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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
  [deleted]
- 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
  [deleted]
- 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
  [deleted]
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.

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
[deleted]
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
[deleted]
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
[deleted]

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.