuade voters. It's a match made in hell.
  • banachtarski 7y ago
    There are two separate matters here. Defining the law and enforcing the law. Misreporting capital gains on crypto violates existing law and is illegal today. Tax evasion by legitimate means (401ks, IRAs, writing off losses) is perfectly legal, and if you or I have complaints, this should be taken up with policy makers and at voting booths.
    • JumpCrisscross 7y ago
      > Tax evasion by legitimate means Tax avoidance is legal. Tax evasion is illegally not paying taxes. (The distinction is purely legal.) If you don't like someone's tax avoidance, you change the law. If you don't like someone's tax evasion, you prosecute them.
• cwkoss 7y ago
  As far as I understand it, IRS wants cryptocurrency traders to report USD profit on every trade. This gets extremely ugly if you are trading one cryptocurrency for another, as these trades are unclear as to whether they are an entry or an exit. Now, I simply recommend that everyone only trades USD-to-crypto and back, never crypto-to-crypto if you want to comply with tax law - it gets very complicated fast.
  • sdinsn 7y ago
    > This gets extremely ugly if you are trading one cryptocurrency for another, as these trades are unclear as to whether they are an entry or an exit. Trading one crytocurrency for another is a taxable event. Just like how trading one real currency for another is a taxable event. It's not unclear and trading platforms provide tax tools that solves this problem I traded crypto and paid my taxes
    • 171243 7y ago
      I believe prior to 2018 this was not the case with crypto.
      • verdverm 7y ago
        Weren't they treated more like property then?
        • uwuhn 7y ago
          I think Like-Kind is the term. Someone please correct me if I'm wrong, but IIRC any crypto-for-crypto was a Like-Kind exchange prior to Jan 1, 2018.
          • garmaine 7y ago
            There is no evidence this is the case except wishful thinking.
          • topmonk 7y ago
• rambo5 7y ago
  Remember that the IRS was established exactly one year before slavery was "abolished". This is no coincidence, slaves.
• xenospn 7y ago
  Fake money, real problems.
• trixie_ 7y ago
  There are a bunch of websites that will help compile your crypto trades into the forms you need for your taxes. This year I used cointracker.io and it worked pretty good for me. It created a file that was easily imported into TurboTax. Also if you lost money on crypto you can claim some of that as a deduction.
• deleted 7y ago
  [deleted]
• matt-attack 7y ago
  > The Coinbase customers whose information was turned over bought, sold, sent or received digital currency worth $20,000 or more between 2013 and 2015. Is that in today's value or at the time?
  • rphlx 7y ago
    I believe they valued at time-of-transaction. e.g. if you had no other transactions except for a $100 buy in 2013 that you immediately withdrew to personal cold storage, and then that appreciated to $20k+ today, you shouldn't have been included, assuming they supplied only the minimum amount of info legally required.
• a2tech 7y ago
  Glad I sold at the peak and made sure that my accountant filed the appropriate gains paperwork.
• AdrianB1 7y ago
  This will be a very unpopular opinion, but it is true: USA is much better than 200 years ago; if 200 years ago you were a slave, 100% of your output belonged to your master. Now your government owns only 40-50% of your output and you feel totally free. The only bad thing is that almost 100% of the population is now a half-slave. You don't chose what to pay, how much and what for, you just have to pay up, or else. Yes, you get some services, whatever the governments wants to, same as slaves got shelter and food, as much as the master wanted to. I see some similarities, tell me they don't exist.
  • rphlx 7y ago
    Slavery was not fully eliminated in the US; it was just fractionalized, and the terms - which groups are enslaved, which groups are entitled to their output, and how much of it, etc - were obviously heavily modified. For instance you are able to change employers now, but no matter which one you pick - even if it's your own firm - in most highly-valued fields 40-70%+ of your output will be taken by various layers of government - by force if necessary. Your children are subject to the same obligation so "fractionalized chattel slavery" is a decent first-order description. It is true that acts of extreme violence are less common than they were in the 19th century South, but that alone does not make the system "not slavery" given that a threat of overwhelming force still underpins it.
  • wpietri 7y ago
    This is just foolishness. Are some rich people still exploiting others and rigging the system? Sure. But chattel slavery was an extraordinary evil. It's at best vacuous to put it in the same moral bucket as a democracy where people vote to, say, make sure old people don't starve in the streets.
    • AdrianB1 7y ago
      USA was a democracy also before Abraham Lincoln. Voting to take 50% of regular Joe's income does not make it right, like voting to kill Joe or voting anything that affects Joe, no matter how nice is the "cause" used as an excuse.
• ddtaylor 7y ago
  I don't think most people getting phone calls or letters from the IRS think any of them are real at this point.
  • yeezyseezy 7y ago
    Worth noting that the IRS will not call without having sent a letter first
    • jmspring 7y ago
      And realistically, they send a letter. They then follow up with a certified letter. Then they may move on to other means.
    • anonymous5133 7y ago
      New scams have been sending fake letters claiming to be from the irs.
      • mehrdadn 7y ago
        Whoa, that's a thing now? How prevalent is it?
      • enobrev 7y ago
        I haven't seen the letters. Isn't that considered a federal crime since it's fraud via the US Postal Service?
        • blhack 7y ago
          Isn't it fraud already a federal crime?
          • garmaine 7y ago
            Federal? No. You defraud someone and it is state, local, or even civil.. unless circumstance (e.g. via mail) makes it a federal offense.
• liquidify 7y ago
  Crypto currencies have properties of a lot of different types of assets. The crypto tax scenario should reflect that it is different than any existing single class of asset and should be treated as uniquely as it is.
• blhack 7y ago
  To highlight how nuts this could be: I travel to India every year, and I always carry with me a few hundred USD worth of rupees (the local currency). It would be insane for me to try and track the value of the rupees (in USD) for every time I bought something, and calculate the deltas between that and what I originally gave to the money changer. It is completely impractical to do that, and while I'm not an accountant, I have an intuition that for any reasonable amount of money that any traveller would be carrying with them, the fluctuations are irrelevant. And yet this is what people using cryptocurrencies are expected to do. Obviously if there is a large capital loss or gain, then this should be reported on your taxes, and I suspect the same is true for foreign currency exchange. I guess to ask a question: are individuals expected to track the fluctuations in USD value of their cash while travelling? If so: is there a threshold? Why is crypto different (other than some belief that it might be more convenient).
  • jefftk 7y ago
    The IRS has decided to treat cryptocurrency as an asset (like gold) instead of a currency.
    • blhack 7y ago
      Which I think is a mistake. The tax code should be accommodating; it should not be adversarial. Many people do not treat bitcoin like gold, they treat it like a paypal account.
      • Analemma_ 7y ago
        Strongly disagree. In terms of both actual usage and the rhetoric I most commonly see on crypto fora (“digital gold!”, “store of value!”), commodity, not currency, is the correct categorization.
        • blhack 7y ago
          Maybe there should be a third category then.
• iaw 7y ago
  My experiences with the IRS have been nothing but positive over the years. They were always polite and clear in their positioning. They either made corrections in my favor or sought more information to identify what if any additional taxes I owed due to a mistake in my filing. What I suspect is happening here is that the IRS is figuring out how to prioritize it's investigations. Sign or don't, it only determines when you are investigated. Once they've identified a holder of bitcoin it's likely that an investigation will be forthcoming.
• HocusLocus 7y ago
  I am not a tax expert, so I'll spare you my advice.
• jonjonBoy 7y ago
  Wish there's a way to change the regulation to leave crypto alone. Me watching too much fight club and partying with too much tea..
• firemancoder 7y ago
  I got a notice that registered mail failed to deliver from the IRS. Since I have no other dealings/reason for them to send me mail, I'm assuming I'm one of the ones. Will find out Monday.
  • firemancoder 7y ago
    And for the record, all my bitcoin dealings have been this year (late starter) so I have nothing to worry about with unclaimed income. (Thank you flying spaghetti monster)