Bitcoin Forum

10k+ taxpayers are receiving warning letters from the IRS. there are 3 types of letters---one is just a "soft notice" that is information-only, not alleging any misreporting. the other two are a bit more threatening. this is how one user on reddit described them: (https://www.reddit.com/r/Bitcoin/comments/chupoe/irs_we_have_information_that_you_have_or_had_one/)


here's the article from CNBC. (https://www.cnbc.com/2019/07/26/irs-is-warning-thousands-of-cryptocurrency-holders-to-pay-their-taxes.html) an excerpt:


and also an insightful article written by a tax attorney on the subject: Crypto Investors Don't Need To Panic About IRS Letter 6174-A, Here's Why (https://www.forbes.com/sites/tysoncross/2019/07/26/crypto-investors-receiving-irs-letter-6174-a-dont-need-to-panic-heres-why/#51a2e75c2111)

Literally billions avoided by business and HNWIs in tax havens, off-shore accounts, shell companies and the like, but they come after average citizens for making a couple of thousand dollars here or there on bitcoin trading, which for some reason they feel entitled to a cut of. Land of the free. ::)

Presumably this is linked to the several thousand accounts which Coinbase handed over to the IRS last year. Everyone should bear in mind if you have completed KYC requirements on any exchange, though, the IRS will eventually end up with your details.

Given that every crypto trade, even crypto-to-crypto trades which never touch fiat, are a taxable event, I suspect the proportion of people accurately reporting their crypto taxes is very small.

In life, only two are very certain the first one is death and the other while still living is tax. Of course, that depends a lot on which country you are in and if you are well-off or not as usually moneyed people can easily find many loopholes in the law that they can exploit. As to lesser mortals just like me, I have no choice but to follow and pay what can be due to the government regardless if I am into cryptocurrency or not. This is the role of the taxman or IRS for this matter. We have to pay tax to avoid the inconvenience of being hounded by the long reach of the governmental arms...and that is regardless if we agree with the government or not.

Step by step Taxes departments started to develop and use big data. It's getting a little trendy and I can tell you that it's not a myth, they do it in my country already. So the US doesn't even need the disclosure from Coinbase anymore. Banks snitch a lot also.

For me I think it's fair to have to pay taxes, after all, we're the ones who benefit, but I don't necessarily agree with the rates applied.
In fact, more taxes I pay more I'm happy because it means I earned more

One way of pissing off the government is to avoid paying taxes and we all know paying taxes are like dying, eventually all of us will die and we know eventually the IRS will knock on your door. The excuse that regulation about Bitcoin was not clearly defined by the IRS, will not be accepted. The US made their tax stance towards Crypto currency very clear, when they officially classified it as a tradeable commodity.  ::)

It was a bitter pill to swallow, but I paid the capital gains on my Bitcoin profits every year. Now I sleep like a baby, because I know they will not knock on my door in the future. <Go to them and talk to them and pay the damn taxes>  >:( >:( >:(

Maybe because those are legal loopholes while crypto falls under general trading regulation?

Also, they might want to setup precedents to discourage people from thinking that crypto's are some sorts of tax heavens, so they are just being proactive instead of waiting until crypto becomes widespread as a method of evading taxes.

And this just shows us again that exchanges are a central point of failure in crypto economy, and as long as majority of people use them as gateways to cryptocurrency, cryptocurrency itself can be regulated.

I guess the mandatory requirement for registered exchanges requiring them to submit transaction records of their customers are really paying off. That's the only way they know that these citizens are holding and earning cryptocurrencies.  View it as violation of privacy but taxes are taxes and its their obligation to pay it, with a disturbing amount reaching to thousamds of people I think they should be alarmed that the IRS are always on their radar, it's either they comply or the the whole US crypto industry suffer the consequences.

If you mean the FATF travel rule, it hasn't been implemented yet. The US still needs to pass a new law requiring that exchanges comply with those rules. The recipients of these letters were most likely drawn from customer data Coinbase handed over to the IRS (https://www.coindesk.com/coinbase-tells-13000-users-its-sending-their-data-to-the-irs) by court order.

Here are some interesting insights (https://www.reddit.com/r/Bitcoin/comments/civvgy/irs_letter_writing_campaign_info_from_insider/) from someone who supposedly worked at the IRS:

Probably the worst move for the IRS's crypto sector to make. There millions worth of taxes avoided by large corporations via crypto, shell companies, and other ways. I don't see a reason to go after the average joe, and I don't think anyone out of the 10,000 people contacted actually used abused the system to a large scale.

Also very surprising - Coinbase handed over thousands of user accounts last year... A good survey would be accessing how many of the 10,000+ people used Coinbase.

This is one of the worst feelings - hopelessness. Being forced to pay huge amounts of taxes to the government while you sit here and watch other companies cheat the system without punishment.

Only positive change this is bringing is that regulations are catching up to crypto's technology, which omens mainstream adoption.

Internal Revenue Service Sends New Round of Letters to Crypto Holders

https://cointelegraph.com/news/internal-revenue-service-sends-new-round-of-letters-to-crypto-holders

Last week, the United States Internal Revenue Service sent another round of letters to crypto traders called CP2000. These notices were sent to traders of some crypto exchanges due to inconsistencies found in their tax reports.

they'll get nothing from me


I don't give money to thieves, gangs or murderers, no matter how much they threaten me, or however respectable they claim to be

It's easy talking right now, until you come to a point where you realize that no amount of money is worth the torture and imprisonment the government gangsters subject you to when you don't pay your taxes.

I am against certain forms of taxation as well, but that still isn't worth it to me to not pay anything and risk very long prison time. You only live once, so why make things unnecessarily more complicated for yourself?

I do wonder though, what made you become so aggressive against taxation? Have you been treated unfairly because of a dispute between you and your tax authority?

this is true. i'm not paying 1 satoshi though



you only live once, why sell everyone out just for yourself?



It was when I discovered that the established media, financial system, academia and the justice system were housing a bunch of lying crooks that prop up a false narrative of how the government are just here to help you, when in fact they're squashing regular people's power, their ability to fight back, and murdering millions and millions of them instead

BitHodler, do you want to stand by and maintain that system? you have massively questionable ethics if so, that's the sort of thinking that gave us Apartheid or Nazi Germany. What wouldn't you do to save your own skin?

I'm already past my limit with the genocide, then lying to me and everyone else to actually attempt to convince me genocide is necessary. But you're cool with that?

---

"Cowardice asks 'is it safe?'
Vanity asks 'is it popular?'
Expediency asks 'is it politic?'

But conscience asks 'is it right?'
And there must come a time, when we do something not because it is safe, popular, or political
But because it is right"

This article talks about 1099-k forms, and I believe there was a report of a number of tax payers receiving the CP2000 due to discrepancies between the 1099-k and their filed tax returns.

My understanding is that the 1099-k is for when someone uses Coinbase for example to process bitcoin transactions from customers and will only be generated if certain thresholds are met.  I am surprised the author of the article claims to be a tax professional. I don’t think this will apply to many coinbase account holders, as it doesn't affect "retail" accounts, according to my understanding.

I'm thinking of this scenario that will be experience by people who hold crypto in our country, we have a local exchange which we register with KYC, so since they are monitored by the government particularly the central bank, I'm sure the tax implementer already have our data.

Thus far, there is no warning yet since there is no clear crypto regulation yet in our country, but I know the moment it will be implemented, it's hard to mess up with the tax implementor or they called that agency as IRS in the US.

Of course I do not want to support that system, but I have seen it myself how people have been subjected to so much horror just for not paying taxes (which governments call tax evasion to make it sound worse) that I don't want to ever go through that myself.

I can understand why you may not like my view on this, but we're all different and not everyone is as daring as you are to not pay a penny in tax even when they force you to do so. In other words, you choose prison time over paying tax.

I'm however not sure how long you will be able to stay firm in prison. You're going against an entity that doesn't care for a single moment that you are suffering in prison for decades until you finally realize this torture isn't worth it.

so you'll pay for mass murder, child sex slavery and the psychological manipulation to stop people reacting against it, just so you can avoid being bullied too?


nice

Actually it's clearly U.S government have an interest all about cryptocurrencies they know how crypto useful and important as expensive money in the future.
But only one thing government want go clear uaing crypto need to regulate it to collect taxes for the holders to become legal specially the trading.
Simple reason i seen for this situation if government hate bitcoin and bitcoin is threat for the economy whynthe government want to collect taxes from the crypto currency.

That is why if you are from US then you need get the hell out of here and live in bitcoin tax-haven countries like Germany. Sooner or later, their staff will come knocking on their door and they investors of btc will have no choice but to pay huge taxes that is more than what they eaarned  for trading bitcoin where the US does not even recognize it as a currency.

Indeed, we are living in a land where the government maintain it.  So definitely we need to contribute in form of taxes.  Wether they (government officials)corrupt it or not, we are bound to it(taxation) and is our responsibility as a people of a nation.  Lucky, in my country, taxation on the cryptocurrency is not yet implemented though they are getting more tight regarding its regulation and I believe sooner or later our governemtn will implement it too.

What nonsense, if I buy a crypto from my salary, then I will pay tax again? This is a robbery! Tax on tax. When you buy the currency of another country in the exchanger do you also pay tax?

you're barely paying taxes for your own benefit at all, you both clearly do not understand the system

• the majority of taxes in the modern age are used to pay OLD government debts, anything up to 100 years old!
• the money used to pay for your public services today is borrowed, using loans that aren't due for repayment for up to 100 years in the future
• private companies who "win" a contract for public services are usually government cronies, wasting money that's (again) borrowed from decades away as loans that they don't need to take responsibility for
• or a government department does essentially the same thing; borrows a load of money, and spends it on things that aren't needed for the project (in some countries they pocket huge amounts using accounting fraud)

think about it, this is money they borrowed from our kids & grandkids they're misusing, and so any taxes you pay now was borrowed from you already 20, 40, 50 or 100 years before when you were not even born

---

Bitcoin was created as a protest against this sort of system, but if you really want to pay your BTC back into that kind of system (systematized fraud/theft), then you'll get exactly what you deserve¹ ::)


¹ crappy services, and 40-80% of your BTC converted to cocaine in politicians/contractors/government administrators noses

Actually, they do as governments have done everything they could to get people to adopt that thinking.

The part that I find more interesting, is that the people who actually do understand the system's (flawed) working, are still enabling them to do the same because they're either too afraid to say no to certain forms of taxaction (likely out of fair of prison time or high fines), or they don't want to look like a "criminal tax evader" within their circle of friends and family.

My question to you pretty much is; taking the above in consideration, what forms of taxes do you pay and not pay?

You had a point for that mate possible to pay taxes double or triple in very transactions made. But I am curious about it IRS implementation collecting taxes from the coinbase and bittrex users.
What happen to the crypto users not follow to the IRS command to pay taxes.

I simply avoid everything I can, and evade when it's smart to do so.

• find people growing food, and buy directly from them. there's a high chance it will be healthier, as they will have an actual conscience
• find independent businesses that sell other stuff for your home. try to get things from people outside your local gangster turf, it's harder for them to track the paper trail, so the people you buy from are more likely to use it as an opportunity to evade taxes themselves
• don't use the postal system for any of this, as the postal system is subsumed into your local gang's tax reporting

In most of these cases, it's not possible to stop people you trade with from paying some taxes, it's hard to be a business and avoid scrutiny of your finances. But the world's a big place, you can find businesses who trade outside of scrutinizers, if you just look for them ;)

Do you know if this is a follow up to the coinbase subpoena that requested information regarding customers  who have transactions over $20,000 or more?

Yes. As far as I know, the IRS hasn't said where they are getting their info from, and I'd be surprised if they ever did since people would then know to avoid those methods. However, there have been loads of users on this forum and on reddit who have confirmed that Coinbase shared their details and they also received the tax letters.

The IRS are likely receiving similar information from a number of exchanges, and will continue to push harder and harder until all exchanges hand over all customer details. If you have ever completed KYC on any exchange, at some point in the future the IRS will likely find out your trading history.

I knew this would happen eventually, due to regulatory bodies cracking down on crypto. It also explains why Huobi Global and Binance have taken the initiative to open American based exchanges, while blocking further access from new account signups for U.S citizens.

That applies to foreign exchanges, too, if someone has any doubts. A lot of countries have treaties or similar agreements signed between them to share financial information for tax purposes, and a lot of people, except maybe those who live in the poorest 3rd world countries, may one day find out they have unpaid taxes to pay if they ever went through KYC.

Not just for tax purposes, but for general mass surveillance and spying on their citizens. The Five/Nine/Fourteen Eyes countries, for example, spy on their own and each other's citizens, and share all that information between themselves. And if you think the spying programs we know about are bad, just think about all the ones that the public has no idea exist.

Exchanges initially existed in an unregulated space providing a product (bitcoin) that government's hadn't heard of. Now every government knows about bitcoin and will regulate any company which tries to operate within its borders. It won't be long before every exchange will be handing over details of all their customers or face being shutdown. And when faced with a choice between profits or protecting customer privacy, I have zero doubt that every currently operating exchange will pick the route which maintains their own profits. Once those details are in the hands of one government, it won't be long before they are in the hands of the US and shared with all its allies.

Simple solution; don't do KYC, trade peer to peer.

the consensus is that's the primary source of the IRS data used in this campaign. most people who reported receiving letters confirmed that.

at this point, there are other american exchanges that send the 1099-k though, like gemini. if the IRS received a 1099-k from gemini and you reported nothing, i'm confident you'd receive a letter too.

That's next level. I definitely didn't see that coming, so thanks for the insight.

I thus far have mainly focused on whatever I hold outside the banking system in terms of wealth, which comes down to not declare any of my cold wallet Bitcoin holdings, and not declare what I have in physical Gold. It's so silly that I have to do this, but the other option is to hand these government criminials 1-1.5% annually, which I won't ever be doing.

It's one very arguable thing to tax profits, but to annually tax people's net worth that hasn't been touched in years is the most retarded thing ever. This blatant form of theft should never be rewarded.

Let me ask you another question. If you buy gold coins from your salary, would you refuse to pay the applicable VAT/GST? And once you sell your coins later for fiat cash, would you again refuse to pay the capital gains tax? You can't do that, as there are laws specifying the requirement to pay taxes. The same with cryptocurrency. Now crypto is mostly being used as an investment asset, rather than as a currency. So you can't refuse to pay taxes.

Funny thing, but the exchanges where I actually went through KYC went bust and the data is most likely gone along with them. Some other exchanges that I bought my coins on also went bust and disappeared or got hacked, or whatever. If you got lucky like me, hodl and don't go through KYC ever again to limit your chances of those mobsters from the government destroying your life.

I work at work, earn money, pay taxes and have the right to buy anything you like for this money, do you think that I have to pay another tax for every purchase? there are so many taxes on one product, I bought a product on it, I already paid tax, the seller, + they take a tax on salaries, 3 taxes on one product, then I will sell this product to you and pay the tax again? will you still sell this product to someone and also pay tax, what service did the state provide you to buy this product, and do you still have to pay for the service? (let's say that the product is some kind of token)

It's just ridiculous, let me sell you a product, and then you sell me the same product, let's do it 100 times, and for all operations we will pay 100 times tax each? Solving the problem, each product must be indexed on the blockchain network, that a tax has been paid for it! the only way to defeat the robbery by the state! One tax on one item always !!!

Either there's VAT on the coins, it's included in the price, and the seller pays it he has a VAT-registered business (and later gets it back), or VAT doesn't apply/he's not selling as a business and there's no VAT. Capital gains tax or income tax might not apply, where I'm from I don't have to pay it if I hold onto coins for >6 months.

Laws can vary from country to country. I am residing in India and here we need to pay capital gains tax on profits arising from the sale of any asset. The gains qualify as long term capital gains if held for more than three years (liable to a tax of 20% minus indexing) and in case it was being held for less than three years then it will be treated as short term capital gains (equivalent to regular income, subject to ordinary income tax with highest slab at 42%).

Don't take this as tax advice or anything (;D) but it's very difficult to prove exactly how long you've really been holding the money for. The blockchain is not an accurate record for length of possession, only for when transactions happened. Think about that ;)

Well.. if you are claiming for long-term holding, then you need to show the proof of purchase from that time. Blockchain transaction won't be enough for this purpose, as it will be having zero information regarding the price of the coins and the identity of the buyer/seller. In the tax return, you may need to give details of the exchange log, and the bank transaction. Now things can get complicated if you claim that you purchased crypto for physical cash. In such cases, you won't be having any other proof with you (other than the Blockchain transaction).  

that's the surefire way to beat an audit, but it may not be necessary. records can be lost due to reasons beyond your control. the IRS asks that you make reasonable and good faith efforts to comply. (https://books.google.com/books?id=cHHERQoza0gC&pg=PA436&lpg=PA436&dq=irs+dont+have+records+good+faith+effort&source=bl&ots=czJlPq1Kul&sig=ACfU3U3AZuXpbWnS73MMtkMkTd7SwdH6jw&hl=en&sa=X&ved=2ahUKEwjYta699-zkAhXrmq0KHV6XAUoQ6AEwEXoECAcQAQ#v=onepage&q&f=false)

https://i.imgur.com/FIdtsvq.png

if you bought bitcoins with cash, p2p etc years ago it would be reasonable not to have any verifiable records. there are also many defunct exchanges---if you used one of them, it's reasonable not to have complete records.

It's going to be interesting to see how far back they go and how much they go looking for.
The IRS has stated that below a certain amounts unless there is another reason to go after you they don't even try to collect. No letter, no nothing it's just kind of sitting there in their computers.

-Dave

When the IRS originally issued the summons for Coinbase user data, they were looking for everyone "active between 2013 and 2015." To me, that gives a pretty clear indication that 2013 is the limit of what they're planning to investigate.


Link? I feel like the IRS wouldn't say that because their whole MO is to scare people into voluntary compliance.

I agree that the IRS are unlikely to say come out and directly say that (also interested in a link if you have one), but it is likely true.

They simply don't have the resources to investigate everyone who has ever bought bitcoin or another cryptocurrency, just like they don't have the resources to investigate every tradesman who is taking cash for various jobs and not declaring or paying tax on it. They will go after those who have bought or traded a sizeable amount (in this case, more than $20,000 through Coinbase), but spending time, money and resources on reclaiming a few hundred dollars in tax from smaller users would be a net negative for them. I have no doubt they will slap some hefty tax bills and fines on large volume users who haven't paid, and they may even go after a handful of smaller users to try to scare others in to complying. I have no doubt there will be another several rounds of threatening letters though. They want people to come clean on their own, because they can't audit everyone.

And as pointed out above, if you have been smart enough to avoid doing KYC at an exchange, it is extremely difficult for them to actually prove how much bitcoin you own or how long you have been holding it.

I like this kind of discussion, taxation is a legitimate robbery which difficult to avoid, and if we don't pay it, be prepared with the consequence.
I know someone who hasn't paid the vehicle tax for 2 years but almost reaches the limit of not paying it as if the officers accidentally find him, it will be the end of the freedom.
However, there are tons of people who don't pay taxes depending on where you live obviously, a different case if we are receiving warning letters from the IRS, nothing we can do to avoid it. Bitcoin holders will be safe only if they have never registered to an Exchanger and comply with the KYC. Even Localbitcoins recently changed its KYC/AML guidelines which required verification as well.

Funny that you mentioned about the vehicle tax. My country previously had very lax rules regarding traffic violations and vehicle taxation. But last month, they increased the penalties by almost 10x and despite widespread protests from the people the government is refusing to back down. I can't blame the government as well. Recently there was a sharp rise in the number of accidents and the deaths and injuries resulting from them. Also, here it is not unusual to find people who drive without having the driving license.

But taxation is a different topic, which is separate from traffic violations. Here they have combined both. The vehicle tax is very high, at least when compared to the neighboring nations. And now everyone is forced to pay this high tax after the new amendment. Tax evasion is not very rare in my country. But it depends on your luck. You commit one mistake, and your free run is over. The penalties can be 300% or more of the defaulted amount, and it can leave you high and dry.

Tax evasion is more common than people think, and those who usually blame others for evading taxes, do the exact same thing without realizing, or they are just a bunch of hypocrites and only point at the wrongdoing of others.

The very fact that a large group of people talking about tax evasion and consider it a crime is already quite shocking, because all it technically is, is self protection.... protection against criminals who want to steal your money by force.

I'm just going to put this out there:

https://www.propublica.org/article/irs-sorry-but-its-just-easier-and-cheaper-to-audit-the-poor (https://www.propublica.org/article/irs-sorry-but-its-just-easier-and-cheaper-to-audit-the-poor)

So yeah, they do target the easier people. You can read into that what you will. But, have a bit more money and a more complicated return and you are more likely to get away with stuff.

-Dave

it looks like they specifically target EITC recipients for audits (https://www.propublica.org/article/irs-now-audits-poor-americans-at-about-the-same-rate-as-the-top-1-percent) because they are often slam dunk cases. i guess that's a pretty big incentive not to claim the credit!

apparently these audits take IRS agents 5 hours per return. can you imagine how much longer it would take to audit a crypto trader? talk about a more complicated return......

Well.. it depends on your ability to hide your evasion. Oligarchs and billionaires have talented CAs out there to help them, and they normally pay much lower taxes rates when compared to the middle class (making use of all the loopholes and tax breaks). What they are doing is entirely legal, even if it is not very ethical. Also, most of the income for the super-rich comes in the form of capital gains, dividend and stock options and there are enough loopholes available for them to make use of.

On the other hand, the middle class gets most of their income in the form of salary. Now the catch is that there are not many loopholes available with the salary income, to qualify for a lower tax rate. So these guys are forced to pay a higher tax rate when compared to the super-rich. This is not fair, but the system works like that. Because if a particular country increases the tax rate for the super-rich, then they'll just migrate to another country, where the tax rate is low. With the middle class, there is no such risk, as they can't afford to shift.

ethics and morality are subjective

I would entirely approve of the ethical stance of a US or EU citizen refusing to pay taxes, on the basis that they would be repaying the money borrowed to conduct:

• WWII
• Korean War
• Vietnam War
• Cambodian War
• Afghan War I
• Iraq War I
• Yugoslav War
• Afghan War II
• Iraq War II
• 2011 Libyan Annihilation (can't really call that a war)
• Syrian War
• Yemen War

and several I probably forgot

So many people weren't even alive to vote against any of this, and yet they must pay the massive bill for these turf-war genocides. If you think it's ethical to just pay though, @bryant coleman, I would suggest it is you that is the unethical one.

Perhaps that's what they taught themselves throughout the years. If you convince yourself that you're stuck in a situation with no possible way out, you will actually believe and act like that.

I'm not saying it's easy for the middle class to shift, but with will, dedication and education, a lot can be accomplished. Even if there is no possible way out of the tax rates the middle class is subject to, there are always other fields where you can get an advantage tax wise. People need to get over the believe that they are screwing over their country by avoiding taxation legally or "illegally".

Even such a thing as not declaring your cold wallet or physical Gold holdings helps. As long as you have obtained and stored them without any logs pointing in your direction, you're pretty safe.

Most of the people pay their taxes not because they think that it is the "right" thing to do. Also nobody thinks that it is their "duty" to pay the taxes on time. A lot of us pay the taxes because we know that the others are doing the same, and if we refuse to pay the taxes then the authorities will seize all of our assets and throw us in the prison to rot.

It is always risky to go against the status quo. If 20% or 30% of the population refuse to pay their taxes, or try to evade, then it gives us confidence. We know that they will not be able to go after this many people. But as long as the tax evaders constitute a minuscule proportion of the population, it gives the authorities the power to destroy them and to make an example out of them. Well... it is always the question of who will bell the cat first.

easy problem to solve

digital individual's checklist:

• own digital assets that are protected by cryptography
• own internet assets (VPS) anonymously
• rent physical assets as much as possible
• have backup plans for theft of physical assets (laptops, PGP keys etc)

that would be people like me ;D

feel free to do the same, we're taking alot of the risk atm in order that you can do so too

I wish you was right, but unfortunately, that's not the case. Most of the people around me feel it as their duty to pay tax, all because they think that otherwise the country will run out of finances. In other words, they are purposely serving as a cash cow and they're proud of it too, because it's their tax money that keeps the country up and running they think.

Common joes actually consider that to be a rightful punishment for tax evaders. They have been far gone already and can't be helped anymore.

I like the general thinking of Bitcoiners, because they don't only have a better understanding of economics, but they know they have the tools needed to actually make it work to their advantage.

From what I understand, he's not voluntarily paying his taxes, but does so out of force and the fear of imprisonment. If he's comfortable doing that, then that's up to him. I don't see much wrong with people doing so.

I'm kinda in a similar boat. It's not as easy as you make it look to just avoid taxation and clean after your paper/digital trails. Another thing is that it requires you to pretty much dig yourself into the ground and give up on a lot of things.

It's fantastic and all that you have made it your top priority to not pay any or as little taxes as possible, but that doesn't justify your behavior towards those who do pay taxes and make them feel like they are a problem.

you could always start by reading his post, what people say gives a general impression of what their stance is ::)

he said I (and tax evaders like me) are the problem, and that we should all be good boy and girls



how many genocides paid for with your tax dollars would you like me to post?

Well.. it is tough. I am a resident of India and here 99% of the citizens will tell you that if someone refuses to pay his taxes, then he deserves to be imprisoned. They'll even label such individuals as unpatriotic and anti-national. Recently we had a few scandals related to tax evasion, and the public opinion was heavily favoring the government authorities.

And if you analyze the government expenses, then you will be surprised. Most of the tax revenue collected from tax payers like us is used to give freebies to the lazy people and to pay salaries to the government employees (who are one of the most unproductive group of people in India). It is a bit complicated. People always complain that the tax rates are high. But they are very much against any sort of tax evasion.

Things just a whole lot sillier/fruitier - https://www.irs.gov/newsroom/frequently-asked-questions-on-virtual-currency-transactions

https://coincenter.org/entry/irs-cryptocurrency-guidance-answers-some-questions-while-raising-messy-new-ones

https://www.coindesk.com/the-irs-just-issued-its-first-cryptocurrency-tax-guidance-in-5-years

I can't believe they let something this woolly and illogical out in the wild. It reads like something a drunk Indian bureaucrat would come up with that no one else could be bothered to check before signing it off.

https://twitter.com/brucefenton/status/1181981988221329413

I was really freaked out when I first read the guidelines, but I'm glad Coincenter pointed this out:


Since hard forks are valued at zero at the time of receipt, this actually seems like a positive development. It means if you ignore the hard forks, you never received any taxable income. And if you sell the fork coins, the taxes are really straightforward.

Honestly, the regular and long term holders who don't move their crypto-currencies a lot and only do a bit of trading will be fine, the real issue is with crypto traders.

How will people who buy and sell BTC get taxed? It seems like they will end up losing a lot of money on each transaction, and I could see a chance of every transactions being taxed.


That definetly looks like a change for the better, they aren't trying to squeeze cash out of their citizens

The IRS is at it again. They circulated a draft of the 2019 Form 1040, Schedule 1. About 150 million people will file this form next April. Check out the highlighted portion:

https://i.imgur.com/pgJIxPu.png

Given this, the new tax guidance issued this month, and the mass mailing campaign over the summer, it sure seems like the IRS is looking forward to crawling up our asses.

Wow. What a pain in the ass it must be if someone in the US is KYC verified on exchanges. Here only profits must be declared when cashing out and cryptocurrency-to-cryptocurrency transactions are excluded for simplicity's sake.

Receiving coin usually means that you had some kind of income that you were paid via coin. Sending coin means that you probably exchanged coin in a way that you need to report a profit/loss via a barter transaction.

I would imagine that sending coin to yourself would be exempt from having to check 'yes' on the above box. Receiving or sending coin would almost always mean you have something to report on one or more tax form anyway.

the way it's worded, it's a catch-all for any and all cryptocurrency activity. even if you only sent coins to yourself, you first must have acquired a financial interest in it.

they're asking for confirmation even where there is no taxable event, eg buying and holding. it's almost like a stripped down FBAR filing that's required with your tax return! if you have any involvement with crypto, they want to know about it. :-\

Buying coin with fiat and holding it in cold storage wouldn’t be a taxable event, so I don’t believe there is any basis in law for the IRS to require this to be reported, although I am not an expert in tax law.

If you were to sell your services and receive payment in coin, this would be taxable because you are receiving payment. You would owe taxes on the value of the coin you receive and this amount would be your cost basis. There are other similar situations in which you would also need to report income when you receive coin.

I don’t know what the final instructions will look like once the form is complete and no longer in draft format. 

They aren't asking you to specifically report your holdings. However, if you bought any cryptocurrency in 2019, you're supposed to answer "yes" to that question -- even if you never sold anything.

Hopefully they scrap this from the final form, but I'd say the chances are low.

Yeah, it's a bullshit question. Even if you just bought and held, which isn't a taxable event and so wouldn't need to be declared, they still want to know even though its none of their business. If you answer "yes", expect them to hound you every year for the rest of your life. If you answer "no", you are effectively lying on your tax return, which is felony punishable with both thousands of dollars in fines and prison.

What's their definition of a "virtual currency"? As far as I know, they don't have one yet? What about my air miles? They have value, I receive them, can buy more for fiat, can send/sell/trade/exchange them with friends or family, can sell them in exchange for flights, upgrades, or add-ons. Do they count as "virtual currency"?

Is this a confession? Why would anyone in their right mind share something like that with some clerk. Are they going to look into my garden now, because I might be eating my own veggies and not buying them in the store by which I'm not adding to the GDP :D It's not their business if you have crypto or not and only someone who paid crypto taxes in the past would participate in their sad survey.


What about currencies used in games like eve online. You can trade them with random people for ingame stuff, but you can also trade it for game fees and subscriptions and sell them for money. Just wait, soon they will ask you for any valuables you might have.
Do you own art? Do you own gold? Maybe you have an expensive watch or a diamond ring. You got a necklace from your boyfriend? That's a taxable income! Don't have money to pay? Sell the necklace and pay us, or else!  :D

Let's say you answer "no" to that question. A couple of years down the line, the IRS are successful in their push to get Coinbase, Kraken, Gemini, Binance, etc. to hand over all their customer details. They find out you lied, and did indeed own and use bitcoin in 2019, and you lied on your tax return. Do you think they are going to be sympathetic? No chance. They are going to try to string you up as an example to everyone else.

I have a number of ways to answer that, one being that I don't use any of the centralized exchanges. I don't have my personal data on any of the existing exchanges. I have used some of the ones that went bankrupt or run with the money, but back in the day there was not much push for KYC so the majority of exchanges in 2014 and 15 did not even ask for a scan of ID. They just wanted your name, address, email and phone number and you were free to trade.

You could also risk it and start getting a citizenship outside of the US. Chances are pretty high that in a couple years your cryptocurrency will be worth so much that you'll be able to abandon everything you have in the US with no regrets and go live somewhere where you won't have to worry about government agents marching in and stealing everything you've worked for, just because they can.

It's all a personal choice. I'm not a US citizen nor am I ever going to apply due to your taxation. I like a lot of things about the US but after reading some stories from people who got robbed by the government and even after being acquitted never got their things back I'd be scared to live there.

It's a good moment to start using DEX and trade in person for cash. I'm all cash right now. My bank account is only for emergencies and I don't have more than €1000 in there at any time.

That's more of a Halloween story.
These exchanges are sure going to be seize by the government if they really will crack down all of the cryptocurrency owners. If you just hold few coins in there I guess its something you can afford to pay. When later they find out you have no activity to the accounts you have in the exchanges, they will probably start creeping into you. Is Mexico, Brazil or Venezuela a good idea also?

They defined it in Notice 2014–21 (https://www.irs.gov/irb/2014-16_IRB#NOT-2014-21), their first guidance on cryptocurrency. It seems to cover both cryptocurrencies and stablecoins:

Like I previously said, I haven't seen the proposed instructions, so I don't know what circumstances tax payers would need to answer 'yes' to the question; it is probably not going to be as simple as answering the question on its face. I am also unaware of any basis in law for the IRS asking about transactions that do not affect income or eligibility for credits/deductions.

What law are you referring to that carries these penalties? The only law I can think of that a taxpayer could possibly get charged with is perjury (US § 1621 (https://www.law.cornell.edu/uscode/text/18/1621)), but this law does not carry any fines. Perjury is very rarely prosecuted, even for 'slam dunk' cases, but it may be a very reasonable defense that any statement that does not change the amount of taxes due on a tax return is not 'material' and thus does not meet the criteria for perjury. Most people who get in criminal trouble with regard to their taxes usually are charged with attempting to evade or defect taxes (US § 7201 (https://www.law.cornell.edu/uscode/text/26/7201)), but I don't believe answering this question incorrectly, alone would make someone guilty of this crime.

it doesn't fall under the tax evasion section, but there's another one you missed: https://www.law.cornell.edu/uscode/text/26/7206


perjury prosecutions may be rare but false/fraudulent return prosecutions---less so.

I'm the same, but we are definitely in the minority. The majority of users have completed KYC on at least one exchange, if not several, and I fully expect every exchange to hand over details of their users to the relevant governments sooner or later, and we all know just how happy governments are to share data with each other. There are also plenty of other ways for the IRS to track you down and link your identity to various addresses and transactions.

An interesting definition. So by their any "digital representation of value", my air miles would count, as per my previous post. So too, technically, would things like World of Warcraft in game gold.

As above, lying on your tax return is still fraud/false statement, and I would be expecting the IRS to go hard on anyone caught out so as to "set an example" for other users.

So no one will dare to attract a felony charge against them, if any traded in any exchange and your KYC is verified then there is no way you can lie to them as they will be another issue, i am not facing these issues now but in the future we are also expecting this in the future but want to know the possibility of the punishment before revealing what i own ;D.

could those things really be defined as "a medium of exchange, a unit of account, and/or a store of value" though? that seems like a stretch for rewards rebates and in-game credits.


what do you think they plan to do with this info?

i figure it's some sort of pre-audit system. if you answer "yes" and file a form 8949 disclosing crypto and there are no discrepancies with 1099s they received.....you're probably in the clear.

the thing is, buy and holders would answer "yes" but file no form 8949, and they may get 1099s (which just show total volume) if they bought more than $20k worth. that could make it look like there is unreported taxable activity going on, even if there isn't.

They could certainly be classified as a "medium of exchange". It's a poor definition, but I suspect they've kept it deliberately vague so it can apply to whatever they want it to.

Yeah, agreed. If you answer "yes", but haven't also reported and paid taxes on some crypto activities, I suspect you may end up being audited. Remember of course the IRS class any crypto to crypto trade as a taxable event, so even if you bought bitcoin only to use it to buy and hold some altcoin, and have never sold for fiat, they would still fine you for not declaring that.

logically, that's not easy to sustain. if something is too variable in market value to be a universal store of value, it cannot be a either a unit of account or an exchange medium. Unwanted gifts get exchanged, that does not make them accounting units, nor exchange media.

however, Bitcoin is a strange case. It was designed as an explicit medium of exchange (but the network performs that role, not the units :) ) and implicitly as money. That would be the grounds of a perfectly sensible argument; just because some people use Bitcoin as money, doesn't mean that's what you're doing!

If there is evidence you bought or mined, there is still no evidence that you necessarily sold any, even if you conducted transactions with any outputs you provably owned. As there is no way to prove that you didn't send your cryptographic numeric abstractions  ( :) ) to an eater address for which no known spending key exists (or to a key-hash you did have the private key for, but later lost it). There's a real possibility that tax evasion cases will take place in courts exactly like that, where someone really did lose a wallet, while the public prosecutor tries to insinuate that the defendant exchanged it for something without paying capital gains.

how much difference will sensible, logical arguments make? I guess it depends how badly IRS & their cohorts need the money

It's more than a little dishonest on their part that for the purposes of this question they have a definition of virtual currencies, defining it as a medium of exchange, but for the purposes of actually taxing bitcoin is classed as an asset and not a currency, so they can extract the maximum amount of money from you.

Even if they were to see transactions from an address I provably owned to other active addresses, in the absence of KYC or IP logs from exchanges or other third party services, it would be very difficult to prove that it was me who made the transaction. "My seed was stolen" is a defense I suspect we will see a lot of in the future.

I'm also curious as to what will happen in the scenario you describe, where someone claims they lost or never owned the private keys for some addresses. What about 5 or 10 years down the line, does the person think that enough time has passed and it would now be safe to empty those addresses? Will the IRS be monitoring these addresses forever more?

supposedly, the IRS has no legal mandate to tax people anyway. A constitutional amendment was required, and it was not ratified by the required number of states.

"Can there ever be justice on stolen land?" - KRSOne



if someone wanted to use the "lost or stolen" defense in falsehood, they need not wait any amount of time to move it. Send the outputs to a channel HTLC (privately or on the overall LN), then what happens to it after that becomes incredibly difficult to trace.

If necessary, I will be willing to pay taxes, but for this I will demand protection for me as a trader.

This is the biggest irony out there. Our wealth is already taxed once (when we received it as salary). And we make risky investments using whatever amount is left after paying the income taxes. And if we incur losses, then no one is going to help us. We have to bear our losses without any support from anyone. On the other hand, in case we end up with a profit, then we need to pay tax on this amount as well. How many times we need to pay taxes on the same amount? And the biggest joke is that the vast majority of these taxes are going to bomb the sh!t our of some third world country such as Syria, or used to pay salaries and pensions to lazy government employees.

Don't get me wrong here, I absolutely agree that it's theft that we are being taxed twice or even more on the same money, but you can claim against your losses.

Any capital loss can be used to offset a capital gain within the same year, and therefore pay no taxes on the amount offset If your losses outweight your gains, i.e. you made a net capital loss, then you can claim up to $3,000 of that against taxes on other income that you pay, and you can roll over any additional losses over the $3,000 threshold to future years.

If you are going to pay these horrendous taxes, then at least claim back every cent you can.

the joke is even bigger than that

current due taxes are paying off wars and government services from decades ago, not today's spending. They can't afford their debts & spending today despite how much tax they are levying against current wages, and they also couldn't afford it long before you were alive at all.

The money you pay in taxes now was (in effect) already stolen from you decades before you were born. Voting today for politicians promising spending on services/wars today will only affect your grandchildren's taxes, and the government contractors will be sure to overcharge for the work so they can steal something from both yours and their own grandkids too :-\

Fair enough, but I would maintain that arguing the discrepancy is not material if it does not affect the total tax due would not be frivolous. I am also unaware of any prosecutions for violating this statute when the proper amount of taxes were paid.

Sorry to update the thread but I think this is the right thread to post this since its related to it.  And so this is it!

The IRS is now asking Kraken investors who at least conducted $20,000 in the platform. It might not be long they will also be asking from Binance and other exchanges.
Source: https://bitcoinmagazine.com/business/irs-authorized-to-summon-kraken

Would the traders get to pay the tax even when they conducted transactions before the crypto tax law?

If I were them I'd withdraw my excess money and send it through a mixer fast, and start trading crypto with an actual CFD provider instead of a random exchange that doesn't let you easily bet short (or even bet long, if you don't consider holding BTC to facilitate that like I don't).

In my opinion, this is such a psychological trick. It is only a matter of the severity of the legislation on tax evasion. You are not included in the list of people who are generally associated with cryptocurrency. And there must be such a list of owners. Therefore, in my opinion, it is easier to somehow convert the proceeds from the sale of cryptocurrency into something third that is not directly related to it and pays tax on this already. And even more so not to disclose wallets that could be directly related to you.

The IRS will likely send similar letters to Kraken customers, and Binance customers if a similar order is granted against Binance.

My advice to anyone who hasn’t been reporting all their bitcoin/crypto related income would be to file amended returns ASAP. IIRC, some of the letters allowed taxpayers to file amended returns, however there is no guarantee the IRS won’t simply audit taxpayers who appear to have not reported all their income.
There is no crypto tax law. I believe in 2014, the IRS issued guidance that they expect taxpayers to treat bitcoin as property, and that you must treat any capital gains on bitcoin as capital gains on your taxes.

For example if you receive $100 worth of bitcoin on March 1 as a payment for a service, you would report this as $100 worth of income. If you were to subsequently use that bitcoin to buy $120 worth of goods, you would report $20 in capital gains the year you sell/barter the coin.

Everyone’s situation is different, so it is always best to consult with a tax professional to discuss your specific situation.

What would that achieve? If you have completed KYC at a centralized exchange, then it doesn't matter how well you obfuscate or mix your coins after withdrawal in this case. The exchange still have a complete record of all your deposits, trades, and withdrawals, and will report that to the IRS.

---

As we've said before, it is only a matter of time before all centralized exchanges are reporting all their customers to the IRS (or your equivalent tax agency or government). I am very surprised it has taken them this long to start going after other exchanges after they served a similar summons to Coinbase in 2016. If you have completed KYC somewhere, then expect the IRS to get their hands on your details sooner or later.

Well.. I am not going to deny any of this. But let me ask you one question. Coinbase claims to have an userbase of 56 million verified users. A large majority may be from the United States. Then there are other exchanges such as Kraken and Bitstamp, which mostly service the American users. Do the IRS have the resources available to go after these 50-100 million users? If the users had used these exchanges for just one or two trades, then what is the possibility that the IRS will go after them?

Maybe. Maybe not. They certainly have the resources to send mass threatening letters to everyone, and one would imagine their database is sophisticated enough that they could simply pull the details for everyone that Coinbase/Kraken/whoever tell them about and see if they have reported cryptocurrency gains, or even something as simple as marking "Yes" to the cryptocurrency question which now appears on everyone's Form 1040.

I suspect they aren't examining actual reported gains and losses against the data the exchanges are providing them except for people with high trading volumes, because that takes a lot of manual work and is expensive and time consuming. However, if you have a fully verified and KYCed exchange account, but you have marked "No" to the question mentioned above, or haven't filed a Schedule D, or haven't filed a Form 8949, then that can be flagged up with a simple database search and is a pretty sure fire sign that you aren't giving the IRS what they want.

At the end of the day, none of us can be sure. But if you have a fully KYCed account, then the IRS will get your details eventually. Whether or not they end up investigating you further is anybody's guess. If you are concerned about this, then you should take the advice of a tax professional.

And everybody should stop handing out their KYC like confetti to anyone who asks for it.

The IRS can trivially review tax return data along with the data received from the various exchanges to get a good idea as to if income was properly reported and if not how much income was not reported. They have no reason to go after 50 million people when 99%+ of these people properly reported their income.

The number of trades is less important than the value of the transactions/trades.

I assume there are no actual public data for this, but I would be very surprised if only less than 1% of US citizens had not properly reported their cryptocurrency gains or losses. I suspect the real figure is much higher, which is why the IRS are pushing exchanges to hand over the info. If it were only a handful of users, then their resources would be better spent elsewhere, like going after bankers who abuse loopholes to avoid tax (HA! Like they are ever going to do that.) I also suspect that if the number were really this low, the IRS wouldn't be putting the cryptocurrency question right on the front page of the 1040 and forcing literally everyone in the country to answer it.

It appears that approximately 1 in 6 tax dollars go unpaid, so the percentage of taxes related to unreported crypto gains may be higher than 1%. Even if 1% of citizens fail to report crypto-related income, it would mean that over 3 million people are not reporting their income accurately.

When the IRS reviews data from an exchange, they can compare this data to tax return data to get a good idea as to the amount of unreported income. However, when the IRS reviews blockchain data, for example, they will have a difficult time determining which transactions are related to taxpayers obligated to report income to the IRS.

It would not be a good use of resources for the IRS to go after people exploiting loopholes in the tax code. A loophole may or may not be something that congress intended, however, a loophole is still legal. If loopholes are being used in ways that Congress did not intend, it is up to Congress to close the loophole.

I have heard that US citizens need to report each and every cryptocurrency transaction made by them in the income tax return, as per the directive from the IRS. Now how many out of 50 million could have done this? I strongly suspect that a majority of the low volume users might have ignored this directive. And I don't think that the IRS will go after them for $100 or $200 in pending taxes. But they are moving very slowly. Only around 10,000 have been sent the notice till now. 10K out of 50 million... And out of that 10K, I assume a majority would be letter 6174.

I think the situation has changed over such a period of time. The number of cryptocurrency holders has grown, so this number is not relevant today. I also think that letters came to those who previously declared their assets in cryptocurrency. So I think that most of the owners of digital assets did not do this at all. I think that the funds spent on the calculations of all these people in terms of the volume of expenses for these activities will exceed the taxes themselves that can be obtained in the future. Nobody knows the exact numbers, so these are only assumptions.

IRS, DOJ, CFTC, Bafin ...

https://www.techtimes.com/articles/260223/20210513/binance-under-irs-doj-investigation-due-alleged-illegal-transactions-platform-cryptocurrency.htm

Correct. The form in question is Form 8949, which you can view here - https://www.irs.gov/pub/irs-pdf/f8949.pdf - unless you have a 1099-B from your exchange(s) which is unlikely. Every trade you make, even if trading bitcoin for an altcoin or vice versa, needs to have a cost basis worked out in USD and reported on this form.

I agree. Further, given the number of exchanges which have scammed, been hacked in to insolvency, shut down, etc., not only will many people not have done this, but many people will be unable to do this retrospectively as they did not keep their own records and can no longer access their exchange's records.

Who knows for sure, but if they find out you have a KYCed account on a bitcoin exchange and you have never paid taxes related to bitcoin, then expect to be investigated.

Now this is very interesting. If someone had an account in BTC-e/Wex.nz or Cryptopia, then how is he supposed to list the details of all the cryptocurrency transactions he made using these platforms? How the IRS is going to react in such a situation? Thankfully I am not a citizen of the United States. I had accounts with at least half a dozen exchanges (all of them KYCed) and 2-3 of these exchanges doesn't exist anymore. And in my country, I haven't yet heard from anyone that the authorities are targeting cryptocurrency users. 

I don’t think the IRS is going to go after taxpayers who owe $200 in unpaid taxes in masse, although they may go after a small number of them in order to make a statement.

My advice is to pay your taxes according to the law.

The IRS will expect that you have kept full records of all your transactions, including between fiat and crypto and between crypto and crypto. If you don't have these records, then you will need to report your trades as accurately as you can, which would include contacting the exchange in question and requesting your transaction records if possible. If you have no records at all, and the exchange no longer exists to provide those records,  then I suppose your only option would be to figure out what you deposited to the exchange and what you ultimately withdrew, and calculate the difference as your capital gains. If you can't even figure out that, then I assume you would have to assume a cost basis of zero on whatever you are holding.

Having said all that, I am not a tax professional and have never been in this situation given that I do not use any centralized exchanges, so if being audited by the IRS (or your country's equivalent) is a concern of yours, then you should take professional advice.

If such a situation arises, then obviously I need to consult a CA. The last time I used a centralized exchange was in 2018. After that I realized the dangers of using their services. For the past 3 years I am mostly using DEX and P2P platforms. But what was done earlier can't be undone now. In case the tax department digs out all those past transactions, then I guess I will be in trouble. The amounts involved are not that large, but still it will be better to be prepared.