Bitcoin Forum

In summary:

- Alexander and Laura Strashny filed income tax return due in 2017, but unable to pay

- they sent IRS letters proposing to pay the liability in iinstallments over a period of 6 years

-  IRS received the proposal recorded it and put in in pending status

- As of December 2018, the outstanding liability + interest exceeded $1 million

- IRS sent petition notice "Intent to Seize Your Assets" and Notice of Your Right to a Hearing.

- Petitioners timely requested a CDPhearing, expressinginterest in an installment agreement (IA) and attaching a copyof their previously submitted Forms 433-A and 9465.  They did notcheck the boxindicating thattheycould not pay the balance, and they did notdispute theirunderlyingliability for 2017.

- SO review the case and saw that they have a huge cryptocurrency investment

- SO eceived from petitioners’ repre-sentative a copy of their 2018 tax return, which reported wages exceeding $200,000, and investment statements showing cryptocurrency assets valued over$7 million.  During the conference the SO noted that petitioners were currently
- 4-[*4] withdrawing$19,000 per month from their cryptocurrency account, and she asked why they could not liquidate or borrow against those assets in order to discharge their tax liabilityin full.

- Lawyers for the petitioners argue that they are unable to draw on their cryptocurrency account to pay their liability.

- On June 25, 2019, the IRS issued a notice of determination sustaining the proposed levy, rejecting petitioners’ request for an IA, and stating that “[l]evyaction is permitted 30 daysafter the rejection.

https://www.ustaxcourt.gov/USTCInOP/OpinionViewer.aspx?ID=12258

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There's no denying that the petitioners have money to pay to settled their tax liabilities. But they can't withdraw it in a timely manner, maybe they are waiting for the price to go up and make profit to at least lessen the damage. What are your thoughts on this?

Are you willing to sell your crypto to pay our debts or just go on settle it in months or years?

Cryptocurrency is already under the scanner of government agencies. They have associated it with everything which is illegal.

After reading the story of this couple I am in the conclusion that they are wrong on their part. I have no doubt about it. They should immediately do something to repay their tax.

If they need to sell their crypto assets then they should otherwise, the tax agency would suggest the government that cryptocurrency is a new illegal way to abet tax.

It does sound silly but, it will happen for sure.

@Baofeng I’m really baffled as their tax liability was just 1 million plus interest, and they had over $7 million in crypto assets then why didn’t they sell off their crypto’s and clear their dues?, unless they had no real intention of paying their dues which is really shameful considering the fact that they had the required funds to pay off their dues.

@pakhitheboss you maybe surprised to know but bitcoin is legal in USA, hence the government cannot seize their crypto assets by claiming it’s illegal, also is there any link where we can follow further updates regarding this matter?.


Source:

https://www.investopedia.com/ask/answers/121515/bitcoin-legal-us.asp

This is such a weird case.

I think the couple have probable ulterior motives for doing such things. Perhaps bringing their crypto assets under the eyes of the law would allow the accusers to see that they could be paid in full. The very reason they consider this case worth fighting, probably means they owe more than the accuser could force them to pay, and they likely know that crypto assets can't be seized so easily without your consent. Their lawyer expenses must be huge anyway.

This is a crazy case, but I wouldn't consider it setting any precedent that would be worth looking back to, unless of course it moves to a higher court. IRS tends to avoid setting precedents afaik. Guidelines and regulations vary from state to state and the landscape in the U.S. is generally very fractured.

Probably that's the reason why IRS declined their Installment payment requests. If someone has $7 million but still asking for favors from the government agency, doesn't really show a good picture. Liabilities of any sort is not good for anybody's financial health and when the liability is from a government agency like IRS, it wise to pay up to avoid all future hassles.

If it was for me, I would have paid the liability to IRS to stay safe and out of the scanner. IRS can bring immense level of hassles so it is wise to keep them at bay!

They should do that and they should've done that in the first place because if I'm not mistaken, authorities know that they have a huge cryptocurrency asset which got revealed when it got reviewed again.

They are probably waiting for the price to pump but they probably predicted it incorrectly to the point that the due date to pay their liability came. I don't know how big this would get but it's still trouble for them.

The question you ask yourself is "Is it worth it to go in to debt and have a bad credit score because I simply want to keep my cryptocurrency, or avoid all that and pay my debts down".  Seems like a pretty obvious choice to me.

Weird little story. They're willing to attract the ire of the most vindictive government agency in the world for the sake of mad gainz that may never arrive?

They're already withdrawing crypto and have offered no reason why they can't withdraw more. If I were the IRS I'd nail them to the wall.

In future there are going to be many more cases like this. The 'I took a risk so I shouldn't have to pay tax' or 'it's on the internet so it shouldn't be taxed' crew are going to get some harsh lessons in The Man not giving a fuck about what you would like to happen vs what actually will happen.

It's one of those cases wherein a simple solution can be made but is being evaded for unknown purposes. I don't know why the couple just can't be done with all the trouble and all these legal stuff by paying what they owed. And $1M in tax liabilities? Who in their sane mind would even get it that high when they could have settled their dues yearly? The IRS has every right to demand payment, especially if it deemed that the party in debt has the capability to pay it in one instance. If they are withdrawing $19k a month for whatever reason there is, why can't they withdraw even more?

This is something to be anticipated.

There is nothing strange in a situation like this, they owe money to the IRS and they have assets in cryptocurrency over $7 million and since they disclosed their assets to the authorities they are bound to pay the amount one way or the other and they cannot expect them to wait till the price of their asset reach a certain level so that they could earn the profit they desired. It is better to pay the money they owe rather than getting into trouble with them.

One thing is probably the reason here, they have no intention in paying their tax.  I believe they decided to not to withdraw their cryptocurrency to pay for their tax thinking that it will double in value and possibly to lessen the losses from this investment.

Anyway, I hate troubles so yes I am willing to sell my crypto to pay my debt but if it is possible I'll go on settling it in months or years.  Who doesn't want to wait for a crypto investment to go up ?


Indeed, institution doesn't care for people, all they care is the agreement between them and the law governing the situation.  They won't wait for anything but the implementation of the law.

It seems pretty clear to me that this has little to do with cryptocurrency. They simply are doing whatever they can to avoid paying $1 million dollars to the government. Wouldn't you? They won't win, but at least they tried.

Yes, this was a failed attempt by the couple, You cannot cheat the IRS especially if you have enough money.
I think that the couple are trying to gain some time, until the market thrives and makes some profits, then they go to the interest and pay.

We know the fact that its really hard to oppose the government and if you do force yourself that way then you know that they can fucked you up hard in legal way which you cant really escape from that specially when law is on the line.

$1M tax liability is insane but its better to pay it off and stay out of the radar yet they are capable on doing so.Its really hard on their part though yet theyve been waiting for such increase but
if you are into this kind of problem then you wont really have any choice.

No matter how long and make reasons, you would still end up on the same line which is to pay on what you owe.

Are you saying it's a shame not to pay taxes? I haven't heard that one before ;D

They are rich and have enough money to pay and even after paying they are going to have 10 times more than most people since the average American family has almost no savings just loans but does it mean we should accpt the government is stealing from them?

Many of you say it's all fine because they have money. What if it were you? The tax man will first take from the rich and then from the poor, he doesn't care.

when i withdraw to fiat i pull an extra 20% or so to keep aside for taxes. i stick it in a CD or something, just so i dont touch it. tax time i cash it out and pays the man my taxes.

Baffling indeed. I mean, they still have over $6m in crypto assets if they ever decide to pay their liabilities, so I don't really see a reason why not? Plus, the decision to be made is based on the "now" and not the future after all. Sure, we can invest in our future all we want and all of that, but only if we're on the safe for the present. At the very least, what I see is that it's not that they "aren't" able to withdraw but they "don't" want to withdraw their crypto funds. If the IRS actually approved the Petition before, they could've argued that it's in the agreement but sadly they didn't.

Well, it IS an agreement. Whether it be stealing or not, the moment they applied for a tax return but failed to pay it, they were bound by the agreement to pay the said amount + interest in the time frame that they didn't pay.

They were able to withdraw $19000 a month with no economic hardships, according to the T.C. Memo and they still didn't do it? I think that's the problem we are facing now with cryptocurrencies. According to the memo as well, they can pay but still didn't pay the liabilities. They chose not to do so; that's the start of the problem. What they did is that they skipped the part where the government collects the tax, and the government wants that piece of the pie.

As a non-US human,i just want to ask that how exactly do these people rake up such liabilities. By natural law, any tax liability can only arise from an actual gain from an investment. So how do they go from setting up and investment that is worth "1 Million in taxes" and then going back to a stage where they supposedly withdraw 19k per month from crypto account to fund themselves.
That kind of financial mismanagement sounds kindda insane. Business gone bankrupt means you get to file for bankruptcy etc.

While that liability itself is hard to understand, trying to evade it even though you can pay off the taxman is plain stupid at best and fraudulent at worst.

The liability stems from 2017. They obviously sold a lot of cryptocurrency that year to have incurred a $1.1 million tax bill. They may have lost a significant amount in early 2018 -- after the market crashed -- and opted not to pay their 2017 taxes, expecting that the IRS would approve a long term payment plan. In the meantime, they probably used their remaining capital to reinvest -- which is likely why they are sitting on $7 million worth of cryptocurrency now. They may be waiting until they can liquidate at long term capital gain rates rather than short term rates.

They essentially used the IRS as a backer for their investments. Now the IRS wants their money. They'll get it too. Legally, the couple has no legs to stand on. The IRS can approve or deny payment plans at their discretion. If a taxpayer doesn't pay on time and the IRS doesn't approve a payment plan, they can put a levy on the taxpayer's assets (https://www.irs.gov/businesses/small-businesses-self-employed/levy):


Personal property includes digital currency.

I hate the IRS but I wouldn't mess with them, either. Good luck to these people.

What many crypto 'traders' will have done is put whatever gain they made straight back in and many will have subsequently lost it. The moment you realise any gain is when it's taxable and you need to secure that there and then. A frenzied trader could have made tens or hundreds of taxable events every day. Each one counts.

If you don't keep on top of that then you can wind up with nothing and a tax bill that still runs in millions of dollars. I've seen a few cases of this now.

https://www.reddit.com/r/tax/comments/9tcnu8/did_i_ruin_my_life_by_trading_crypto/?sort=confidence

In this case at least they have the money to meet the debt. Many won't.

I'm not sure whether crypto to crypto trades were taxable that way in 2017, that has been clarified and they are now in the US, crypto to dollars and vice versa always were and I'll bet many ignored that too thinking it didn't count as it was nothing more than a figure on a website.

There may be capital losses you can play against it. Dunno.

If it all exceeded 1 million dollars , it is a safe bet to say that they have been doing it since a long time , see income tax might now always be reasonable but at the same time If you keep doing your part every year there is nothing to be afraid of.

What the government did shouldn't have been that weird for people , since now every wallet and exchange does have a KYC requirement , the government already records every step , therefore the more they would have waited :
1. The more would have been the interest
2. The price is actually not that bad right now
3. Legal charges would have been more harsh
4. If they have Investment in crypto I do think it is safe to say they they would have had other investments too , so they are actually not loosing much .

They should have just paid it every year , I do think the decision was fair .

At least they are not in the jail , see income tax is only implemented for the people who can afford to pay it , but people try to avoid it when they most easily can be done with it , plus there is no assurance that Bitcoins is going to give good returns in the upcoming year , we all know that we cannot be sure of anything.

*We are all being tracked*

Lets leave it at that .

Oh my god!! Read that reddit thread. The poor guy never converted anything to fiat but incurred tax liability simply because of the "Portfolio value in USD" number against his account moving to 880K on coinbase!! How isn't that insane?? From what i understand, every single trade (crypto-to-crypto) or (crypto to USD) is a taxable event on these "exchanges". And with the "exchange" providing a full record of every single one of your transactions, the taxman seem to have hit the jackpot. They are milking people against gains that actually NEVER materialized.

Why isn't there more push-back against this? I guess plenty of people in the Late 2017 pump and dump would have incurred such taxes. I understand the basic concept that every single act of "buy and sell" is something for which you owe the govt tax. That is insane for people who started investing in late 2017, saw a short boom and then had their portfolios wiped out subsequently.

Thanks for your answers @gentlemand and @squatter

For me, it is better to pay up their debt using part of the crypto they have. The couple know what they are doing and it makes me tend to believe they do not want to pay that debt because if they do, nothing stops them from using part of crypto. I have seen and read stories about people invading tax and don't want to pay and this is part of reason why some countries want to regulate crypto. If you enjoy social amenities and other benefit from the government, I do not see any reason why you shouldn't pay

But they did materialise. The trader made profit and that profit was available to realise. It's not the tax man's problem if he immediately threw it back in somewhere else. It's his responsibility to secure their share.

It's not crypto 'persecution', the same thing applies everywhere else too. If he were moving between currencies forex trading it may never be dollars but there still might be profits that are taxable in dollars.

yes. and even if blockchain analysis isnt that good now, it will be.

i mentioned upthread i always pull 20% more on sells so its already in fiat for taxes. i dont touch that 20% fiat in the bank, only cash it in when the man wants his tax.

also i  put on my tax returns the stuff i buy through payment processors and stores that take btc directly. as they are taxable events and need to be reported too.

now i probably could of got away with not reporting newegg or whatever purchases, but im sure glad i did. you do NOT want the IRS as your enemy.

Really?
How the fuck would be crypto illegal in the US when even in this case alone they recognized the value of a crypto investment?
They are paying their taxes and the IRS has recognized that those cryptos they hold (whatever they have) are valuable in terms of $

What the hell is illegal?
Damn, why do people jump so fast to a conclusion that's always the evil gubbermint that is to blame?


Yeah, surprisingly it's not the IRS that's doing any kind of abuse here it's the ones not paying their taxes.
You can argue taxes are not fair, you can argue that cryptos shouldn't be taxed but here we're talking about liability from 2017, which,


They are sitting on 7 millions of cryptos value they don't want to sell their 1 million debt but they wanted an installment plan for

Not only that but they're were withdrawing money on a monthly bases

Let's assume you were the IRS, someone has 7 times the debt they've own you for 4 years at their disposal, what would you do?
Agree on 6-year plan in which the only guarantee you have to actually get paid is that is someone telling you those coins might increase in value, or ask them to liquidate now and pay their debts?

From what I read it's pretty clear to me that those people simply don't want to pay their taxes.
The IRS tells them "hey,you have cryptocurrencies worth millions of dollars,sell your crypto and pay your taxes without intallments!",but those people are just "nah,we can't sell our crypto,we wanna pay in a 6-year time frame".This is just plain stupid to me.I assume that the IRS will try to confiscate a large portion of their crytpocurrency investments.
Trying to hide your wealth from taxes by investing in cryptocurrencies isn't that easy.

The problem that they are facing could have been avoidable if they paid their taxes properly in the first place, the problem with IRS and other agencies that are handling taxes is that they can drain someone of their entire funds just by dragging the process for too long, that is how bureaucracy works, the paperworks are going to kill you when in the end you could have paid it. Authority is very hard on people  avoiding taxes. Now they have to spend their crypto investments to pay for their mistakes which is kind of a bummer.

I would have payed the tax and settle the dues and closed the case considering I am liable for the above said amount . But surely why would they not be paying it when they have money and why would they want to make it the big news and now many things would be find out by IRS and also they be under suspicion as haveing money and not paying it this no government would ever want it . Unless some one has lost the money or something and does not have really to pay that becomes different story .

Plain and straight, if they do really concerned about paying their taxes no one can stop them selling their assets/crypto
but this couple are really trying to convinced IRS
to have 6-year time frame hoping that the value of their crypto is really high, from that it will favor them in paying the
debt as it can possibly the earnings from the assets that they've got.

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IRS though can easily track their resources and since that it was their debt the couple needs to comply and use their
crypto assets and pay the said amount.

Interestingly USA has been pretty developed with cryptocurrency too now. They have defined cryptocurrency as financial asset therefore it's their right to seize them for recovery of their taxes. Moreover even if it wasn't a financial asset they can seize any asset they want. True indeed it makes no sense to speculate on price going up to pay you taxes in future. You know there are huge interests penalty and prosecutions involved. They might be thinking of declaring some bankruptcy or something in real world then after getting the immunity would withdraw their crypto holdings to get a new life. You just can't say this for every debt you have to calculate the additional costs involved in deferment of debt when you decide to do so.

I understand what you are saying. A lot of people just juggled alt-coins on these websites hearing about the insane stories of latest "collaborations" and "Proof of X" which would revolutionize crypto. A lot of people saw those 10X gains. Many were financially too naive to realize these things. If i consider myself in that situation, I would never consider the stupid bunch of 100 NXT, 200 OMG, 500 GNT and such obscure tokens sitting on my bittrex account as worth anything today. At that time they were worth a few 1000 USD. Its scary to think that these can be taxed retrospectively on being considered as returns (which eventually evaporated, of course). I no longer use that Bittrex account but it has some fractional worth of Alt-coins from the early days. They have blocked the account asking for KYC. The stupid "three shots, one front, left, right, holding a placard, lol its insane). Its also a sign that the exchanges have become institutions in themselves with full compliance. This escalated quickly.

The safest way is to follow what vapourminer said about keeping away some 20% realized profits for taxes. Sounds sensible enough. Anybody indulging in trading, even if they are financially unware students should do this.

Most of us would.
I don't llike taxes and I oppose them as much as I can, but if I had a reported surplus of a few million dollars, I'd pay. There's no other way. It's like they already got a speeding ticket, signed it and a year later decided they don't want to pay it. Pretty dumb if you ask me.

Your argument will not stand up in court if you take this to court... It is the same as saying... "Listen IRS, I will pay my debt when the stock price of my Microsoft shares reach X amount." The taxman takes whatever they get, when they want to...they do not wait for you to say when you are ready.

Will I sell my Crypto currencies to pay them?.... Yes I will, because I cannot do anything with that Crypto when my ass is in jail. Pay the taxes and be done with it and then enjoy what is left after the taxes was deducted.  ;)

This is a hard decision to sell your Crypto just after the halving, I mean you could be losing a lot from potential profit coming from those coins you are hodling if they will grant you to settle it in months or years just a specific date in the future maybe two years  it will be preferable, you are not only going to pay all your obligations but you can make a profit from the Crypto you are holding now.

Good call. I don't have to worry about this now but I wonder if at some point I will have to, I'm never certain of my next tax jurisdiction but I think anyone who trades, and who isn't 100% certain or has not got the all clear from the tax man should always have a bit of padding in that bank account.

Strange case because they went to court standing on no legs. What kind of lawyer do they have haha.

One who told them what they wanted to hear for the amount of money he wanted to hear.

Maybe he's retiring in a few weeks. That's the only possible explanation for the sheer outlandishness.

Right, It would be really disappointing when the crypto they sold goes high after months of selling it. There's no way you can tell if the crypto they are holding will grow after months so for me it's a great risk knowing that you need to pay your liabilities. But if they chose to risk the crypto assets they have now to make it grow and being successful on that plan can make it worth the risk, Earning some profits and paying the liabilities at the same time is a good plan but the execution is way complicated because there is pressure on you that you can't lose to the risk you entered.

There are still countries that we cannot use crypto currency because they haven't yet legalize it so we cannot disobey their rules or else we are going to jail. If your country is not yet accepted crypto currency then wait for it to get legalize or migrate to another country where crypto currency is legal. Bitcoin is the crypto currency that has the biggest number of countries where it is legal since it is the first crypto currency that is launched way back 2009. I hope that other crypto currencies can also get legalize in different part of the world so that we can use crypto currency without worrying to get jailed.
Source: https://www.investopedia.com/articles/forex/041515/countries-where-bitcoin-legal-illegal.asp

Aye, that usually be the case, especially with people who got money by being really lucky, rather than by being really hardworking --  a sweeping statement I know but when you hear stories like this, you really got to wonder how lucky these guys must have been to be able to be in a position to make such decisions.

It is an extremely interesting story. I still thought till now, that government organisations don't even know something about crypto and they are not looking if someone has some investment in it. That's why I like more P2P exchanges, cause there is much harder to track how much I bought money.

It depends on how much debt do I have. sometimes when I can no longer find some money to pay my debt, I go to my cousins they have some fortunes though which is the very best option I have. they always pay for me my debt and will pay them later when I find some money to pay them. the good thing about them is they don't give me an ultimatum to pay my debt, they give me free time to pay. Anyway, the question here is talking about huge amount of debt which is no doubt a big problem for the debtors. I won't regret paying it with my cryptocurrencies since things like this can happen nowadays we should ready for something like this to happen to us.

I don't see any problems here. A married couple has a million dollars in debt to the IRS, which they do not deny. At the same time, they have about seven million dollars in cryptocurrency. However, they do not want to withdraw some of their cryptocurrency assets, possibly due to the fact that they expect profit.
These difficulties are not the tax authorities. They rightly suggested to the couple to voluntarily pay off the debt at the expense of savings in cryptocurrency. They cannot withdraw the cryptocurrency and forcibly repay the debt at the expense of it, since they do not have access to the private keys of their wallets. If the tax debt is not paid, the tax service may well enforce the property of the married couple through the court. This couple, therefore, has a choice.

While the couples move is understandable, the reaction from the IRS is too. Only death and taxes are certain so if you are a smart person you calculate that in your investment plan. As for attempt to confiscate or seize the money, it´s just as it is everywhere. If you own money to the state, they are eager to "motivate" you to pay asap. If the state owns you money, it could last 2-3 months until something happens

The IRS can go jump in a lake because taxation is theft. Shouldn't have to pay these thugs a dime no matter what the circumstances.

 So after having read that summary i cant really understand how that couple thought the IRS would let them of the hook for their liabilities just because most of their money ( 7 million) was tied up in crypto currency. I mean fair enough if they were to make an argument that they needed a month or so to liquidate the money to discharge the liability but asking for 6 years seems to be a bit much u cant really claim bankruptcy or being unable to discharge your debts (whether taxes or banks loans or whatsoever) while having that much in assets whether that be in Cryptocurrencies, real estate, stocks etc. ( unless of course you hadn't declared your crypto holdings and purchases in the first place but that's another scenario all together, Incidentally another reason why NO-KYC exchanges are so highly valued)

As far as any tax authority is concerned ( assuming they know about your crypto holdings) what they demanded in this case seems pretty fair. Also wouldn't the IRS letting them off the Hook here only encourage ( setting a legal precedent) people to buy crypto currencies come tax season as a method of avoiding your tax liabilities.

If it was me I’d just file for bankruptcy & deny all knowledge of bitcoin. I’d say that I got hacked or something & don’t have access to those coins any more. There’s no way I’d be selling all of my bitcoin to pay debts.