[2017-08-29] It Looks Like New Bitcoin Millionaires Are Avoiding the IRS

[pitham1]

At one point I had three law firms on retainer burning through about $250,000 of my money:  a Bitcoin savvy federal felony criminal defense firm [in CA], a special federal civil asset forfeiture defense firm [in CO], and a federal tax law firm specializing in Bitcoin tax law [in NY].  So from direct experience:  you owe the tax the second you convert your crypto to fiat and realize a gain over what the price was in fiat when you bought it.  Normally you can wait until the end of the year to fill out your Schedule D and report all your gains (minus all your losses) and then pay all the tax at once.  But if you have a large underpayment of taxes for the year there will be penalties and interest charged because you did not pay the taxes on time throughout the year when you realized the actual gain at the time you sold the crypto.

Some people might misinterpret that as saying you don't owe taxes when you trade crypto, as long as you don't tough fiat. Taxes are due when you convert crypto (to fiat, another crypto or anything else).

[BurtW]

If you don´t have a job in the US you can cash out 38000 $ worth of BTC per year without paying a single
$ in taxes. If you are content with a modest lifestyle, this amount could actually be enough to live off

Besides, you could always use a debit card that can be funded using BTC and pay at a merchant
directly. If you pay for clothes, groceries and so on using a debit card like this, the 38000 $ could
be sufficient to pay for the remaining costs like rent.

Where are you getting this?  Please post a reference to the appropriate regulations.  Where did you get the $38,000 amount?  Even if you end up owing no taxes you still have to fill out the Schedule D and account for your capital gains and losses.

BTW using a debit card to pay for things directly in BTC does not help you as far as the IRS is concerned.  When you buy something for BTC you have to account for the transaction as if you converted the BTC to cash (causing a capital gain or loss) then used the cash to purchase the item.  So if you cashed in the $38K in BTC with no tax your use of the debit card would add to that, possibly pushing you over the magic $38,000 number and causing you to have to pay tax.

For example:  I once bought a case of girl scout cookies using BTC so in my books I took a capital gain on the BTC for that transaction at the value of the cookies I got.

[bbc.reporter]

@BurtW. That is why I reckon that Monero will be the cryptocoin of the future for the darknet and for questionable and corrupt dealings. From what you are saying, I know that the IRS will still try and get you but this might be the case of technology catching up with the system.

Was it not disruption that lead some of us to the cryptospace?

[dreamhouse]

If you use one address once, it will be very difficult for them to track. However, this will create big trouble for yourself also.

[BurtW]

If you use one address once, it will be very difficult for them to track. However, this will create big trouble for yourself also.

I use an HD wallet (Trezor), never use any address more than once, not a problem at all. 

You must have an antiquated wallet if address reuse is an issue for you.

[Nibeloss]

This is silly. to earn on bitkoin quite good money and deviate from non-payment of taxes. This can lead to the collapse of your investments and all profits. As they say, you earn. Give and others too.

[Nibeloss]

This is silly. to earn on bitkoin quite good money and deviate from non-payment of taxes. This can lead to the collapse of your investments and all profits. As they say, you earn. Give and others too.