What is the current tax status of crypto-currency in the USA?

[Pipdips]

With coinbase which is a shady company dealing your information to others and giving it to government as well and basically allows you to be watched by everyone for every move you do is still better than most decentralized ones when it comes to actually cashing out your money to dollars. Its both easy and also fast for it and there is still no better way. Decentralized ones still require a ton of work on cashing out process plus volume still sucks compared to others.

How is it different cashing out from other exchanges compared to Coinbase?

[exstasie]

How is it different cashing out from other exchanges compared to Coinbase?

It's not. Not really, unless you're trading P2P. But trading P2P like on Localbitcoins = paying huge premiums and giving out KYC documents left and right.

All the large exchanges (Binance, Coinbase, Kraken, and so on) respond to US government requests for user information. Coinbase happens to have the biggest target on their back because of their position as the largest US-based exchange. That's why they were targeted by the IRS in a federal lawsuit seeking customer information. They fought it but ended up being ordered to hand over information on 14,355 customers. I think that's what he's referring to.

[RealMalatesta]

I think the difference is depending on what other exchanges you talk about. I mean if you use exchanges like poloniex or binance they are mainly alt to btc or vice versa with maybe usdt sprinkled in there but there is no cashing out to your own bank account as far as I know.

Coinbase offers you the chance to actually trade and then send money to your own bank account. They are horrible and they are definitely the worst in customer service however if you are American and want to buy bitcoin they are by far the leaders of that, you can send money from your bank to them and then buy bitcoins, do your trades and then end up sending back money to your bank account. There are local exchanges like that all around the world and Coinbase is the leader in USA, there is no other difference than that.

[Pipdips]

All the large exchanges (Binance, Coinbase, Kraken, and so on) respond to US government requests for user information. Coinbase happens to have the biggest target on their back because of their position as the largest US-based exchange. That's why they were targeted by the IRS in a federal lawsuit seeking customer information. They fought it but ended up being ordered to hand over information on 14,355 customers. I think that's what he's referring to.

Thanks for clarifying that.  I ponder that the 14 thousand customers could be high rollers with big accounts or very big purchases in the six figures or more.  (not my account!)

Coinbase offers you the chance to actually trade and then send money to your own bank account. They are horrible and they are definitely the worst in customer service however if you are American and want to buy bitcoin they are by far the leaders of that, you can send money from your bank to them and then buy bitcoins, do your trades and then end up sending back money to your bank account. There are local exchanges like that all around the world and Coinbase is the leader in USA, there is no other difference than that.

In regards to sending funds out of Coinbase and bank into bank accounts, how are other exchanges different?  Are other exchanges less reliable in some ways?

Certainly we can bash Coinbase (I sometimes do) but they are probably backed up by the most money in case of emergencies.  And also Coinbase has never been hacked before, am I right?

[fiulpro]

Well you should know that it is not completely untraceable once a particular bank account has been associate with it , when I think about myself , my bank account my KYC all actually merges into one .
Therefore due to your PAN card and other identity cards Being used in your wallets you can be easily traced and unfortunately they are considered virtual investments and ate highly taxable .
I think if you could use some method where you don't involve any of your documents , you could really get off of this thing.
But not really sure , because every government sector is also comprising IT one...come on people are preety intelligent there too that's why they have that job.

[davinchi]

Well you should know that it is not completely untraceable once a particular bank account has been associate with it , when I think about myself , my bank account my KYC all actually merges into one .
Therefore due to your PAN card and other identity cards Being used in your wallets you can be easily traced and unfortunately they are considered virtual investments and ate highly taxable .
I think if you could use some method where you don't involve any of your documents , you could really get off of this thing.
But not really sure , because every government sector is also comprising IT one...come on people are preety intelligent there too that's why they have that job.

I believe that satoshi knows about this fully which is why he created a system in crypto codes that will ever make a transaction to be traceable no matter the technology that they use. We caused all these exposure of our self to the government, when bitcoin had already created a decentralized system, but we virtually created and turned it around and many people started coming up with a centralized system.

It is only when such transaction passes through the centralized system that it becomes traceable by the government, provided it is fully a decentralized system, I doubt if the government would ever trace such transaction, and this is why we should try ad solely use bitcoin alone, if we have a transaction that would involve keeping the eye of government off it.

[silversurfer1958]

Is crypto-currency actually taxable in the USA?

It is confusing for me to figure the tax issue out. If a person buys Bitcoin and then sends it all around the place, uses it for trading on multiple exchanges, makes thousands of trades, then buys coins like BNB for trading more, then sends portions of coins to wallets and back and forth.

How can that be traced? Even with block chain ledger, it seems impossible to trace that much activity.
How many people are washing their coins to make them untraceable?
How can the IRS determine and verify who owns coins?

Are they going to tax people who lose money from crypto-currency?

Does anybody else think it is confusing?

They can tax based on the amount deposited on the bank or credit card of the people. The US government always has surveys on the work and income of the people to easily manage. If they see anomalies in transfers, they will investigate and record different taxes for each job.
in Asian countries still do the same.

[Pipdips]

What if you buy some Bitcoin, send it into a mixer. Now that Bitcoin is not traceable. How can anybody tax you on that coin?

If the Tax Man asks about the Bitcoin just say it was lost. It's gone so you should not have to pay taxes on something that was lost.

Let's say somebody used their bank debit card to buy a pound of physical gold bar.  Is the Tax Man going to knock on their door and say they need to pay taxes on that?  A person can say it was just lost and is not in their possession anymore.

[Pipdips]

The main thing is that the tax inspectorate does not have any evidence that you actually own a cryptocurrency or have income from a cryptocurrency market.  Otherwise, no conversations will help and you will have to answer for unrecorded income.

This is how I feel about it too, and by the way, I am not trying to evade taxes in any way.  It just seems like privately holding Bitcoin should be completely non-taxable.

Since the IRS is starting to consider that Bitcoin is "property" it is not the same thing as real estate property, or even intellectual properties - because there is no paperwork legally establishing that ownership.  Although Bitcoin is not "anonymous" it is still in the realm of being an anonymous asset class, and I hope that it should stay that way.

[MonsterV]

The main thing is that the tax inspectorate does not have any evidence that you actually own a cryptocurrency or have income from a cryptocurrency market.  Otherwise, no conversations will help and you will have to answer for unrecorded income.

Maybe they don't have that proof if you don't trade it in exchange. Just look at the Binance US exchange that is used exclusively for US citizens because Binance cannot combine global and US users, because the US has strict regulations on exchanges.

Well not only at binance but bittrex, KuCoin and other exchanges must have the same rules for US citizens. Where they have to do the KYC to report their taxes, not only that, many platforms do not accept US citizens because US regulations are quite strict with the crypto platform.

[exstasie]

It just seems like privately holding Bitcoin should be completely non-taxable.

Holding BTC is non-taxable. Selling it and realizing capital gains is a different story. It's the same as with any property; gold, stocks, real estate, whatever.

Since the IRS is starting to consider that Bitcoin is "property" it is not the same thing as real estate property, or even intellectual properties - because there is no paperwork legally establishing that ownership.

Yep, it's like a bearer instrument. That makes tax enforcement difficult but it doesn't change how the IRS sees it. If you buy anything for $1 and sell it for $2, they want a piece of the action.

[Saisher]

Is crypto-currency actually taxable in the USA?

It is confusing for me to figure the tax issue out. If a person buys Bitcoin and then sends it all around the place, uses it for trading on multiple exchanges, makes thousands of trades, then buys coins like BNB for trading more, then sends portions of coins to wallets and back and forth.

How can that be traced? Even with block chain ledger, it seems impossible to trace that much activity.
How many people are washing their coins to make them untraceable?
How can the IRS determine and verify who owns coins?

Are they going to tax people who lose money from crypto-currency?

Does anybody else think it is confusing?

I find it confusing they state that they are going to serve it to over 10,000 US cryptocurrency investors but how are they going to track each and every trade, they can only track those trades on a centralized exchange, but not possible if a user will trade his coins in a decentralized exchange, and of course we also have a peer to peer transactions, that leaves them a lot of loads.

[Irvinn]

The main thing is that the tax inspectorate does not have any evidence that you actually own a cryptocurrency or have income from a cryptocurrency market.  Otherwise, no conversations will help and you will have to answer for unrecorded income.

Maybe they don't have that proof if you don't trade it in exchange. Just look at the Binance US exchange that is used exclusively for US citizens because Binance cannot combine global and US users, because the US has strict regulations on exchanges.

Well not only at binance but bittrex, KuCoin and other exchanges must have the same rules for US citizens. Where they have to do the KYC to report their taxes, not only that, many platforms do not accept US citizens because US regulations are quite strict with the crypto platform.

In general, I completely agree with you, because due to the massive requirements of KYC taxes can not be avoided. The fact is that in any country, every citizen personally submits a declaration of his income to the tax authorities.  But this does not mean that every declaration is checked.  If you selectively check and find errors, then the person will have problems.  If someone has suspicions that there are left-wing incomes, then the tax office will immediately get down to business.  I think this system works that way.

[Pipdips]

Over the past year I have moved and exchanged and transfered my funds all over the place through multiple wallets (cold and hardware), multiple exchanges, I have been gifted coin, I have made coin through Coinbase Earn, I have switched it from coin to cash and cash to coin, from my bank account back into other exchanges, I have traded for stablecoins, I have bought BNB that was used for trading expenses, then I have also done trades, and I mean thousands and thousands of small fast trades. I did my very best to track my funds by recording it all on paper but:

How much do I owe in taxes? It is almost impossible to say because two different currencies are colliding and Bitcoin is totally unstable, You can not tax something that keeps moving like that.

[exstasie]

Over the past year I have moved and exchanged and transfered my funds all over the place through multiple wallets (cold and hardware), multiple exchanges, I have been gifted coin, I have made coin through Coinbase Earn, I have switched it from coin to cash and cash to coin, from my bank account back into other exchanges, I have traded for stablecoins, I have bought BNB that was used for trading expenses, then I have also done trades, and I mean thousands and thousands of small fast trades. I did my very best to track my funds by recording it all on paper but:

How much do I owe in taxes? It is almost impossible to say because two different currencies are colliding and Bitcoin is totally unstable, You can not tax something that keeps moving like that.

Moving fiat to/from bank accounts and coins through mutiple wallets/exchanges isn't taxable. Receiving gifts isn't taxable, but the realized capital gains (when you sell) are. I'm not sure about the Coinbase Earn income.....probably negligible amounts right? It's probably self-employment income, which is reportable, but if you make less than $400 in SE income in the year it's not subject to the additional self-employment (FICA) taxes.

BTC/fiat and BTC/stablecoin trades are easy: they get reported on Form 8949 exactly as they are shown in your trade history. Trading altcoins against BTC requires an addition step: calculating the fiat value at the time gains/losses are realized. The IRS just wants consistency. You could probably use the daily Coinbase BTCUSD close on the day of any given trade. Tradingview calculates some altcoin markets to USD value, so maybe you could use those.

The BNB being used for trading fees is a bitch to figure out. You're on your own there.

[Pipdips]

Do they expect people to pay taxes on trades they lost money on?  Or is it just the wins?

[o_e_l_e_o]

Do they expect people to pay taxes on trades they lost money on?

You won't be expected to pay money on losses, but you will be expected to document and declare them. Doing so is actually beneficial for you; you can use your capital losses to offset your capital gains, meaning you pay less tax overall. If your capital losses are greater than your capital gains within a tax year, you can even use this to offset taxes you pay on gains from other sources (such as stocks), or even on your income tax. There is a cap on this at $3,000 per year, but you can roll any excess over to the next financial year as many times as you like.

For example, lets say in one year you made $2,000 from bitcoin, but at the same time, you lost $3,000 from altcoins. You would have a net loss of $1,000. You would owe no tax on your cryptocurrency activities, and you would be able to offset $1,000 in tax from elsewhere. If you had also gained $5,000 from stocks in that year, you would only have to pay tax on $4,000.

[Pipdips]

Do they expect people to pay taxes on trades they lost money on?

You won't be expected to pay money on losses, but you will be expected to document and declare them. Doing so is actually beneficial for you; you can use your capital losses to offset your capital gains, meaning you pay less tax overall. If your capital losses are greater than your capital gains within a tax year, you can even use this to offset taxes you pay on gains from other sources (such as stocks), or even on your income tax. There is a cap on this at $3,000 per year, but you can roll any excess over to the next financial year as many times as you like.

For example, lets say in one year you made $2,000 from bitcoin, but at the same time, you lost $3,000 from altcoins. You would have a net loss of $1,000. You would owe no tax on your cryptocurrency activities, and you would be able to offset $1,000 in tax from elsewhere. If you had also gained $5,000 from stocks in that year, you would only have to pay tax on $4,000.

How much tax do people pay after purchasing BNB that they use in trading?

How much tax do people pay from a transaction fee from sending crypto out of Coinbase?

How much tax do people pay when they convert the small remainders of coins at Binance into BNB?

How much tax do people pay for lost coin?

How much tax do people pay from washed coin?

How much tax do people pay from gifted coins?

How much tax do people pay from Coinbase Earn income?

When people buy coin at Coinbase they do not charge taxes it is just a transaction fee so how much are people expected to pay?

Why do none of the exchanges mention anything about taxes at the moments when all the transactions are being executed?

Is it the users fault for not understanding all the tax laws?

There are still too many unknown variables to take the IRS seriously about this. I think it is premature to start paying taxes on crypto. I think we are all looking at at least 3 years before ordinary people and ordinary traders are going to be expected to pay taxes for this stuff. Most people in the world still have no clue what is happening in the crypto world and that includes most governments are still completely puzzled about how this can adapt as a working asset class.

There are still people that are moguls of money in our society who think Bitcoin is invalid and they still think it was created out of thin air. You can't expect USA citizens to pay taxes on it since the president of the USA claims Bitcoin is essentially fake and bogus and not a valid form of money. The biggest investor Warren Buffett publicly bashes Bitcoin (although I suspect Buffett is already fully loaded up on Bitcoin and if not he plans to be). Bill Gates has slammed it too.

Once those 3 guys get on board then you can start thinking about taxing people but until then the wealthiest and most powerful people say it is just a ponzi scheme. Why follow the tax laws when the government does not yet consider it truly and genuinely taxable? The IRS is claiming that Bitcoin is "property" but they still think it is fake money. The IRS has prematurely launched these new tax rules and they know it.

[SirLancelot]

The main thing is that the tax inspectorate does not have any evidence that you actually own a cryptocurrency or have income from a cryptocurrency market.  Otherwise, no conversations will help and you will have to answer for unrecorded income.

This is how I feel about it too, and by the way, I am not trying to evade taxes in any way.  It just seems like privately holding Bitcoin should be completely non-taxable.

Since the IRS is starting to consider that Bitcoin is "property" it is not the same thing as real estate property, or even intellectual properties - because there is no paperwork legally establishing that ownership.  Although Bitcoin is not "anonymous" it is still in the realm of being an anonymous asset class, and I hope that it should stay that way.

Why do you think that bitcoin is not anonymous, but till now, it is still difficult to trace the transaction of bitcoin, if it was not anonymous as you think, it would have been quite so easy to trace all these hackers that has been stealing money from people. I understand that you can view some few details but not to be traced which is the main anonymity of the system we really want.

I know that we have privacy coins, and these ones claims that they have fully covered all these part where you can make transactions that will not been seen at all.  With bitcoin, it will still be very easy to evade tax and I think it is the more reason why bitcoin is the major threat to government and banks, you see that they care less about other crypto but focuses more on bitcoin because of its true decentralization.

[Pipdips]

Why do you think that bitcoin is not anonymous, but till now, it is still difficult to trace the transaction of bitcoin, if it was not anonymous as you think, it would have been quite so easy to trace all these hackers that has been stealing money from people. I understand that you can view some few details but not to be traced which is the main anonymity of the system we really want.

I know that we have privacy coins, and these ones claims that they have fully covered all these part where you can make transactions that will not been seen at all.  With bitcoin, it will still be very easy to evade tax and I think it is the more reason why bitcoin is the major threat to government and banks, you see that they care less about other crypto but focuses more on bitcoin because of its true decentralization.

This the IRS unveiling their new treatment of Bitcoin law:


I say that we decide in this Bitcoin community whether or not to pay taxes on this stuff. I am starting to think NO.

Also, with 2,642,923 registered members at this forum, we outnumber the IRS employees of 80,000...