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Bitcoin In IRS Crosshairs
- dropdownmenu 13y agoIt was really only a matter of time before this happened, regulation of trade (and the taxation thereof) is one of the main tasks of a government.
- gesman 13y agoIRS is entitled to have opinion about receiving taxes from bitcoin transaction.
- drivebyacct2 13y agoWho thinks trading in Bitcoin makes them magically exempt from the tax laws of their country? Of course, pretty unsure of how they'd have any sort of accountability or venerability for self-reported Bitcoin income. "On your 1099 please list all Bitcoin address you've sent or received money from". Right.
- wmf 13y agoA lot of people operate on wishful thinking.
- gamblor956 13y agoThat's how you report much of your income right now (in the US). Tax collection in the US is generally based self-reporting, and that extends to gain from foreign currency exchanges. Information collection from multiple parties is used only to audit the self-reported data. If the IRS discovers discrepancies upon comencing an audit, if may (probably will) impose penalties, back taxes, and interest. Sufficiently large underreporting usually leads to criminal charges. Thus, self-reporting of Bitcoin income is fundamentally no different than the existing tax regime.
- DanBC 13y agoThe only scary thing is paying tax on something that has sometimes drastic changes in value. Taking tax off you, and simultaneously making it impossible to convert bitcoin to dollar seems a bit tricky too. Unless they're happy to accept bitcoin as payment of taxes?
- betterunix 13y ago""On your 1099 please list all Bitcoin address you've sent or received money from". Right." Yeah, here is what would happen if you were caught cheating: "Hi Mr. Auditor. I have nothing to do with Bitcoin, honest!" "Oh, well, what did you use 10kW of power every month for the past yeah?" "Oh, see, I was actually trying to make a cold fusion reactor!" "Show me." "No, I blew it up by accident." "Oh, well, funny how there is no crater..." Seriously, do you think the IRS does not know how to catch people who cheat on their taxes?
- joejohnson 13y agoThere is no strong correlation between power consumption and the number of bitcoins you've mined. What's to stop me from hoarding hundreds of bitcoins but claiming I've only slush-mined 0.5 BTC?
- betterunix 13y agoNothing, but then you face the same problem that the mafia has: how do you spend all that hidden money without getting caught? Yes, you can get away with small things -- groceries, bullets, etc. -- but once you buy something big (a car, a boat, a house, a fancy rifle) you're going to have a hard time hiding the transaction.
- lettergram 13y agoUnless of course you claim you made enough BitCoins to buy a house that year, but perhaps not so many as to furnish it (even though you did) Still avoided $20,000 in taxes and pretty much impossible to get caught unless you invite the IRS to your home.
- betterunix 13y ago...or if the IRS conducts an audit and just shows up, wondering why someone would buy a home, list it as their address, but not bother furnishing it.
- pseudonym 13y agoThey don't care so much about the Bitcoins themselves as they do getting their cut of the fiat money when you cash them out, I'd wager. If you buy 300 bushels of apples for $1 and, for whatever reason, the price spikes to $300 overnight, when you sell them do you claim that "Well, I paid the tax on the $1 so I don't have to pay taxes on the $299"? If you keep your money in apples the IRS doesn't want 20% of your apples. It's only if you sell them back out and claim it as income.
- qq66 13y agoIf you buy wood in Bitcoin, and then carve it into figurines and sell them for Bitcoin, your profit is entirely in Bitcoin. Does this mean that you can pay the IRS in Bitcoin? If so, do they have tax brackets defined in Bitcoin?
- ihsw 13y agoThat's specious reasoning, there are many BTC->USD exchanges and the IRS could easily compel you to exchange your currency for USD.
- qq66 13y agoWhy? If you make profits in a foreign currency such as Swiss franc, you only pay tax once you convert those to U.S. dollars.
- kudu 13y agoI'm not sure that's correct. I'm no tax expert, but from my limited knowledge of US income tax, it applies internationally and isn't based on currency. There are some tax treaties to protect people with multiple nationalities from double taxation, but I don't think it's related to currency. Do correct me if I'm wrong.
- saalweachter 13y agoWhile I'm not a tax expert either, the fact that the US demands that people living and working indefinitely in a foreign country pay taxes (something that people have been outraged about on HN before) seems to indicate that they're perfectly willing to tax your Yen.
- kevinnk 13y agoCitation needed, I'm not a tax expert but based on what advice I've previously been given and on http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad http://www.irs.gov/Individuals/International-Taxpayers/U.S.-... I'm pretty sure that's not true.
- jedanbik 13y agoPurchases are taxed. Bitcoins can be purchased. It then follows that purchased bitcoins are taxed. A transitive relation, no?
- nthitz 13y agoI'd imagine most people do not use Bitcoin specifically to evade taxes. But much like Capone, that could ultimately be one of the bigger problems.
- bionsuba 13y agoI fail to see how trading one 25th of a representation of a solution to a math problem can be considered bartering.
- deleted 13y ago[deleted]
- drumdance 13y agoAlas, laws are written by lawyers. :-)
- lettergram 13y agoIt would be interesting to note that due to the fluctuation in pricing of BitCoins, you could probably get away with lower taxes by just doing a conversion of BitCoins to USD at the lowest price that year. Then claiming all of it in USD for the IRS because your BiCoin assets were assessed at that price when you calculated them for taxes. There by avoiding part (up to 20-50%) of the tax. Or just say you don't have BitCoins, since it would be mighty hard to track that.
- betterunix 13y ago"Or just say you don't have BitCoins, since it would be mighty hard to track that." Yeah, nobody would ever think to look at the public record of Bitcoin transactions.
- joejohnson 13y agoHow would they know which bitcoin address corresponds to me? I can make a brand new wallet, find someone on Local Bitcoins (https://localbitcoins.com/ https://localbitcoins.com/) and buy some nearly-untraceable bitcoins with cash in a matter of hours.
- betterunix 13y agoLook, this is no different from lying about your income in any other situation. People do it all the time. Yes, you can get away with it...until you are audited, at which point the auditor is going to start checking on things, and if you do not have a believable story you'll meet the same fate as Al Capone.
- lettergram 13y agoCould just not say you own BitCoins, unless you have a couple thousand I doubt you'll even be a blip on their radar. If you have that many, you could just spread them around wallets too... Really I can't see them picking up on it if you do it right.
- jpdoctor 13y agoI would love to know why real estate qualifies for a 1031 exchange but currency exchange does not.
- wmf 13y agoHonestly, our laws haven't been based on any legal principles for a long time. It's a long list of special cases, just because.