Bitcoin Forum

So there are some serious no KYC people on this board. There are many who think all BTC should be anonymous.
We continually have several threads on it getting posts all the time.
Even a one I started about privacy vs. anonymity https://bitcointalk.org/index.php?topic=5366195

But..... does anyone worry that some of that might come back to bite them in the ass at some point in time when it comes to taxes / proof of ownership / other things.

Case in point. I bought 1BTC on Coinbase in 2016 at under $600 a BTC I sold it this year. I know I am going to take it up the ass in taxes. It is what it is.

Now lets say I bought 1BTC anonymously and I can find someone to give me the $50000 in cash today. I should report it and if whoever gives me the money should report it, and if we don't report it it does violate the law. But, whatever. Once again, that is up to how an individual wants to do something.

Here comes the kicker.
Lets say at the last big bullrun in 2017 I bought 10BTC @ $16000 when it hit $60000 this I wanted to sell and get a really nice house somewhere. If all BTC I accumulated back in 2017 was anonymous. I am going to really take it up the ass in taxes since I can't prove what I paid for it....since it was anonymous. So the IRS will take it as $0 cost.

So following that, so do you really want it all with no paper trail. Or even a difficult to follow trail, since if it is difficult to follow and you do have to prove it you might spend a lot in time and effort (read money) proving it.

Just a random Saturday thought.

-Dave

I don't understand your parallelism with anonymity. Based on your post, it doesn't matter if you've made it difficult to be traced; it's just you - being the owner of those coins instead of an exchange.

What do you mean you can't prove what you paid? Can't you use a notary to make it official? Also, why will the IRS take it as “$0 cost”?

So this is anonymity v taxes, and this is a U.S related theory.

In my country Bitcoin and Crypto is treated like any other investment for taxation,
we pay 33% on the profits, so regardless of whether I bought mine anonymously
or not I have to determine a cost and sell, I suspect you would have to do the same.
If you have a date you can determine the cost or buy price and if you are agreeing to
pay taxes then anonymity is a non discussion IMO, maybe I have it wrong though?

This is not a topic about the anonymity of bitcoin, but about the concealment of income) Each country has its own rules and its own "human fears", some countries may simply take everything away from you and you will still receive a very real punishment for using cryptocurrency or hiding income. Based on their Bitcoin court hearings in Europe, 90% are prison sentences for money laundering and cybercrime.

Because if you can't prove what you paid and they do audit you, you're screwed.
Not BTC related but there was a case like that with a classic car sale a few years ago. Was watching a show about it the other day
More or less; someone paid about $7500 for some old car, lost the receipt during the years long restoration process and when they sold it they wrote off the cost of the car, the parts and many other things. They got hit with an audit. And even with YEARS or receipts showing parts purchases for the car in the end since he could not prove what he paid and WHEN for it they only allowed some silly small amount in the 100s. So he owed more in taxes.

That's what brought on this thought.
If you are planning to buy today as an investment are you better off going through one of the big annoying KYC exchanges, since if you sell it in a few years you have proof of what you paid.
Saying a paid $49000 for 1BTC from BlackHatCoiner today is great and all, but if I handed you cash and you sent it to me how do I really prove it.

It's a sad comment but in most places in the world you are innocent until proven guilty.....Except for taxes and traffic court.

-Dave

This is the reason why I haven't mixed my BTC. I don't spend it, but I have plans to make fairly large sales (and already did one), so naturally I must be prepared for answering to my bank or tax authorities about the origin of my coins (but so far it didn't happen, luckily). So my logic is, better to not mix the coins, to not make them look suspicious.

If I were spending BTC regularly, I would have prepared some mixed coins, because I don't want some services being able to learn about my other transaction and use or sell that data.

Maybe in the future every aspect of Bitcoin use would be regulated and you could use mixers and other privacy tools and be able to reveal your transactions to government if needed, but right now I don't want to risk it, not when the amounts that are large to me are at stake.

If you bought a house, how would you expect to pay taxes on it if you did not register the funds with the IRS? That money can't magically be deposited into your account without it triggering a red flag? Seems to me this is more regarding taxes than anonymity, and whether the government has a right to interfere with commerce so they can collect taxes. I don't advocate that people do not pay their taxes, although that's not to say they don't have too much power to do so. Down to the technically of Bitcoin, it isn't true anonymity - your identification is merely represented with a string of characters.

if you are willing to live a cash only lifestyle. where by its then difficult to buy a house as most real estate agents want traceable bank transfers for their escrows. you will find you are considerably limiting your options of a good lifestyle.

making large cash purchases for a house or car through agents that allow cash, ends up having questions asked about how you funded the purchase. and where the cash came from.

this then ends up with you getting flagged anyways, that you do actually have taxable value and you have some how evaded the IRS. which can lead to more trouble.

so again unless you are willing to live a full cash lifestyle avoid bank transfers and hide under a blanket of hidden value, which then limits things you can then spend that wealth on without causing a flag. sometimes its better to just make a profit and accept the taxes on the profit and just get on with your life. still wealthy, but just a little less wealthy, but not having the hassle stress and fear of looking over your shoulder and limiting what you can do.

example.
buying 10btc at $17k each and selling at $50k each, is $170k-> $500k..
minus say 33% of the $330k profit..  is $110k tax.. leaving you with $390k

$390k still better then $170k so you still made over 2x profit, and you still live a normal life happily able to spend it all legit and clearly without looking over your shoulder or having to limit purchase choices with that money.

or. play around in hidden cash transactions and hope that no one finds $500k under your mattress and seizes it under money laundering or tax evasion. or end up spending $500k on court costs trying to defend your belief in any right you think you had to evade tax.

meanwhile. if its about tax rather than anonymity. theres a difference between 'avoidance' and 'evasion'. and a good accountant can usually set up some trust or shell company to put the money into whereby you personally are not physically holding the funds so IRS is not going to grab tax from you. and the trust/company then pay out value in business contracts so that the company/trust becomes net zero 'profit' by the time their year end approaches... its how the big guys do it.

Well I have a different theory.  If you are in this game 10% should be very well hidden just in case whatever country you are in falls apart.

The other 90% should be reported so as to avoid the government punishing you .

which ever one you are stuck in  has some set of rules best to follow them with most of your coin.

You make some pretty good points here and certainly ones I’ve considered over the years. Personally I think it’s ridiculous to want fully anonymous bitcoin, so my answer is no, I do not want all my bitcoin to be anonymous. Making bitcoin anonymous would spell its doom. Just look at Monero. It’s a great coin but it’s struggling to move up in value because of how hard it is to use and strict government regulations. I mean some countries won’t even allowed for women to drive or vote, certainly aren’t going to allow on/off exchange ramps to operate in their country. My 2.

If I were to answer your question, it wouldn't be on the basis of tax. I am living in a developing country where tax laws are archaic and are not implemented as they are. Tax policies here couldn't keep up with the times. So tax authorities fail not only to monitor the citizens' actual income but also to collect their due taxes. Having said that, you could have as many Bitcoin as you want without paying a single centavo for tax and would continue to live the rest of your life without worrying that the tax bureau would one day knock on your door.

So while I would want much of my BTC to be anonymous, it would be because of safety reasons.

Israeli woman turned $3K to $320K in Bitcoin but Bank now refuses to deposit (https://techstory.in/israeli-woman-turned-3k-into-320k-by-investing-in-bitcoin-bank-now-refuses-to-deposit/)

The above news is something similar to the one OP have thought. In this an Israeli lady who invested $3k on bitcoin have now turned to be $324k after eight years. She has used her pension money to invest on bitcoin hearing it through family members. The hapoalim bank refused for the deposit as it might be connected with terrorism and money laundering. Then she hired a lawyer and explained the incident. She doesn't have any accounts other than the hapoalim bank. The court have requested the bank not to restrict just because it is from digital assets and do the needful at the earliest.

So, depending on the country there'll be changes in the judgement given. If the bank allows the deposit, then she'll be taxed and lets her use the funds.

Probably no one cares about it. As long as you're enjoying the full features of the platform such converting cryptos to real fiat, especially when it comes trading and p2p.. perhaps being not anonymous isn't not a problem, and also paying tax will be worth it if it's possible to happen in the space. But how they will gonna implement it if other people using another way of withdrawal, i mean not bank.. Because here in our country we have another digital asset as well that based on the real fiat and we can really covert crypto easily and cash out through small stores.. :D

Tax is necessary for the government. That's why Biden whispers "Pay your share".  It's an obligation as part of society so if we trade our coins to fiat, it's definitely taxable.

There are just people who had seen what might happen in the future though and its because they look back at history when the government took the gold owned by the people like owning gold makes you an outlaw. That's why having BTC anonymously will still be a good idea until governments are done with all its regulations.

Your arguments have nothing to do with bitcoin and the anonymity of transactions though. It is all about the regulations of a specific country regarding bitcoin and taxes. Although many countries have similar laws but it is not everywhere, there are many countries that aren't so invasive about people's affairs.

I guess a better title would be whether you want to abide by your country's laws even if you don't agree with them and what can you do about it. After all the laws are there to serve you not to eff you up the arse. :P

Yes, is the never-ending story in this forum. It has been discussed in other threads, but not exactly from the point of view that you raise it now. o_e_l_e_o is one of those who advocates privacy to the maximum, I guess he will soon come by.


It depends very much on each case. In that case, as I have argued in other threads (https://bitcointalk.org/index.php?topic=5355749.msg57747612#msg57747612), the problem will not only be that they will apply the 0 cost, the problem is that you risk an investigation for money laundering at least. Imagine that you show up in front of the IRS with $600K in cash and tell them that it is from an investment that has worked out well for you and you want to declare it. But you can't provide proof of when you made the investment. You could end up like Al Capone for money laundering and tax evasion.

In addition, a 0 cost would not be so much of a problem if the benefit is 90% or more. In the case you put the price has only been multiplied by 4, but let's suppose someone got 10 Bitcoins at $1k and holded them until they are worth $50K, then sell. The purchase cost was $10K and the sale price $500K. In that case it makes no difference if the IRS applies a 0 cost to you than if they apply the $10K it cost you, the difference in tax is negligible. To me it's more problematic if you show up with $500K that you can't justify. That's assuming you're an average middle class worker with an annual income of $50K who let's say you have a half paid off house (with equity and you are still paying a mortgage), $70 in retirement funds and $3K in savings but also with some personal loan and credit card debt.

Showing up with $0.5M to declare in front of the IRS, whether in cash or Bitcoin is very suspicious.

In that case there are two possibilities. If you did not move the bitcoins in the first place, you can clearly prove that they are yours. But let's say you bought them on a decentralized exchange, or P2P from someone you knew, and for the sake of privacy you passed them through a couple of mixers over the years and there is no way to track them. In the latter case you run into a problem.

As far as I am aware, this has never been tested in the US so none of know what would actually happen.

There are plenty of ways other than trading that people receive bitcoins in significant amounts without leaving a KYC-ed paper trail though. Mining. Gifts. Betting or casino winnings. Faucets from the early days. Etc. I simply keep my own good records of buys and sells made as I do with any other asset. Bitcoin also has the added advantage over any other asset in that you can point to a specific transaction on the blockchain, say "This is when I bought these coins", and sign a message from the receiving address as proof.

You just don't have any idea how the other government seized that money from you as soon as they know you are holding a huge amount of it. Of course, you may not experience it in your country since you are residing in someplace where they don't really bother about how much do you own as long as you are paying some taxes but in our country, you need to be vigilant and careful. you need to have lots of connections if you own a huge amount of BTC because if those corrupt officials trace you, they will just simply put you in jail and get everything from you. those people don't have a conscience after all. When they raid houses they get every appliance inside the house, so what more if they knew about your precious BTC?

Well, I think most people have Pseudo Anonymity when they use cash .. right. There are not actually people taking note of all the serial numbers of your paper notes and following all your cash transactions.... so why should Pseudo anonymity or financial privacy be an issue with Bitcoin?

People do not have the ability to see from the cash that you give them.. How much cash you have left, so why should this be any different with your Bitcoin transactions? We are Pseudo anonymous to protect that information... not because we want to evade taxes.  ;)

Anonymity comes at a price, and when it comes to Bitcoin most people have invested through centralized exchanges anyway and have made KYC, so there is a clue about activities they can’t hide. Except for those who live in the delusion that they can hide their profits, most will still pay taxes and sleep peacefully without fear of the IRS.

I am in a situation where I can pay 0% tax if 2 years have passed since the purchase, and of course, it is in my interest that there is a paper trail to prove it. But when it comes to what I earn from signature campaigns, then every time I receive a payment I would have to report it to the tax office which would mean every week - and this is insane and completely unacceptable - and even crazier for faucets, I should do it every day.

Therefore, I have a good reason for a part of BTC to be anonymous, and legal investments are certainly desirable to be recorded because I do not have to pay taxes after the legal deadline for that.

Great points OP, some I've touched on myself on past threads. I do agree: the rights to privacy, and anonymity, must be respected, and must be possible. So Bitcoin's recent technology and most recent upgrade is in this direction, as it has been for the past 3 years since the scalability debate settled.

But for my personal use, because:
- I am a freelancer with some clients who couldn't work without my identity
- I am a taxpayer who does want to serve my social dues

These and other reasons that fit my situation and circumstance require me to not be anonymous at exchanges, with my home tax jurisdiction.

Personally I think the best is to just treat Bitcoin as any other asset.

That means, depending on your country, you might be able to get a reduction in taxes if you held it for more than a year for example.

In Germany you are discounted 100% of capital gains tax if you hold Bitcoin for at least a year before selling it.

In Australia you are discounted 50% of capital gains tax if you hold Bitcoin for at least a year before selling it.

Etc.

That way, you will have no problems with exchanges, banks, tax agencies, etc, while using tax incentives available in your country.

If I was someone who kept avoiding the taxes, then "yes ^{[it's inevitable]}".

• Quote from: DaveF on December 11, 2021, 09:48:14 PM
  proof of ownership / other things.
  
  Depending on the situation, I can argue on both sides... It's 50-50.

---

Personally, I prefer to go with a route that doesn't lead to a big mess in the future!

Since only one part of the equation is dealing with cash, then the other side still has to make a transaction ^{[assuming that you're not going to receive the private key from the other involved party]} and that means you can still find a record of it with the help of certain explorers that also lists their value when each of those transactions was made.

If it's one of the choice when exchanging btc to fiat, of course, why not.

One of the reasons why people avoid getting taxed is because of the percentage that authority take which is sometimes is injustice compare to other service people used.

When you exchange btc to fiat there's a fee, transferring it to bank account has fees as well, and then some authorities wants to declare people's holding, transactions involve in crypto is getting taxed as well. So you will get -negative balance after that.

People will say that its better than to ban crypto in the country but to those who experienced it a lot, it's a big difference.

Because it's the new kid on the block. If cash never existed and someone introduced it for the first time today, you can guarantee lawmakers would be all over it, lambasting it for allowing money laundering, untraceable illegal transactions, supporting the drug trade, "Won't you think of the children!", and all the usual nonsense. We see it in commonly in other branches of government and policy as well; compounds which are less harmful than alcohol and less addicting than caffeine are scheduled drugs. If alcohol was discovered for the first time today it would be a Schedule 1 drug.

Because most people don't hold the majority of their wealth in cash but rather in bank accounts and various investments. The banks and the government don't care about your protecting your privacy from people you are transacting with, as long as they are able to monitor you, which they can't do if you use bitcoin smartly.

Well everyone is different, and the choices we make is also going to be different. If I myself can figure out how to go about a situation like that, then I would likely be preferring that my transactions are just kept totally private. Everyone has their choice to make, and like I said, for as long as you know how to go about it then you can do that.

I just see a lot of people who say they don’t like making use of centralized exchanges, and personally, I hardly make use of all these centralized exchanges, and I can’t even remember the last time that I used a centralized exchange to buy cryptocurrency. I have mostly, recently, been making use of decentralized exchanges which are peer to peer and requires no KYC. Another thing is that where I live, it might be easy for me to pull this off, but it wouldn’t be easy for you. So whatever works for you, just do that.

Sure, if it was me then I would keep hiding from KYC to be anonymous. If you can all transactions on the exchange without KYC it will be more interesting. But it doesn't seem to be possible because there are regulations. In addition, KYC is also useful as evidence of security verification. Although actually if it is changed as fiat money in the end money from BTC will flow to the Bank. At the Bank we are required to provide identity as evidence as well. What I fear is the security of my identity, because KYC uses digital indetity that bad people can use.

Yeah most people think the cryptocurrency is no need to be regulated and let it as right now because crypto people doesn't need to be regulated, the anonymousity of crypto is the main reason for people coming. Scams or hacks couldn't be handled by any law because of it's not regulated, that's the bad things that happen if it keeps anonymous but yeah, that's the art of crypto itself

I like privacy, I like anonymity, but it's quite complicated to maintain. Buying Bitcoin with fiat and selling for fiat is a complicated process. If it's legal in your country then you can buy but it will be a matter of tax. My country does not allow trade Bitcoin so I have to buy anonymously and sell it anonymously as well. But somehow at the end of the day, I have to reveal privacy. Especially selling time, either I have to take cash or deposit into the bank. So if unusual activity is noticed by the bank then my account would freeze. So I can say it's quite impossible for to stay anonymous for me. But we might hide from the government by selling it in the black market, but still revealing privacy actually. I don't know if there is any way to skip that.

Is btc or crypto even Anonymous again. Because so many of us have done KYC on so many of decentralized exchanges and if regulation should come into crypto, Everybody will be required to pay taxes on whatever amount of crypto he's having in his decentralized wallet

It is hardly worth striving for Bitcoin to be completely anonymous. The current elements of anonymity and confidentiality are enough. We need to be prepared that states will tighten the rules for the circulation of cryptocurrencies and fight even with the current manifestations of anonymity. If states are not satisfied with the state of anonymity of cryptocurrencies, they will prohibit its circulation. Cryptocurrency needs legalization in society and peaceful coexistence with the national currencies of states. Only under such conditions can it have the necessary infrastructure for its use as a means of payment.

Can you imagine, someone transferring some BTC from a 'Patoshi'* account and let us know who she/he is?

Just a random Monday thought.  :)



'Patoshi'*: early BTC miner (2009 - 2010), holding ~1.1 million BTC - https://cryptowords.github.io/the-return-of-the-deniers-and-the-revenge-of-patoshi (https://cryptowords.github.io/the-return-of-the-deniers-and-the-revenge-of-patoshi)

Absolutely! F**K KYC!
At very least should be optional....


The US gov, from what I understand, want taxes on every single trade even if you dont sell for cash? That's insane. I dont even mind paying taxes once I cash out. But if I swapped some btc for litecoin or vise verse it shouldn't be a tax, that's retarded. The wallet I'm on, it doesn't keep track of my trades and measures everything in sats not dollars so I typically have no idea how much of an increase if any there was when I traded. I think I typically traded at losses technically since all my btc was paid for via overpaying. if btc is 40k I'm paying nearly 60k from an ATM which sucks. That's the cost of privacy for me uhg >_<

But uh.... hey..... so.... can someone explain how that works tho? If you can't prove the price that you paid for it... they treat it as zero????
What? THat's fucking scary. Maybe I should just never sell since pretty much all my btc is anon... O_O

I hear people can borrow against their btc instead of selling so idk.

---

Pretty sure they have trouble keeping track of crypto once it leaves US controlled exchanges.

But, what can they do for people who buy from an exchange but immediately convert to XMR then back to btc?
Or send through btc mixers?

It's better to make everything legitimate to have no problems with the law, and everything that you have worked for will be gone if you hadn't done it the right way. It's better to remit everything needed because it's not going to haunt you, and you're not going to be worried if someone audits you or something. If you were to convert it at an exchange or something, I think that's where they can audit you or something.

Fact is: Can you even make all your bitcoins anonymous??
Most of the things are tracked and at the end of the day you would have to encash bitcoins at most places because you don't really have a lot of options in developing countries. Therefore if you want to buy something significant, you won't be able to find so many p2p transactions and somehow you would have to use a wallet, but most wallets are now required to submit KYC therefore even if they don't they would still be caught the moment the money comes in the bank, which would essentially be reported to the government. The wallet that I have been using have started making the tax statements for every person as well. Therefore I think it's essentially impossible in certain situations and countries.

Speaking of p2p transactions, it used to be very difficult, but now it is very easy. There was a time when there were not enough customers or buyers to do p2p transactions, there was also a matter of security. But finding a p2p buyer is not a difficult task at present. Nowadays all freelancers know about Bitcoin and everyone has a group to do p2p transactions. So, now it is possible to transact with tax evasion if you want.

True if you happen to be in a very restricted and highly monitored p2p2 group it will be a lot easier to transact because there are escrow services in the group to be used,
I remember used to be in one and the admins were mainly the escrow providers but it wasn't enough to keep scammers at bay, there were many of them pretending to be admins to scam. P2p2 have a high chance of getting scam than using the actual exchange  with the constant talk about regulation of btc and crypto I think having btc anonymous won't matter much to some people because from a recent post I saw about Michael Saylor request for btc regulation, majority of posters believe regulations is the way forward. So it all depends on the owner an