US has planted a land mine in Tax Reporting for 2019.

[morggin]

Beware if you have not done your 2019 tax return yet.  The IRS has planted a land mine in the Schedule One.  They directly ask you "At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?".  Answering No to this direct question will result in them having a clear case in prosecution for people that are discovered to hidden their assets. I recommend someplace like cointracker to help you track your tax liability.

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[squatter]

Beware if you have not done your 2019 tax return yet.  The IRS has planted a land mine in the Schedule One.  They directly ask you "At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?".  Answering No to this direct question will result in them having a clear case in prosecution for people that are discovered to hidden their assets.

We've been discussing that landmine since last year.

I assume at the very least that the IRS plans to cross-check 1099-Ks received from Coinbase, Kraken, et al. against taxpayer Form 1040 Schedule 1. Be careful answering no to this question if you've ever given your SSN or EIN to an exchange and transacted there, especially if you have received a 1099-K. That will probably put you on a fast track to getting one of these nasty non-compliance letters from the IRS.

[20kevin20]

How is this a landmine? I mean, if someone did not report taxes for 2019, had a financial interest in cryptocurrencies and checks the "No" box is clearly trying to deceive authorities and trying to deceive your authorities on your own signature is like handcuffing yourself. Am I getting something wrong here?

It's hard to get away with lying about your income. Very hard and you have to be very smart to be able to hide financial interest in a 100% transparent currency without ever getting caught. One day, like gentlemand said a few weeks ago, there will be a moment when authorities will have a software and within the push of a button they'll know literally everything about the money you receive, the money you spent and the money you owe.

[Harlot]

I wouldn't consider this as a "landmine" as technically it's not something like where they hid this under somewhere it isn't readable, in this case they are part of the the Form 1 where you really need to answer it truthfully without hiding anything. Reporting your taxes might always be like a trap for someone but they aren't you just have to answer it truthfully and declare all kinds of income you have or may have potentially earned during that year. If you do just that expect the IRS to don't bother you with any kind of tax implications. Being clean here is the key for not having problems against them.

[NotATether]

I don't know about you guys, but since bitcoin wasn't created with anonymity in mind (that's included in altcoins like Monero and Zcash), I wouldn't attempt to lie about my cryptocurrency net worth in the first place. I know talking about paying taxes is a sensitive topic for some people because it could easily be seen as attempting to dictate you in how to manage your money.

As bitcoin gets more popular it's inevitable that it will be taxed on, taxing isn't inherently bad, they are one way of funding the government, but there are a large demographic of people who would rather pay less taxes. It isn't wise to evade filling this field because usually they will find out and interest will have been accrued on the tax so not only would you have to pay the cryptocurrencies tax but also the interest that accumulated after you tried to dodge the form.

The warning letter they send is basically "You have 30 days to send the remaining taxes". I don't think they're doing anything malicious here.

[figmentofmyass]

I don't know about you guys, but since bitcoin wasn't created with anonymity in mind (that's included in altcoins like Monero and Zcash), I wouldn't attempt to lie about my cryptocurrency net worth in the first place. I know talking about paying taxes is a sensitive topic for some people because it could easily be seen as attempting to dictate you in how to manage your money.

As bitcoin gets more popular it's inevitable that it will be taxed on, taxing isn't inherently bad, they are one way of funding the government, but there are a large demographic of people who would rather pay less taxes. It isn't wise to evade filling this field because usually they will find out and interest will have been accrued on the tax so not only would you have to pay the cryptocurrencies tax but also the interest that accumulated after you tried to dodge the form.

The warning letter they send is basically "You have 30 days to send the remaining taxes". I don't think they're doing anything malicious here.

you're giving the IRS too much credit. they are utterly dependent on voluntary compliance. that's what this is about---scaring people into paying or else. the same goes for the mass letter campaign from last year.

if you received a "Letter 6173" or "CP2000" that means you either got caught in the coinbase john doe summons net, or an exchange sent you a 1099, and you obviously didn't report some activity. lying in this situation (at least about the data the IRS already has) is obviously dumb.
https://cointelegraph.com/news/internal-revenue-service-sends-new-round-of-letters-to-crypto-holders
https://www.cryptotrader.tax/blog/irs-letter-6174-a-for-cryptocurrency

as for the rest of your holdings and trading activity? the IRS has nowhere near the manpower to unravel the mess of p2p/no KYC services, mixers, exchanges etc for every average joe. if a broker or exchange sends them info and you didn't report it, that's when shit gets real.

[Harlot]

you're giving the IRS too much credit. they are utterly dependent on voluntary compliance. that's what this is about---scaring people into paying or else. the same goes for the mass letter campaign from last year.

Aren't they the ones who are requiring crypto exchanges operating in the U.S. to submit "random" trading transactions from their customers with unusual activity as part of their KYC and AML compliance? From what I know they are also using Chainalysis to track down suspected illicit activities in the U.S.'s crypto industry so I wouldn't say that voluntary compliance is the only thing they are doing in order to scare or put people back in line when it comes to reporting their taxes. They do tons of research as well as background checks so that they are taxing their citizens correctly or try to maximize the tax they want from each individual so I do think it is out of the question when they are doing this things within the industry.

[malevolent]

Aren't they the ones who are requiring crypto exchanges operating in the U.S. to submit "random" trading transactions from their customers with unusual activity as part of their KYC and AML compliance? From what I know they are also using Chainalysis to track down suspected illicit activities in the U.S.'s crypto industry so I wouldn't say that voluntary compliance is the only thing they are doing in order to scare or put people back in line when it comes to reporting their taxes. They do tons of research as well as background checks so that they are taxing their citizens correctly or try to maximize the tax they want from each individual so I do think it is out of the question when they are doing this things within the industry.

That and various tax treaties so even using a foreign exchange might not be enough long term if someone went through KYC.

[Harlot]

~snip~

That and various tax treaties so even using a foreign exchange might not be enough long term if someone went through KYC.

U.S. citizens don't even have that option in the first place. Before Binance re-entered the U.S. market their previous operations was labelled as illegal and they are left but to either freeze their US Customer's accounts if they haven't withdrawn their balances before the deadline. Just by writing this post I just have realized that the IRS and various other US authorities might have just covered a lot of loopholes when it comes to shedding of some of their citizens' taxes. They are really keen on looking each and every way we use out cryptocurrencies and they are always trying to cover it with their power.

[malevolent]

U.S. citizens don't even have that option in the first place. Before Binance re-entered the U.S. market their previous operations was labelled as illegal and they are left but to either freeze their US Customer's accounts if they haven't withdrawn their balances before the deadline. Just by writing this post I just have realized that the IRS and various other US authorities might have just covered a lot of loopholes when it comes to shedding of some of their citizens' taxes. They are really keen on looking each and every way we use out cryptocurrencies and they are always trying to cover it with their power.

Have all foreign non-scammy exchanges blocked US citizens/residents from using their services? Some of the biggest ones such as binance and bitmex (and bitfinex for most users) don't deal with US citizens, but some smaller exchanges don't seem to have such restrictions, e.g. bitbay. They don't allow US citizens to participate in their IEOs, though.

[Theb]

Have all foreign non-scammy exchanges blocked US citizens/residents from using their services? Some of the biggest ones such as binance and bitmex (and bitfinex for most users) don't deal with US citizens, but some smaller exchanges don't seem to have such restrictions, e.g. bitbay. They don't allow US citizens to participate in their IEOs, though.

The way I see it is they either don't care about the small fishes or they always focus on the big volume exchanges that's why these small crypto exchanges always fly under the radar. It's always this way in the crypto market that some small reputable crypto related businesses will always fly under the radar as long as they aren't turning any heads yet, but when they get more and more popular this is when authorities start to become more concern on their businesses. Some crypto-related businesses I know who we back into a corner are Shapeshift.io and ang Changelly who suddenly required KYC for their users.

[figmentofmyass]

Have all foreign non-scammy exchanges blocked US citizens/residents from using their services? Some of the biggest ones such as binance and bitmex (and bitfinex for most users) don't deal with US citizens, but some smaller exchanges don't seem to have such restrictions, e.g. bitbay. They don't allow US citizens to participate in their IEOs, though.

kucoin (based in singapore) allows USA traders. they are much smaller than the big boys like binance, but coingecko ranks them above poloniex and bittrex, so they're not insignificant.

actually it's a strange grey area---they won't verify USA traders but they still allow people to trade from the USA with an unverified account. that means a 2 BTC/day withdrawal limit and up to 5x leverage on kumex.