Bitman7976 (OP)
Newbie
Offline
Activity: 29
Merit: 7
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 01, 2021, 03:30:34 PM |
|
So lets say you purchase 1 bitcoin at $1,000 from coinbase. You then transfer the bitcoin to your own Ledger wallet. Maybe 10 years later its worth $50,000.
I know according to the IRS you "should" pay tax on the gains, but how do they know you still have it. For all Coinbase and/or the IRS knows, you bought it at $1000 and sent it to a bitcoin address or the wrong bitcoin address at the same worth of $1000. After that, Coinbase and the IRS dont know if you gave it away or even lost it at that price.
So at this point, its invisible, correct?
So as long as you buy bitcoin, transfer to your wallet right away, and hold there, you're good, right?
And am I correct in thinking, even 10 years later if you tranferred the 1 bitcoin back to Coinbase, they cant simply report to the IRS about this, correct? Hiw is there anyway for them to know where that 1 bitcoin came from. For all they know at this point is that you couldve purchased this 1 bitcoin at $50,000 2 days ago and transfered there. Who is to say you made money off of it and it was the same bitcoin you bought 10 years ago?
Do you see what I am getting at? Can somebody please explain? Thank you.
|
|
|
|
Lucius
Legendary
Offline
Activity: 3346
Merit: 5964
Crypto Swap Exchange🈺
|
If you are in the US, then I suggest you read carefully everything that the IRS publishes regarding cryptocurrencies - and from everything that I have personally read on the subject, it shows more than clearly that the laws on this issue are very strict. For example, if you bought 1 BTC on Coinbase it means you made KYC and the money you paid into Coinbase from your bank account also left a paper trail. If after 10 years you decide to sell that same BTC, you will use your Coinbase account and your bank account again, and you will not be able to hide the payment of, say, $50 000. Until you sell or exchange that BTC for goods, services and some other coin you do not need to pay any tax. I advise you to visit the following links for more information: Do I pay capital gain tax on trades if don't cash out?Here’s what you need to know for your 2020 taxes when reporting virtual currency to the IRS
|
|
|
|
Upgrade00
Legendary
Offline
Activity: 2142
Merit: 2292
Playgram - The Telegram Casino
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 01, 2021, 03:53:55 PM |
|
I know according to the IRS you "should" pay tax on the gains, but how do they know you still have it. I'm not an expert on tax regulations as it's not yet much of an issue where I reside. But if your tax report shows a Bitcoin purchase at $1000, then it's assumed you still own it until you report that you have sold it at a certain price. If you purchase on a centralized exchange which logs transactions, simply sending out (even using mixers) would not blur out the history, as you have been recorded to own xxx amount of Bitcoins already and omitting it completely could be termed as evasion of tax. For all they know at this point is that you couldve purchased this 1 bitcoin at $50,000 2 days ago and transfered there. Who is to say you made money off of it and it was the same bitcoin you bought 10 years ago?
If you did purchase it just 2 days ago, the transaction should be included in your tax report, right?
|
|
|
|
▄▄███████▄▄███████ ▄███████████████▄▄▄▄▄ ▄████████████████████▀░ ▄█████████████████████▄░ ▄█████████▀▀████████████▄ ██████████████▀▀█████████ █████████████████████████ ██████████████▄▄█████████ ▀█████████▄▄████████████▀ ▀█████████████████████▀░ ▀████████████████████▄░ ▀███████████████▀▀▀▀▀ ▀▀███████▀▀███████ | ▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄▄ Playgram.io ▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀ | ▄▄▄░░ ▀▄ █ █ █ █ █ █ █ ▄▀ ▀▀▀░░
| │ | ▄▄▄███████▄▄▄ ▄▄███████████████▄▄ ▄███████████████████▄ ▄██████████████▀▀█████▄ ▄██████████▀▀███▄██▐████▄ ██████▀▀████▄▄▀▀█████████ ████▄▄███▄██▀█████▐██████ ██████████▀██████████████ ▀███████▌▐██▄████▐██████▀ ▀███████▄▄███▄████████▀ ▀███████████████████▀ ▀▀███████████████▀▀ ▀▀▀███████▀▀▀ | | │ | ██████▄▄███████▄▄████████ ███▄███████████████▄░░▀█▀ ███████████░█████████░░█ ░█████▀██▄▄░▄▄██▀█████░█ █████▄░▄███▄███▄░▄██████ ████████████████████████ ████████████████████████ ██░▄▄▄░██░▄▄▄░██░▄▄▄░███ ██░░░█░██░░░█░██░░░█░████ ██░░█░░██░░█░░██░░█░░████ ██▄▄▄▄▄██▄▄▄▄▄██▄▄▄▄▄████ ███████████████████████ ███████████████████████ | | │ | ► | |
|
|
|
masterzino
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 01, 2021, 04:10:42 PM Merited by tertius993 (1) |
|
Everything depends on your country of residence.
For example, as a Bulgarian, I have to pay taxes only when I turned this bitcoin into fiat.
But if you are in the UK, you are taxable on every crypto conversion. In the US there are other propositions.
For the best - ask a professional and accredited local tax advisor.
|
|
|
|
xcaret
Jr. Member
Offline
Activity: 126
Merit: 7
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 01, 2021, 04:29:47 PM |
|
Another thing to keep an eye out for is the proposal of some newly appointed person in power now in the USA, that wants to tax " unrealized gains" this means if you have $1000 invested in BTC in 2010 ( yes ,I know they didn't keep track back then) and it went to $30,000 , that is unrealized gain . That's what you would pay tax on at your year end . BTW ,here in Canada ,if I move out of the country , I can become a non Canadian resident , and pay no tax on income earned outside of Canada . I'm still a Canadian citizen , but not a resident .
|
|
|
|
sheenshane
Legendary
Offline
Activity: 2464
Merit: 1231
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 01, 2021, 04:33:56 PM |
|
For the best - ask a professional and accredited local tax advisor.
For now, this is good advice, just seek a professional legal advisor before making such a decision regarding taxes because IMO, the US has very strict when it comes to taxes. They treat Cryptocurrencies as assets or property same as the country of Canada, Australia, and the UK. I'm no expert on this but here are my tips AFAIK, every transaction of Bitcoin was recorded on the chain network, you can trace there and also trace the price when you purchase your Bitcoin 10 years ago. You can calculate and determine the gain or losses based on the purchased price back then and the price at this moment if you will transfer on the exchange. But if you're not sure about this, much better do the suggestion above to find a better professional advisor.
|
|
|
|
DannyHamilton
Legendary
Offline
Activity: 3472
Merit: 4790
|
Do not take tax advice from random people on the internet. If this question applies to your tax situation, you should seek the advice of a tax professional that is familiar with the tax laws in your particular jurisdiction.
That being said, here are a few things to think about:
Bitcoin was most recently available at $1000 on the open market on March 27, 2017. It is quite likely that it will be over $50,000 before the end of this year (2021). That's only a bit more than 4 years, not 10 years.
More importantly though...
When you sell your 1 Bitcoin for $50,000, the Federal Income Tax Law in the U.S. requires you to report BOTH your revenue ($50,000) and your cost basis ($1000) on your tax return. If you get audited, they are going to expect you to provide proof of the price you sold it for AND proof of your cost basis. If you are unable to prove your cost basis, then they will expect you to pay capital gains on the FULL $50,000.
So, if you want to claim that you purchased it 2 days ago at $50,000, then you're going to need to provide proof of that. If you want to claim that you bought it for $1,000 four years ago, (so you only need to pay long term capital gains on $49,000) then you're going to need to provide proof of that.
You are welcome to break the law and illegally report a false cost basis. You might even get away with it, but if they believe they can prove to the satisfaction of federal court that you did it intentionally you'll be looking at fines AND prison time. Is it really worth that risk to try and save some tax costs? If they feel that they can't prove maliccee to the satisfaction of a federal court, then you'll still be looking at needing to pay the appropriate taxes, plus interest for all the time between when you should have paid and when they noticed, plus late penalties. Again, is it really worth that risk to try and save some tax costs?
|
|
|
|
The Cryptovator
Legendary
Offline
Activity: 2338
Merit: 2209
Crypto Casino and Sportsbook
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 01, 2021, 06:25:57 PM |
|
If you want to skip tax then perhaps you would fund many ways. But if caught, then you would be in problem. I am not familiar with how authorities detect Bitcoin transactions and ask for tax. But I am pretty sure you will be in trouble during cashout if you are intending to skip tax. If you want to cash out via an exchange like coinbase, then your bank will know the funds came from where and ultimately you can't skip tax. The only option sells your bitcoin from your noncustodial wallet by a face-to-face transaction which is quite risky. If you sell peer-to-peer decentralized exchange and accept money into a bank then they might detect unusual transactions and could lock your funds as well. Isn't better to follow the government's rules about tax since they allow you to use Bitcoin?
|
| | | | | | FIRST NO WAGERING BONUS CASINO & SPORTSBOOK SLOTS │ LIVE CASINO │ LIVE GAMES │ SPORTS | | | ► | WELCOME BONUS ─── UP TO ─── [ $500 ] | | ► | MULTI BET BONUS ─── UP TO ─── [ 200% ] | █████████████▄██▄ ████████████▐█████ ███▄██▄█████▐██████▄ ████████▄▄██████████▄ ███▐██▀██▀███████████ ██████████████████████▄ ███▐▄█████▄████████████▄ ▄▀▀███████████▄███████░█▌ ▀███████████████████████ ░███████████████████████ ░░▀▀▀▄██▄███████████████▄ ░░████▀█▀█████████████████▄▄ ██████▀███████████████████████▄ | PLAY NOW |
|
|
|
shield132
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 01, 2021, 10:07:23 PM |
|
Are laws that strict in the USA? I know some people who do that kind of job without reports and they hadn't a single problem. What If I use for example Yandex Money? That's Russian and I guess they shouldn't have that much control on transactions, history, etc. What if I say that my relative sends me some money in bitcoins to feed me or financially help me? Won't they believe? Will they dig further? Do they really do that on every single person?
I hear this kind of things online but in real life, some people say differently. I don't know if they want to appear manly or cool buys by not paying taxes but...
Taxes... Foods in supermarkets are taxed, our salaries are taxed, supermarket employee's salaries are taxed, supermarket's income is taxed, etc... I used word tax for four times, I would have used it twice or thrice more... Things are more than 5X taxed, that's insane.
|
|
|
|
RickDeckard
Legendary
Offline
Activity: 1120
Merit: 3106
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 01, 2021, 11:33:49 PM |
|
I'm always on the side that you should pay tax, whether you agree with it or not (it's the law). Still, it may very depend on the country where you are. In most countries you only pay Tax when you have a gross margin (this is, your outcome of the transaction is superior to your cost of purchase). Here's a simple example: - March 2017 - You bought 10 BTC for 1.000 €. You spent 10.000 €
- February 2021 - You sold 10 BTC for 40.000 € each. You got 400,000 € from the sale.
- The amount that is taxable is the following difference : "Revenue" (400,000 €) - Cost (10,000) = 390,000 € . So you would have to pay tax on the 390,000 €.
The
This is, again, if your country taxes cryptocurrency. There are some countries in Europe that don't tax it. As always, I would seek a professional and authorized answer before you do any move just to be on the safe side ![Wink](https://bitcointalk.org/Smileys/default/wink.gif) Happy earnings!
|
|
|
|
tinopener
Member
![*](https://bitcointalk.org/Themes/custom1/images/star.gif)
Offline
Activity: 224
Merit: 36
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 01, 2021, 11:42:16 PM |
|
You pay when/if you ever cash out. Many people got BTC for free in the early days, do you expect them to pay taxes if they don't use them yet?
This. You only pay tax when you convert back into cash (at least in the UK). It's the same as any capital gain, such as property. You only pay tax when you sell for cash. Else how do they calculate exactly how much to tax you? It is good for the OP to bring this up though, as it isn't instinctive to understand.
|
|
|
|
tinopener
Member
![*](https://bitcointalk.org/Themes/custom1/images/star.gif)
Offline
Activity: 224
Merit: 36
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 01, 2021, 11:51:03 PM |
|
I'm always on the side that you should pay tax, whether you agree with it or not (it's the law). Still, it may very depend on the country where you are. In most countries you only pay Tax when you have a gross margin (this is, your outcome of the transaction is superior to your cost of purchase). Here's a simple example: - March 2017 - You bought 10 BTC for 1.000 €. You spent 10.000 €
- February 2021 - You sold 10 BTC for 40.000 € each. You got 400,000 € from the sale.
- The amount that is taxable is the following difference : "Revenue" (400,000 €) - Cost (10,000) = 390,000 € . So you would have to pay tax on the 390,000 €.
The
This is, again, if your country taxes cryptocurrency. There are some countries in Europe that don't tax it. As always, I would seek a professional and authorized answer before you do any move just to be on the safe side ![Wink](https://bitcointalk.org/Smileys/default/wink.gif) Happy earnings! Good example. I sometimes wonder if because you can't easily hold bitcoin in tax free investment accounts (like in the UK), this is part of the reason why people hodl so much. I can only sell about $15k bitcoin per year before I have to pay 20% tax.
|
|
|
|
Khaos77
Member
![*](https://bitcointalk.org/Themes/custom1/images/star.gif)
Offline
Activity: 200
Merit: 73
Flag Day ☺
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 02, 2021, 04:35:29 AM Last edit: February 02, 2021, 04:49:45 AM by Khaos77 |
|
So lets say you purchase 1 bitcoin at $1,000 from coinbase. You then transfer the bitcoin to your own Ledger wallet. Maybe 10 years later its worth $50,000.
I know according to the IRS you "should" pay tax on the gains, but how do they know you still have it. For all Coinbase and/or the IRS knows, you bought it at $1000 and sent it to a bitcoin address or the wrong bitcoin address at the same worth of $1000. After that, Coinbase and the IRS dont know if you gave it away or even lost it at that price.
So at this point, its invisible, correct?
So as long as you buy bitcoin, transfer to your wallet right away, and hold there, you're good, right?
And am I correct in thinking, even 10 years later if you tranferred the 1 bitcoin back to Coinbase, they cant simply report to the IRS about this, correct? Hiw is there anyway for them to know where that 1 bitcoin came from. For all they know at this point is that you couldve purchased this 1 bitcoin at $50,000 2 days ago and transfered there. Who is to say you made money off of it and it was the same bitcoin you bought 10 years ago?
Do you see what I am getting at? Can somebody please explain? Thank you.
Bitcoin is an openblockchain, nothing is hidden. Any Exchanges that lets you cash out, in the US will report you to the IRS. (KYC/AML) Plus it is not like they don't monitor bitcoin addresses on the block explorers for large transfers. https://www.bankinfosecurity.com/irs-seeks-fresh-ways-to-trace-cryptocurrency-transactions-a-14992If you try to pretend like you mined it, then you are liable to pay income tax on it for the full amount. If you are honest and don't hide you purchased it, you are able to only pay long range capital gains tax on the profit. * If you sell/trade bitcoin in 2021 , your taxes are due by April 15, 2022. in the US. * * If you are only buying/holding and not selling/trading, you owe nothing as no gains or losses have been finalized.** Trump signed a law ending like of kind exchanges for crypto, meaning that trading bitcoin for any altcoin or product or service is no longer excluded from taxation, and will be taxed as if you had just sold it. * After this law was passed , trading bitcoin for litecoin or dogecoin or vice versa became a taxable event on US exchanges. Only Real Estate transactions still evade taxation with the like of kind exchange. IE: Trading Real Estate for other Real Estate. * Note the above is US only, other countries differ.*
|
|
|
|
btcb3g1nn3r
Member
![*](https://bitcointalk.org/Themes/custom1/images/star.gif)
Offline
Activity: 178
Merit: 32
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 02, 2021, 05:49:29 AM |
|
My logical thinking tells me that you can get away with it only via services that you didn't connect with your bank account, you didn't connect them with your KYC data, OR, by local ATM with no KYC, local p2p exchanges. You have to justify any income in your bank account that exceeds a certain threshold ($10.000?) so you must avoid any cash out via any service that might report your data to your financial institution. Again, this is my theoretical thinking of your matter, I suggest to not be greedy and you should start trading and you'll see that the annual tax to be paid will no longer be a struggle ![Smiley](https://bitcointalk.org/Smileys/default/smiley.gif)
|
|
|
|
Rikafip
Legendary
Offline
Activity: 1862
Merit: 6284
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 02, 2021, 08:05:31 AM |
|
My logical thinking tells me that you can get away with it only via services that you didn't connect with your bank account, you didn't connect them with your KYC data, OR, by local ATM with no KYC, local p2p exchanges.
Cashing out anonymously without use of bank service and therefore avoid getting flagged by IRS is an easy part, but problems start once you want to buy something big with that money, like house or apartment. I still haven't figure that thing out as in my country even if you want to pay crypto taxes, procedure is so complicated that it will make people try to avoid it all together and find some more "creative" ways.
|
|
|
|
irixo10
Full Member
![*](https://bitcointalk.org/Themes/custom1/images/star.gif) ![*](https://bitcointalk.org/Themes/custom1/images/star.gif)
Offline
Activity: 1078
Merit: 104
GoMeat - Digitalizing Meat Stores - ICO
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 02, 2021, 08:23:30 AM |
|
This will highly depend on various factors, the first would be your country of residence and their stand on taxes as well as regarding cryptocurrencies, therefore advices and opinions will vary since everyone is from different countries, in this csse, involve the services of an expert to understand what it entails, you can also read on taxes of your country to know the right thing to do. Secondly, this will also depend on the time you cash out to fiat, the reason is, many people have been holding Bitcoin for years, might be through mining and so on, so which other way will they pay taxes or know the tax to pay if not when they cash out to fiat.
|
|
|
|
Artemis3
Legendary
Offline
Activity: 2030
Merit: 1568
CLEAN non GPL infringing code made in Rust lang
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 02, 2021, 04:37:27 PM |
|
If they launch an investigation and they are able to correlate your bitcoin address to you as an individual, then yes you may get in trouble. This probably depends on country. Doesn't mean i agree with it, it is nonsense in my opinion, but the risk exists, and its not impossible to hide it either, if you do it right.
To begin with, you could argue where this money is in the first place. If you travel to random foreign country, and earn money and you leave it all there, how come your country back home has to collect taxes on it?
With bitcoin its even more fun, because its not in any country, but in all of them at the same time. There is no crossing borders with Bitcoin, and yet it is actually crossing all borders all the time. That's what the nodes do with the blockchain...
Simply put, the old laws do not fit. If the gov insists to tax, they should stick to sales vat such. You could have made a cold wallet a decade ago, not even in your country of origin, or bought a gold ingot and left it there nobody knows about it.
Just because you can attempt to regulate bitcoin doesn't mean its good or it will work. It does cause problems, serious privacy issues, which criminals love to exploit.
I think this matter is far from finished, and i hope with time, newer generations of politicians understand this and lift the restrictions the guys with the old mindset are trying to impose.
|
█████████████████████████ ██████████████████████████ ██████████████████████████ ███████████████████████████ | BRAIINS OS+| | AUTOTUNING MINING FIRMWARE| | Increase hashrate on your Bitcoin ASICs, improve efficiency as much as 25%, and get 0% pool fees on Braiins Pool | |
|
|
|
death69
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 02, 2021, 05:36:42 PM |
|
It is hard for you not to be traced by the authorities since coinbase requires your identity (or should I say: KYC) in order for you to make any transaction relating to buying/selling cryptocurrency. Then, CoinBase simply sends the information to the government so as to make sure you are not trying to escape the taxation. DO not blame them since they are found in the US and therefore, they have to strictly follow the legislation. If not, their operation will be forced to shut down
The most uncomplicated way to avoid tax is to buy bitcoin on the black market. Since bitcoin is decentralized, it is easy to contact someone who offers bitcoin at an affordable price
|
|
|
|
examplens
Legendary
Offline
Activity: 3388
Merit: 3389
Crypto Swap Exchange
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 02, 2021, 05:43:28 PM |
|
It is all about what if buy BTC for $1000 and want to sell it for $50000. But I am wondering, what if he buy now at $34000 and after one year they want to exchange it on fiat, but then Bitcoin worth $20000. Whether in that case, he can claim the tax back because it has lost the value of the investment. But he paid tax on $34k amount. It can be a rhetorical question.
|
|
|
|
Bitstar_coin
|
![](https://bitcointalk.org/Themes/custom1/images/post/xx.gif) |
February 02, 2021, 06:45:17 PM |
|
If Tax avoidance is a punishable offence in the USA why do you want to get involve, if you don't want to pay tax then don't buy from coinbase where you will be compell to do kyc, because immediately you are kyc fully verified your information is with exchange which means all your transaction details as well, If there are other ways to buy like p2p it is better to use such service, may through this means you can avoid taxes.
|
|
|
|
|