[2019-06-15] IRS turning its attention to recreational bitcoin investors

[o_e_l_e_o]

What gains? There are no gains until you sell any cryptocoin for fiat later. Does the American government tax people for paper gains from holding stocks.

The IRS says that trading a cryptocurrency for another cryptocurrency is a taxable event, even if the trade never touched fiat in any way. If you are using BTC to day trade an altcoin, or using a stable coin like USDT to day trade BTC, every single buy/sell/trade needs to be declared and have tax paid on it based on the market value in USD at the time of the trade.

If overall you lost money in a financial year from trading crypto, you can file those losses to offset taxes you will pay on other income.

[bbc.reporter]

@o_e_l_e_o. Would trading baseball cards for basketball cards among sports enthusiasts then also be a taxable event? For the lack of laws defining cryptocoins, I reckon they can only be something similar to collectibles.

[Sithara007]

@o_e_l_e_o. Would trading baseball cards for basketball cards among sports enthusiasts then also be a taxable event? For the lack of laws defining cryptocoins, I reckon they can only be something similar to collectibles.

Well... this is a very good point.

I have no issues in case the government is taxing the profits from crypto-to-fiat conversion. They can even implement VAT or GST over fiat-to-crypto conversion as well. But what about selling one crypto to purchase another cryptocurrency? This is taxable in some of the territories and in ideal case there should not be any tax burden on such trades. Then another difficult question arises. What about selling crypto to Tether or other stablecoins? I would say that Tether is just another crypto and it should not be taxed.

[DebitMe]

Is there interest in a licensed CPA to complete your tax returns that involve crypto? I have thought about this for awhile, but I am not sure if it is a service that people would be interested in or not? I also think there could be a market for just general advice or knowledge on how to handle different situations, basically paying a fee to have a CPA on call for any crypto tax questions.

[o_e_l_e_o]

Would trading baseball cards for basketball cards among sports enthusiasts then also be a taxable event?

Yes:

You must include in gross income in the year of receipt the fair market value of goods or services received from bartering.

Generally the view is that if you barter, swap, or trade, any goods or services, for tax purposes it should be treated as two separate trades - first you initially sell your good for x dollars, and then you immediately buy the other good in question for the same amount. You then have to pay tax on the money received on the initial sell. This is can be complicated further by how much profit you made from selling the original good, how much the price changed while you owned it, how long you have owned it for, etc.

I have no doubt swaps and trades happen all the time without people paying tax on them, but as far as the IRS are concerned, they want their cut even if no cash is involved. Crypto is no different.

[Kakmakr]

America are ready to go to war again and wars are expensive, so the IRS must find new ways to fund the war. < We already saw 1000s of soldiers being deployed to the Middle East again > 

The IRS are helping to fund these wars and the people who thought that they can escape death & taxes, will soon face that reality. I pay my taxes, because I know tax evasion is a criminal offense in my country and I am too busy making money to have to waste my time in jail. 

Pay the damn taxes and be done with it. 

[bbc.reporter]

Would trading baseball cards for basketball cards among sports enthusiasts then also be a taxable event?

Yes:

You must include in gross income in the year of receipt the fair market value of goods or services received from bartering.

Generally the view is that if you barter, swap, or trade, any goods or services, for tax purposes it should be treated as two separate trades - first you initially sell your good for x dollars, and then you immediately buy the other good in question for the same amount. You then have to pay tax on the money received on the initial sell. This is can be complicated further by how much profit you made from selling the original good, how much the price changed while you owned it, how long you have owned it for, etc.

I have no doubt swaps and trades happen all the time without people paying tax on them, but as far as the IRS are concerned, they want their cut even if no cash is involved. Crypto is no different.

Ok, can I pay them from my collection of NBA basketball cards? There was no cash in the exchange, only cards. If they tax for example they tax me 10% for a trade, will they accept a 10% portion of the card?

I reckon this is a government in desperation. It cannot do anything to the cryptospace except lockdown on users on exchanges that have KYC. What can the government do if you personally give me bitcoin for an altcoin?

[figmentofmyass]

Ok, can I pay them from my collection of NBA basketball cards? There was no cash in the exchange, only cards. If they tax for example they tax me 10% for a trade, will they accept a 10% portion of the card?

even if bartering is your only source of income, the IRS expects you to pay your taxes in USD. this is why people always speculate about bitcoin selling off as we approach tax day in april every year. the assumption is that people need cash to pay their taxes, so they sell coins.

What can the government do if you personally give me bitcoin for an altcoin?

they can't enforce anything in p2p situations. but that's not who they are coming after. they are going after the low hanging fruit---people who trade on exchanges and give up their KYC but still don't pay their taxes.

[o_e_l_e_o]

Ok, can I pay them from my collection of NBA basketball cards? There was no cash in the exchange, only cards. If they tax for example they tax me 10% for a trade, will they accept a 10% portion of the card?

It doesn't matter if there was no cash in the exchange, and it doesn't matter if you trade something for something of an exactly equal value. It doesn't even matter if you trade a pristine Exquisite Collection LeBron James card for a completely identical pristine Exquisite Collection LeBron James card. For the purposes of tax, you sold one for USD, realized a gain in USD on the sale, and then bought the other one for the exact same price in USD. You have to pay taxes in USD on your realized USD gains.

I reckon this is a government in desperation. It cannot do anything to the cryptospace except lockdown on users on exchanges that have KYC. What can the government do if you personally give me bitcoin for an altcoin?

I agree with you, I'm just stating the rules the IRS have issued. Any trade from crypto to crypto, even without touching fiat, is a taxable event if you are a US citizen.

[DebitMe]

Ok, can I pay them from my collection of NBA basketball cards? There was no cash in the exchange, only cards. If they tax for example they tax me 10% for a trade, will they accept a 10% portion of the card?

It doesn't matter if there was no cash in the exchange, and it doesn't matter if you trade something for something of an exactly equal value. It doesn't even matter if you trade a pristine Exquisite Collection LeBron James card for a completely identical pristine Exquisite Collection LeBron James card. For the purposes of tax, you sold one for USD, realized a gain in USD on the sale, and then bought the other one for the exact same price in USD. You have to pay taxes in USD on your realized USD gains.

I reckon this is a government in desperation. It cannot do anything to the cryptospace except lockdown on users on exchanges that have KYC. What can the government do if you personally give me bitcoin for an altcoin?

I agree with you, I'm just stating the rules the IRS have issued. Any trade from crypto to crypto, even without touching fiat, is a taxable event if you are a US citizen.

To take it beyond that, the IRS has explicitly stated that really anything besides property cannot be exchanged tax free. There used to be a loop hole around what BBC was saying whereby it could possibly be deemed a like kind exchange (still needs to be reported which I am sure no one did so still against the law), but that was closed and explicitly stated as only applying to real estate.

[timerland]

This is what the IRS does very well. Making criminals of innocent people like you.

The Internal Revenue Service has a message it wants to get out to recreational bitcoin investors who think they can dodge taxes on their cryptocurrency gains — it knows what’s going on, and people won’t be able to get away with it for long.

Instead of this, wouldn't a better use of their resources and time better directed to investigating certain multibillion and transnational companies for their tax evasion behavior? But of course, they'd like to target everyday Joes instead, with extremely tough tax codes that are hard to understand for specific circumstances.

It comes across like that they're trying to use some sort of scare tactic here, because they know that the enforce-ability of tracing all transactions over the blockchain, especially for anonymous blockchains, is quite hard. They can only track people effectively really through regulated channels.

Of course, you should lodge your capital gains, and I do believe that given the maturation of the tax code in regards to crypto, this increase in investigations in regards to CGT of crypto income will continue to grow. I'm not saying that people should evade tax. But instead of trying to regulate large corporations more effectively, they may be putting resources in the wrong direction.

[o_e_l_e_o]

Instead of this, wouldn't a better use of their resources and time better directed to investigating certain multibillion and transnational companies for their tax evasion behavior?

Absolutely. Go and do an internet search for "*Large corporation name* tax", and see what shows up. Amazon paid zero tax on $11 billion profits. Google move over $20 billion to Bermuda to avoid taxes. Starbucks in Europe paid an effective tax rate of 2.8%, while Apple paid less than 1%. There are billions and billions of dollars in unpaid, avoided, sheltered, and evaded corporation tax, but of course you can't annoy the the companies who have bought out 99% of the politicians. Much easier to go after the average Joe who is trading a couple of hundred or thousand dollars of crypto.

They can only track people effectively really through regulated channels.

Pretty much this. Everyone knows that "cash in hand" jobs are used for tax evasion, but they are still commonplace because they are near impossible to clamp down on. Peer to peer crypto trading is similarly difficult to regulate, provided you aren't using address which are somehow tied to your identity, such as from an exchange you have completed KYC on.

[gentlemand]

Instead of this, wouldn't a better use of their resources and time better directed to investigating certain multibillion and transnational companies for their tax evasion behavior? But of course, they'd like to target everyday Joes instead, with extremely tough tax codes that are hard to understand for specific circumstances.

Those corporations aren't tax evading. They're tax avoiding. They have enough lawyers to know that whatever they pull stands up to scrutiny even if it's offensive. That's perfectly legal and the conditions to foster it are created by legislators in the first place. If it's unintentional then that reflects poorly on their thoroughness.

[PassThePopcorn]

Instead of this, wouldn't a better use of their resources and time better directed to investigating certain multibillion and transnational companies for their tax evasion behavior? But of course, they'd like to target everyday Joes instead, with extremely tough tax codes that are hard to understand for specific circumstances.

Those corporations aren't tax evading. They're tax avoiding. They have enough lawyers to know that whatever they pull stands up to scrutiny even if it's offensive. That's perfectly legal and the conditions to foster it are created by legislators in the first place. If it's unintentional then that reflects poorly on their thoroughness.

As simple as the bold, they have enough lawyers...it's just a PITA to deal with large corporations because even if they are wrong they can make it a long drawn out process where in the end it took more time/effort/money to go after them than the government receives for doing it...
IRS: We are auditing you
Them: Here are a few hundred thousand transactions have fun dealing with them
Lawyers: Here's more BS for you to look through

[DebitMe]

Instead of this, wouldn't a better use of their resources and time better directed to investigating certain multibillion and transnational companies for their tax evasion behavior? But of course, they'd like to target everyday Joes instead, with extremely tough tax codes that are hard to understand for specific circumstances.

Those corporations aren't tax evading. They're tax avoiding. They have enough lawyers to know that whatever they pull stands up to scrutiny even if it's offensive. That's perfectly legal and the conditions to foster it are created by legislators in the first place. If it's unintentional then that reflects poorly on their thoroughness.

As simple as the bold, they have enough lawyers...it's just a PITA to deal with large corporations because even if they are wrong they can make it a long drawn out process where in the end it took more time/effort/money to go after them than the government receives for doing it...
IRS: We are auditing you
Them: Here are a few hundred thousand transactions have fun dealing with them
Lawyers: Here's more BS for you to look through

That's not entirely true. As someone who has handled audits for multi billion dollar companies there are instances where massive excel files are handed over, but that is only when requested as backup. None of these companies are avoiding taxes by making it too hard to audit them. When an audit happens, the IRS sends IDR's of exactly what they want and if you dont provide it in a format they find acceptable, they have no issues requesting more or for you to do the work to summarize it and will access tax based on what they can find if you dont comply.

[squatter]

Those corporations aren't tax evading. They're tax avoiding. They have enough lawyers to know that whatever they pull stands up to scrutiny even if it's offensive. That's perfectly legal and the conditions to foster it are created by legislators in the first place. If it's unintentional then that reflects poorly on their thoroughness.

As simple as the bold, they have enough lawyers...it's just a PITA to deal with large corporations because even if they are wrong they can make it a long drawn out process where in the end it took more time/effort/money to go after them than the government receives for doing it...
IRS: We are auditing you
Them: Here are a few hundred thousand transactions have fun dealing with them
Lawyers: Here's more BS for you to look through

I'm guessing you've never been on the wrong side of government agencies before. You have it backwards. The IRS is happy to have a long drawn out process -- they will add financial penalties all along the way and even threaten you with criminal proceedings and prison time. You can't just drop endless undecipherable papers on the IRS. If you don't provide exactly what they want in the format they require, they will ignore you, say your company is noncompliant, and move forward with enforcement actions against you.

[bbc.reporter]

Instead of this, wouldn't a better use of their resources and time better directed to investigating certain multibillion and transnational companies for their tax evasion behavior? But of course, they'd like to target everyday Joes instead, with extremely tough tax codes that are hard to understand for specific circumstances.

Those corporations aren't tax evading. They're tax avoiding. They have enough lawyers to know that whatever they pull stands up to scrutiny even if it's offensive. That's perfectly legal and the conditions to foster it are created by legislators in the first place. If it's unintentional then that reflects poorly on their thoroughness.

Agreed. Those big corporations also often have the political connections to make some tax avoidance intentional hehehe.

Also, some banks help them evade taxes.

[DebitMe]

Instead of this, wouldn't a better use of their resources and time better directed to investigating certain multibillion and transnational companies for their tax evasion behavior? But of course, they'd like to target everyday Joes instead, with extremely tough tax codes that are hard to understand for specific circumstances.

Those corporations aren't tax evading. They're tax avoiding. They have enough lawyers to know that whatever they pull stands up to scrutiny even if it's offensive. That's perfectly legal and the conditions to foster it are created by legislators in the first place. If it's unintentional then that reflects poorly on their thoroughness.

Agreed. Those big corporations also often have the political connections to make some tax avoidance intentional hehehe.

Also, some banks help them evade taxes.

Dude, stop with the FUD. All tax avoidance is intentional, that is the definition of tax avoidance and there is nothing illegal about it. It is simply using the tax rules to your advantage, anyone can do it.

How do some banks help corporations evade taxes?  Your just spreading nonsense.

[o_e_l_e_o]

All tax avoidance is intentional, that is the definition of tax avoidance and there is nothing illegal about it.

I think his point is that many of these multi-national multi-billion dollar companies spend a not insignificant amount of money lobbying, buying/paying politicians, making "gifts", etc., with the proviso that these politicians will then pass legislation to help them reduce or avoid their taxes. It's not illegal, sure, but it isn't exactly ethical.

How do some banks help corporations evade taxes?  Your just spreading nonsense.

Did you hear of the Panama Papers? Over 500 banks registered over 15,000 shell companies with the one off shore service provider that those documents leaked from. Deutsche Bank has had employees convicted for facilitating almost a billion dollars of tax evasion, with investigations ongoing. UBS was fined over 4 billion dollars for helping clients evade taxes. Santander is under investigation for over 11 billion dollars of suspected tax evasion. The list goes on. The biggest banks in the world frequently help clients to evade taxes.

[Carlton Banks]

America are ready to go to war again and wars are expensive, so the IRS must find new ways to fund the war. < We already saw 1000s of soldiers being deployed to the Middle East again >  

Right, armies all over the world are using (well, borrowing against future) taxes to murder milllons of innocent people over resources
 

The IRS are helping to fund these wars and the people who thought that they can escape death & taxes, will soon face that reality. I pay my taxes, because I know tax evasion is a criminal offense in my country and I am too busy making money to have to waste my time in jail.  

Pay the damn taxes and be done with it.  

how about SELL YOUR FREEDOM MONEY AND BE DONE WITH IT


all of you on this page are a bunch of selfish assholes

satoshi made this so we could use it as a tool against the corruption in this so-called democratic system, and the only thing you can think about is saving your tiny little asses.

pussies, each and every single one of you. You don't deserve the rights Bitcoin gives you, please sell it to someone who values those rights

because if the big-bad government told you to give up 100% of your Bitcoin in taxes, you'd all do it anyway. It threatens their corporate monopoly you idiots, you don't even understand what's going on here