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I'm willing to bet the compliance rate on bitcoin taxation is going to be slightly lower than the compliance rate on people who buy gold coins at X and sell the

by 300bps 13y ago

I'm willing to bet the compliance rate on bitcoin taxation is going to be slightly lower than the compliance rate on people who buy gold coins at X and sell them at > X. Section 9006 of the Affordable Care Act (ObamaCare) almost partially closed this loophole but it was repealed.

Karunamon 13y ago
I'm not so sure.. when you consider the ways that exist of converting BTC into your local currency, most of them have reporting rules for transactions and aggregates over a certain amount. I really wish the IRS would concern itself with USD only.. BTC is going to be a nightmare to tax, let alone enforce. Hoping people are conscientious, here. The recent hearing about Bitcoin was positive, it does not need the association of being a tax cheat's friend to ruin it!
- 300bps 13y ago
  when you consider the ways that exist of converting BTC into your local currency, most of them have reporting rules for transactions and aggregates over a certain amount I've bought most of my bitcoins from Craigslist handing cash to local bitcoin sellers. Many people use https://localbitcoins.com/ https://localbitcoins.com/ There are definitely at least a few ways to buy and sell bitcoin without leaving a paper trail.
  - otoburb 13y ago
    Wouldn't that would work against you unless you cash out your gains slowly to avoid being flagged? I mean, if you have no proof of the OTC transaction, then on whichever amount the government tried to contest they may try to tax you on the full value of the coins at time of sale versus only taxing you on the (presumably positive) price delta.
  - PeterisP 13y ago
    If bitcoin becomes a large enough issue for IRS, then there's definitely at least a few ways for them to proceed. For example, they can subpoena localbitoins.com and such sites for all their user info, and do a full tax audit on them - after all, in taxes generally it's your problem to provide a paper trail for your taxable income/expenses, and if you can't do it, it only hurts you. For example, if you buy 1 bitcoin for $500 and sell for $800, you pay taxes on the $300 difference; but if you have no trail whatsoever for the $500 transaction, then tough luck, you'll be taxed on the whole $800. Oh, and that assumes that you did 'tax yourself' by properly declaring it; if you want them to tax you, then expect that to be tripled as a penalty; and if you're using any 'coin mixing' services then that smells like tax fraud which would move the pain from a few dollars to risk of prison. I'm not a tax lawyer, but you might need one.
- zck 13y ago
  >I really wish the IRS would concern itself with USD only... This wouldn't work at all. If that happens, why wouldn't people switch to using Euros? Certainly there would be difficulties with convincing other people to take Euro, but if the cost of things decreased 20-30% because of no taxation on non-USD currency, people would switch.
- logfromblammo 13y ago
  Some of us wish that the IRS would also concern itself with US states and territories only. The essence is that the IRS is going to invest in a lot of kneecapping wrenches to get any sort of meaningful compliance from BTC users under the current system, as the only way to seize properly secured coin when the owner is unwilling is to somehow make him willing. Thus, if you can't file your bitcoin taxes on a space smaller than a postcard, you're probably not going to get a lot of voluntary compliance, no matter how much people actually support paying taxes. Think about the use tax on interstate retail sales. Hardly anyone pays it because no one cares to tally up every Internet purchase they made, figure the amount of tax owed, and send it along when that information is not already available to the taxing authority. There is no consequence to not doing it, and doing it correctly costs both a small amount of money and an enormous amount of time, which is arguably even more valuable.
- gamblor956 13y ago
  Taxes have always been based on voluntary compliance. Despite all of the grumbling and complaining, people actually do pay their taxes (and understand why they are paying them). There will always be some amount of non-compliance. In those instances, the IRS and DOJ pursue criminal charges (i.e., Wesley Snipes). For the most part, however, the IRS just wants to receive the taxes. If frequently offers amnesty to people who belatedly realize they owe back taxes (meaning, usually no penalties or criminal charges, but interest accumulation does does apply).

by 300bps 13y ago

Karunamon 13y ago

I'm not so sure.. when you consider the ways that exist of converting BTC into your local currency, most of them have reporting rules for transactions and aggregates over a certain amount. I really wish the IRS would concern itself with USD only.. BTC is going to be a nightmare to tax, let alone enforce. Hoping people are conscientious, here. The recent hearing about Bitcoin was positive, it does not need the association of being a tax cheat's friend to ruin it!

300bps 13y ago
when you consider the ways that exist of converting BTC into your local currency, most of them have reporting rules for transactions and aggregates over a certain amount I've bought most of my bitcoins from Craigslist handing cash to local bitcoin sellers. Many people use https://localbitcoins.com/ https://localbitcoins.com/ There are definitely at least a few ways to buy and sell bitcoin without leaving a paper trail.
- otoburb 13y ago
  Wouldn't that would work against you unless you cash out your gains slowly to avoid being flagged? I mean, if you have no proof of the OTC transaction, then on whichever amount the government tried to contest they may try to tax you on the full value of the coins at time of sale versus only taxing you on the (presumably positive) price delta.
- PeterisP 13y ago
  If bitcoin becomes a large enough issue for IRS, then there's definitely at least a few ways for them to proceed. For example, they can subpoena localbitoins.com and such sites for all their user info, and do a full tax audit on them - after all, in taxes generally it's your problem to provide a paper trail for your taxable income/expenses, and if you can't do it, it only hurts you. For example, if you buy 1 bitcoin for $500 and sell for $800, you pay taxes on the $300 difference; but if you have no trail whatsoever for the $500 transaction, then tough luck, you'll be taxed on the whole $800. Oh, and that assumes that you did 'tax yourself' by properly declaring it; if you want them to tax you, then expect that to be tripled as a penalty; and if you're using any 'coin mixing' services then that smells like tax fraud which would move the pain from a few dollars to risk of prison. I'm not a tax lawyer, but you might need one.
zck 13y ago
>I really wish the IRS would concern itself with USD only... This wouldn't work at all. If that happens, why wouldn't people switch to using Euros? Certainly there would be difficulties with convincing other people to take Euro, but if the cost of things decreased 20-30% because of no taxation on non-USD currency, people would switch.
logfromblammo 13y ago
Some of us wish that the IRS would also concern itself with US states and territories only. The essence is that the IRS is going to invest in a lot of kneecapping wrenches to get any sort of meaningful compliance from BTC users under the current system, as the only way to seize properly secured coin when the owner is unwilling is to somehow make him willing. Thus, if you can't file your bitcoin taxes on a space smaller than a postcard, you're probably not going to get a lot of voluntary compliance, no matter how much people actually support paying taxes. Think about the use tax on interstate retail sales. Hardly anyone pays it because no one cares to tally up every Internet purchase they made, figure the amount of tax owed, and send it along when that information is not already available to the taxing authority. There is no consequence to not doing it, and doing it correctly costs both a small amount of money and an enormous amount of time, which is arguably even more valuable.
gamblor956 13y ago
Taxes have always been based on voluntary compliance. Despite all of the grumbling and complaining, people actually do pay their taxes (and understand why they are paying them). There will always be some amount of non-compliance. In those instances, the IRS and DOJ pursue criminal charges (i.e., Wesley Snipes). For the most part, however, the IRS just wants to receive the taxes. If frequently offers amnesty to people who belatedly realize they owe back taxes (meaning, usually no penalties or criminal charges, but interest accumulation does does apply).