IRS sniffing around Coinbase

[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.

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.

I agree that they may flag your account because of a large-volume purchase. VPNs won't help, that's right, you'd need to get your account verified to transact with them. But what I really wanted to stress is that they will have a very hard time trying to figure out what you did with the coins.

[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.

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?

Who says I am going to spend all of it at one time? Besides there is the black market and there are ways to launder your money for a fee. Bitcoin just happen to make it all easier at some point of the process. Add a tumbler to your VPN + Tor usage then it would really be hard for the government to trace your trail.

[Foxpup]

Who says I am going to spend all of it at one time? Besides there is the black market and there are ways to launder your money for a fee. Bitcoin just happen to make it all easier at some point of the process. Add a tumbler to your VPN + Tor usage then it would really be hard for the government to trace your trail.

So, you plan to commit further crimes to cover up your first crime? That really only gets you so far, though I suppose it's an acceptable risk if you expect to get concurrent sentences. Carry on.

[Snorek]

You know what that ind of news looks like Oh look! Let's blame bitcoin as another great solution used by tax evaders general public will love it.
IRS are trying to look cool by targeting bitcoin because they can do very little vs. real way people are evading taxes, by using LEGAL means.
Tax optimization is a fact - no one care, it is legal. Another way creating shell companies and buying sending through them, again fully legal.

[MNDan]

They would be way better off going after general contractors and other independent workers who get paid in cash and never file. That being said, I've got no problem paying my long term capital gains if my $800 coins I bought ever turn a profit. :-)

[panju1]

They would be way better off going after general contractors and other independent workers who get paid in cash and never file. That being said, I've got no problem paying my long term capital gains if my $800 coins I bought ever turn a profit. :-)

Your $800 coins will turn profitable soon. We have oscillated between $730 and $750 for too long.
Another move upwards seems to be on the cards now. 

[0xfff]

If the IRS wants to come after me for $20 in capital gains, let them.  Dumb IRS will spend more money investigating that they would gain in taxes. You want your $0.03 cents IRS? 

[BingoDog]

If the IRS wants to come after me for $20 in capital gains, let them.  Dumb IRS will spend more money investigating that they would gain in taxes. You want your $0.03 cents IRS? 

I don't think so that you are target of IRS. They are after big fishes. If it's true that they are investigating Coinbase they are either sent from someone or have very clear goal what they want to achieve. Money laundering is a serious crime in US but not if it's in cents. :-)

[tunctioncloud]

That's why I lon't like mcuh Coinbase, they're too much in the light. That thing will never to Huobi or maybe Kraken.

[Searing]

Does not take much for stuff like this to go pear shaped. I was almost in trouble with sec in 2013 because
of buying a KNC titan scrypt miner for over 10k. Bank set up voice meeting speaker phone SEC. This was also
a week after IRS 2013 rules came out. I went back to CPA with new rules and fixed old miner on taxes and stuff to
show my legitness. SEC guy was fine. Banker guy who started all this because btc was evil in 2013
was embarssed and pissed. Brought up I was still unlawful by not filing taxes. Trying to screw me

Slapped my revised tax forms filed down on desk. Last I heard from SEC guy was why am I here?

If it all goes pear shaped and IRS starts to look stupid they will or IRS folk will over react to
Keep their jobs etc

Remember the IRS policy with coinbase as of now is if you use crypto and/or BTC.
You are likely a tax cheat.  Thus we want all files this being to the IRS so obvious.

This could be quite the witch hunt.

[leopard2]

It's Swiss banks drama all over again   

Many decades ago, people opened anonymous accounts, putting their trust in entities that they paid for. Swiss banksters salaries were paid by tax fugitives for decades. I am not saying tax evasion is good. However I think that a service provider that you pay, must work for you and protect you even if it means doom. Banks should have rejected tax fugitives, if they are not willing to fight for them until the bitter end.

Then, verification came along, anonymous accounts at Swiss banks were converted to verified accounts. All in the name of "fighting crime" LOL. A few years later, when the worlds biggest bullies came knocking their doors, the Swiss bankster traitors shoved their customers in front of a bus without thinking. 2008, the names of those people were given to the IRS (using "instant emergency law", means no legal base at all), many of their customers went to jail!

If I could go back in time I would buy alot of Bitcoin, but ONLY with cash.

A bitcoin bought from an exchange, verified and all, is not safe. You do not own it, it is merely "borrowed".

There is no time machine, and lots of people will be in trouble.  But they cannot complain because Coinbase, as opposed to UBS & Co., never promised secrecy.

Btw the article says Coinbase opened in 2015, so how can they provide data starting 2013?

[Red-Apple]

It's Swiss banks drama all over again   

Many decades ago, people opened anonymous accounts, putting their trust in entities that they paid for. Swiss banksters salaries were paid by tax fugitives for decades. I am not saying tax evasion is good. However I think that a service provider that you pay, must work for you and protect you even if it means doom. Banks should have rejected tax fugitives, if they are not willing to fight for them until the bitter end.

Then, verification came along, anonymous accounts at Swiss banks were converted to verified accounts. All in the name of "fighting crime" LOL. A few years later, when the worlds biggest bullies came knocking their doors, the Swiss bankster traitors shoved their customers in front of a bus without thinking. 2008, the names of those people were given to the IRS (using "instant emergency law", means no legal base at all), many of their customers went to jail!

If I could go back in time I would buy alot of Bitcoin, but ONLY with cash.

A bitcoin bought from an exchange, verified and all, is not safe. You do not own it, it is merely "borrowed".

There is no time machine, and lots of people will be in trouble.  But they cannot complain because Coinbase, as opposed to UBS & Co., never promised secrecy.

Btw the article says Coinbase opened in 2015, so how can they provide data starting 2013?

the difference is that you are surprised when you hear a Swiss bank gave their customer's private information to IRS but about Coinbase you are surprised to hear if they didn't give anything to IRS.

when Coinbase is in US then it is automatically assumed they already give up private information to government agencies.

[deisik]

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.

A mousetrap never runs after a mouse

They won't necessarily go after you exactly just because you bought $100,000 worth of Bitcoins at Coinbase. They will just sift through the Coinbase records to see who can be caught most easily, pick up a few of those poor fellas, make them into scapegoats and show them on the TV. On the other hand, if you don't live in the US, it seems that you have nothing to worry about so far, I guess. But better be safe than sorry, of course

[Kprawn]

These guys have been sniffing around Coinbase for a much longer time... I think. The people using regulated exchanges to hide illegal money

are plain stupid. You have to adhere to AML/KYC regulations and all transactions are traceable to individuals, so how are you going to hide

these illegal money? If you try to do that, you should get caught... Do not avoid paying taxes, it's a criminal offense. 

[Indrawan77]

It is a bad news for the traders especially the us traders, the government is trying all the best to caught all of the tax income evasion, so it's time to say goodbye to the tax free era, now all of your transactions and your wealth will be monitor by the irs and government

[talks_cheep]

I'm thinking about sending a termination letter to coinbase, asking them to REMOVE and DELETE all my info from their system. Do you think it will be enough to escape the hammer of IRS? I have bought and sold lots of coins on coinbase, so I'm very worried.

[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.

A mousetrap never runs after a mouse

They won't necessarily go after you exactly just because you bought $100,000 worth of Bitcoins at Coinbase. They will just sift through the Coinbase records to see who can be caught most easily, pick up a few of those poor fellas, make them into scapegoats and show them on the TV. On the other hand, if you don't live in the US, it seems that you have nothing to worry about so far, I guess. But better be safe than sorry, of course

Yeah this could be all for show and another fear mongering strategy used by the US government to discourage the use of Bitcoins and other cryptocurrencies. It will not be surprising if the ruling banks are trying to put pressure on the government to put a stop or even ban Bitcoin.

[Searing]

I'm thinking about sending a termination letter to coinbase, asking them to REMOVE and DELETE all my info from their system. Do you think it will be enough to escape the hammer of IRS? I have bought and sold lots of coins on coinbase, so I'm very worried.

Just got my account deleted from 2 years ago from cex.io they stated they keep info for 5 years..so I'd bet coinbase is the same or worse.

(ohhhh....scored $4.44 usd of dodge I forgot about ...before I pulled the plug!)

[Herbert2020]

It is a bad news for the traders especially the us traders, the government is trying all the best to caught all of the tax income evasion, so it's time to say goodbye to the tax free era, now all of your transactions and your wealth will be monitor by the irs and government

yeah but traders aren't trading on coinbase! they do it on other exchanges like bitfinex, bitstamp, btc-e and kraken. coinbase is as it was before a bad choice for trading and it is only good for new users to buy bitcoin the easy way.

and in case the taxes are tightened bitcoin traders move to exchanges that don't enforce the law like btc-e or they pay their taxes just like they pay taxes when trading Forex.

[Soros Shorts]

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.

The problem is a matter of practicality. It every transaction in your wallet needs to end up on IRS Schedule D then many people in the US would simply not use bitcoins. Furthermore, you can no longer file 1040 EZ even if you were making minimum wage but you happened to have bought/sold a small amount of bitcoins.