IRS sniffing around Coinbase

[chesthing]

I wonder how many traders have reported profits and losses?
http://fortune.com/2016/11/20/irs-bitcoin-tax-evasion-case/
This is where being a shitty trader (like myself) actually could end up being a good thing. Have you made a fuck-ton of money with bitcoin over the last couple years trading? better look behind your shoulder. What's even more interesting is, the irs treats bitcoin as property not as currency. So, everthing you ever "bought" with btc is supposed to be reported.
Just in case a mod decides to delete this post as it's not related to speculation, you are outayourmind if you don't think this is bearish news for the bitcoin price.

[quake313]

One would have to be stupid to think that trading on a US exchange is safe from the IRS. I would hope people with some common sense planned ahead if they did so.

[anonymoustroll420]

One would have to be stupid to think that trading on a US exchange is safe from the IRS. I would hope people with some common sense planned ahead if they did so.

Most people knew that if you bought bitcoin and then later sold them that you must report that to the IRS.

However not a lot of people realize that if you buy bitcoins and spent them on something, you must report your profit/loss from the time you purchased them till the time you spent them, to the IRS. In fact, many people had the belief that if you did not interact with fiat you did not need to report your transactions to the IRS, but that is not the case.

Also transactions from people who are not coinbase users but transacted with a business that uses coinbase as a payment processor may now have those transactions handed over to the IRS.

[chesthing]

I find the defining by the irs of bitcoin as "property" rather than "currency" more interesting. I've never bought or sold a single thing with bitcoin because I never saw the advantage over fiat. This could get really ugly for bitcoin users if the irs wants to pursue this.

[chesthing]

One would have to be stupid to think that trading on a US exchange is safe from the IRS. I would hope people with some common sense planned ahead if they did so.

Most people knew that if you bought bitcoin and then later sold them that you must report that to the IRS.

I don't think that's true at all, that most people realized that. If you bought bitcoin at, say, $250 then sold it for, say, $240 and took a loss, wtf would think they needed to report that?!

[JimboToronto]

One would have to be stupid to think that trading on a US exchange is safe from the IRS. I would hope people with some common sense planned ahead if they did so.

Hooray for anonymous off-exchange trading.

It's like trying to tax a street hooker who takes her "fee" to buy dope from a street dealer. No names, no banks, no taxes.  

[anonymoustroll420]

I find the defining by the irs of bitcoin as "property" rather than "currency" more interesting. I've never bought or sold a single thing with bitcoin because I never saw the advantage over fiat. This could get really ugly for bitcoin users if the irs wants to pursue this.

That is the current tax code. It's just that up till now they were having a difficult time enforcing that tax code due to the perceived pseudonymity of bitcoin. But now their strategy seems to be to go after businesses like coinbase that have lots of transaction data on users. Anyone who ever did business with a large bitcoin business is at risk here, which is the vast majority of users. They only need to know about a couple of transactions from your wallet and then they can use blockchain analysis to get the rest. This is why this case is very important. Unfortunately I don't think coinbase stands a chance of fighting this. This is bearish but I don't think most of the moonshot traders actually give a shit, especially since we won't see the true effect of this for many months/years when the IRS starts properly investigating this stuff, so price wise I'm not sure it will have much of an impact.

Hooray for anonymous off-exchange trading.

It's like trying to tax a street hooker who takes her "fee" to buy dope from a street dealer. No names, no banks, no taxes.  

Problem is you take your anonymous Bitcoins and buy a pizza off of a merchant that uses coinbase for payment processing. The IRS pull that data from coinbase. Now the IRS know one of your Bitcoin addresses and your name and delivery address of said pizza. They can then see what other transactions happened on that Bitcoin address and other Bitcoin addresses that are spend-linked to it. If you bought enough pizzas they will have every transaction that ever happened in your wallet. So I hope you used an anonymous drop to get your pizzas.

[chesthing]

I find the defining by the irs of bitcoin as "property" rather than "currency" more interesting. I've never bought or sold a single thing with bitcoin because I never saw the advantage over fiat. This could get really ugly for bitcoin users if the irs wants to pursue this.

That is the current tax code. It's just that up till now they were having a difficult time enforcing that tax code due to the perceived pseudonymity of bitcoin. But now their strategy seems to be to go after businesses like coinbase that have lots of transaction data on users. Anyone who ever did business with a large bitcoin business is at risk here, which is the vast majority of users. They only need to know about a couple of transactions from your wallet and then they can use blockchain analysis to get the rest. This is why this case is very important. Unfortunately I don't think coinbase stands a chance of fighting this. This is bearish but I don't think most of the moonshot traders actually give a shit, especially since we won't see the true effect of this for many months/years when the IRS starts properly investigating this stuff, so price wise I'm not sure it will have much of an impact.

Coinbase has millions of users. I would certainly think the irs will be going after some of the largest buyers/sellers to make an example, and that will happen pretty quickly. I think it will have a stifling effect on your average person who plays with it, which will definitely effect the price.
I'm not sure what Jimbo is talking about, but he should probably should keep his trap shut about his activities.

[JimboToronto]

They only need to know about a couple of transactions from your wallet and then they can use blockchain analysis to get the rest..

Only if you're foolish enough to keep all your coins in one wallet. As along as your coins are kept in as many separate wallets as possible, your risk is minimized.

Only wallets that can be traced to exchanges, personally identifiable purchases, payment services, online wallet apps, etc., are at risk of government snooping.

Be sure to separate your wallets into those with compromised anonymity and those that are fully anonymous.

[JimboToronto]

I'm not sure what Jimbo is talking about, but I think he probably should keep his trap shut about his activities.

Just speaking hypothetically of course. I never said I was doing any of this.

I'm neither a hooker nor a dope dealer nor a tax evader. Those things are illegal almost everywhere.

[chesthing]

Think about how fucked up this is. You buy something with cash or debit/credit card you don't report it, but you need to report every purchase using bitcoin? this is a serious attack against crypto, make no mistake.

[spazzdla]

I find the defining by the irs of bitcoin as "property" rather than "currency" more interesting. I've never bought or sold a single thing with bitcoin because I never saw the advantage over fiat. This could get really ugly for bitcoin users if the irs wants to pursue this.

It is great on the web there is zero reason to fill things out..  The company requires no information of mine to receive value.

[MingLee]

There might be some people who will get caught with something like this, however I would assume that it is far more likely that the IRS is going to target exchange users and not the average users who moved funds through the site at one time or another.

If there really was something that a lot of people should be worried about I would assume more people would be talking about it; something that isn't really happening yet. If they find something then it might start to generate some publicity.

[Wind_FURY]

This will be another legal and a "paper trail" headache for the IRS. Imagine this scenario, I buy $100,000 worth of Bitcoins at Coinbase, transfer them to different addresses using an HD wallet. I gamble some in a sportsbetting website, buy altcoins with some at 3 different altcoin exchanges and then transfer them back to different addresses in my HD wallet. I cash out some using Local Bitcoins for a person to person transaction.

How will the IRS figure that out. Also let us pretend I use VPN + Tor since I am also a dark market user.

[pooya87]

I wonder how many traders have reported profits and losses?
http://fortune.com/2016/11/20/irs-bitcoin-tax-evasion-case/
This is where being a shitty trader (like myself) actually could end up being a good thing. Have you made a fuck-ton of money with bitcoin over the last couple years trading? better look behind your shoulder. What's even more interesting is, the irs treats bitcoin as property not as currency. So, everthing you ever "bought" with btc is supposed to be reported.
Just in case a mod decides to delete this post as it's not related to speculation, you are outayourmind if you don't think this is bearish news for the bitcoin price.

Don't live in US > Don't care about IRS > Don't use Coinbase > Don't use large amounts to draw attention > or use face to face exchange with cash if you are so worried
where i live nobody cares about bitcoin which is a bad thing for adoption but the only good side is that there is no taxes ever on it.

of course you can always pay your freaking taxes and sleep easy at nights! just like when you do while trading Forex or stocks.

[jondeen707]

This will be another legal and a "paper trail" headache for the IRS. Imagine this scenario, I buy $100,000 worth of Bitcoins at Coinbase, transfer them to different addresses using an HD wallet. I gamble some in a sportsbetting website, buy altcoins with some at 3 different altcoin exchanges and then transfer them back to different addresses in my HD wallet. I cash out some using Local Bitcoins for a person to person transaction.

How will the IRS figure that out. Also let us pretend I use VPN + Tor since I am also a dark market user.

That's right, I don't see how they can effectively enforce it either. Untangling a series of transactions you described would not be worth the effort (unless you are a high-profile target )and definitely cannot be automated.

[Foxpup]

This will be another legal and a "paper trail" headache for the IRS. Imagine this scenario, I buy $100,000 worth of Bitcoins at Coinbase, transfer them to different addresses using an HD wallet. I gamble some in a sportsbetting website, buy altcoins with some at 3 different altcoin exchanges and then transfer them back to different addresses in my HD wallet. I cash out some using Local Bitcoins for a person to person transaction.

How will the IRS figure that out. Also let us pretend I use VPN + Tor since I am also a dark market user.

How exactly are you planning to spend that kind of money? Are you just going to walk into, say, a Porsche dealership with a briefcase full of bills as though nobody's going to ask any questions?

[BitcoinHodler]

This will be another legal and a "paper trail" headache for the IRS. Imagine this scenario, I buy $100,000 worth of Bitcoins at Coinbase, transfer them to different addresses using an HD wallet. I gamble some in a sportsbetting website, buy altcoins with some at 3 different altcoin exchanges and then transfer them back to different addresses in my HD wallet. I cash out some using Local Bitcoins for a person to person transaction.

How will the IRS figure that out. Also let us pretend I use VPN + Tor since I am also a dark market user.

That's right, I don't see how they can effectively enforce it either. Untangling a series of transactions you described would not be worth the effort (unless you are a high-profile target )and definitely cannot be automated.

i assume you two have never used coinbase because the step one (the first line of Wind_FURY's comment) is how they can find out about you no matter what VPN you use.

when you sign up with Coinbase you give them all your information and then deposit from your bank (i think credit card also) they again know all your information. so no matter what you do with the coins next your account and bank account are flagged  because of purchasing a large amount of bitcoin.

[alyssa85]

Think about how fucked up this is. You buy something with cash or debit/credit card you don't report it, but you need to report every purchase using bitcoin? this is a serious attack against crypto, make no mistake.

They think bitcoin is an asset, like shares, gold or property. So of course you have to report capital gains. If you bought shares with your debit card and then made a profit on selling it, you would have to report that too.

[jondeen707]

Think about how fucked up this is. You buy something with cash or debit/credit card you don't report it, but you need to report every purchase using bitcoin? this is a serious attack against crypto, make no mistake.

They think bitcoin is an asset, like shares, gold or property. So of course you have to report capital gains. If you bought shares with your debit card and then made a profit on selling it, you would have to report that too.

I don't see a problem here either. The absolute same rules apply to bitcoin as an asset.