How does the IRS look at anonymous bitcoin?

[Anonohmon]

2nd question btw. Any idea how many people are buying/selling bitcoin and have not paid taxes? I've heard it's a lot but idk what percentage of the population. Like a lot of people I know who are into bitcoin didn't even know you had to pay taxes on trades. I, like them, thought it was only when you cashed out. I heard the IRS sent a crap ton of people letter reminding them of taxes.

Also, do exchanges like coinbase automatically hand over all your info to the IRS or do they only do it upon request? Like the IRS has to call them to ask for yours in particular?
What about exchanges like foreign exchanges like kraken or kucoin? I hear they are less likely to cooperate with the US gov? Idk. anyone have much info on that?

[1714007724]

1714007724

[PrivacyG]

Not sure what you mean by 'anonymous Bitcoin' in the title.  If you mean UTXO's that went through Coin Joins and Mixers, it becomes easy to find who that particular person was when a mixed UTXO goes through a Centralized Exchange or a Custodial Wallet and the user behind the UTXO does not try to use tools available today like Tor, Virtual Machines and disposable SIM cards to hide tracks.

I can only imagine most of the average Coin Join and Chip Mixer users are not taking enough care of their 'anonymous' coins after 'anonymizing' them.  They forget there are IP traces, browser fingerprints, Centralized Exchanges that collect, sell and distribute data about you and so on.

I believe exchanges are working with authorities, more or less.  But even if they do not, if your money goes from your bank to Bitcoin on Binance and then you withdraw back to your bank account, they will know you made some Cryptocurrency moves without even having to deal with the Exchange you worked with.  I also tend not to believe that the routine IRS has is calling Exchanges to check every person's holdings or transactions, unless the person is under some sort of investigation.  There is probably a more automated process.  Otherwise, they would end up making hundreds of thousands or millions of calls.  There are of course non US Exchanges that may not agree the idea of sharing information with authorities of the United States, but that typically ends up badly for the Exchange so there are more that do agree than those that do not.

They have enough resources to find out more information about you or your transactions than you wish they could.  And if they have serious doubts about the legitimacy of your funds and transactions, there are even more resources they can dig through and use.  And unless you take extreme care of your online behavior, the chances of them finding at least a few bits of your moves enough to audit you are high.

Note that this is my personal take on this thing.  If you want them not to mess with your business, you have to be suspiciously careful.  Even if you pay taxes as a good citizen, when you want privacy you nowadays become suspicious.

-
Regards,
PrivacyG

[Anonohmon]

Not sure what you mean by 'anonymous Bitcoin' in the title. 
-
Regards,
PrivacyG

Thank you very much for your opinions!
 
Oh to clarify I mean specifically bitcoin that was either not bought on a kyc exchange (ATMs with a burner phone) or bought before KYC was a thing, or mined.

Also including btc made anonymous through XMR swaps.

[zasad@]

2nd question btw. Any idea how many people are buying/selling bitcoin and have not paid taxes? I've heard it's a lot but idk what percentage of the population. Like a lot of people I know who are into bitcoin didn't even know you had to pay taxes on trades. I, like them, thought it was only when you cashed out. I heard the IRS sent a crap ton of people letter reminding them of taxes.

Also, do exchanges like coinbase automatically hand over all your info to the IRS or do they only do it upon request? Like the IRS has to call them to ask for yours in particular?
What about exchanges like foreign exchanges like kraken or kucoin? I hear they are less likely to cooperate with the US gov? Idk. anyone have much info on that?

Not one well-known cryptocurrency exchange in the world will contradict the policy of US financial regulators. If data about you is required, the exchange will provide it. This is written in the user agreement. No need to be so naive, all your data about the actions on the exchange is not protected.
I trade through decentralized bridges
https://app.rango.exchange/

Try it, more information in my topic
https://bitcointalk.org/index.php?topic=5389259

[mindrust]

2nd question btw. Any idea how many people are buying/selling bitcoin and have not paid taxes? I've heard it's a lot but idk what percentage of the population. Like a lot of people I know who are into bitcoin didn't even know you had to pay taxes on trades. I, like them, thought it was only when you cashed out. I heard the IRS sent a crap ton of people letter reminding them of taxes.

Also, do exchanges like coinbase automatically hand over all your info to the IRS or do they only do it upon request? Like the IRS has to call them to ask for yours in particular?
What about exchanges like foreign exchanges like kraken or kucoin? I hear they are less likely to cooperate with the US gov? Idk. anyone have much info on that?

If they can't prove that you bought/sold crypto, how are they going to tax you or punish you? They can't do neither of those. (At least I hope)

Sooner or later the Governments are going to figure that out and probably force the exchanges to ban anonymous coins.

They can already see everyone who bought and sold anonymous coins on the exchanges like coinbase. The problem rises when people do P2P trades and nobody can see the XMR trades because there isn't a public blockchain. While they can track down the traces on the bitcoin blockchain and find your transactions, they can't do this on XMR. That's why XMR is way more dangerous than BTC. (to the govs ofc)

[zasad@]

2nd question btw. Any idea how many people are buying/selling bitcoin and have not paid taxes? I've heard it's a lot but idk what percentage of the population. Like a lot of people I know who are into bitcoin didn't even know you had to pay taxes on trades. I, like them, thought it was only when you cashed out. I heard the IRS sent a crap ton of people letter reminding them of taxes.

Also, do exchanges like coinbase automatically hand over all your info to the IRS or do they only do it upon request? Like the IRS has to call them to ask for yours in particular?
What about exchanges like foreign exchanges like kraken or kucoin? I hear they are less likely to cooperate with the US gov? Idk. anyone have much info on that?

If they can't prove that you bought/sold crypto, how are they going to tax you or punish you? They can't do neither of those. (At least I hope)

Sooner or later the Governments are going to figure that out and probably force the exchanges to ban anonymous coins.

They can already see everyone who bought and sold anonymous coins on the exchanges like coinbase. The problem rises when people do P2P trades and nobody can see the XMR trades because there isn't a public blockchain. While they can track down the traces on the bitcoin blockchain and find your transactions, they can't do this on XMR. That's why XMR is way more dangerous than BTC. (to the govs ofc)

The main problem arises when working with fiat. Finding information in the blockchain is very expensive and requires the services of good specialists, but it is very easy to track the movement of money in your bank accounts. You can use cash, but many countries do not allow cash when buying property. You can hide your cryptocurrencies, but you can't hide your real expenses for long.

[bittraffic]

Binance is known to work with governments, they don't make it secret as they have been complying with the laws which could also be a problem if you want to be private. Some exchanges afaik even block Russians and Ukrainians buying cryptocurrencies using fiat. There is no escape when using fiat and if IRS request from the exchanges, they'd see our transactions.

Would they be able to ask taxes from the previous transactions we made before the tax law on crypto revenues?

[Anonohmon]

2nd question btw. Any idea how many people are buying/selling bitcoin and have not paid taxes? I've heard it's a lot but idk what percentage of the population. Like a lot of people I know who are into bitcoin didn't even know you had to pay taxes on trades. I, like them, thought it was only when you cashed out. I heard the IRS sent a crap ton of people letter reminding them of taxes.

Also, do exchanges like coinbase automatically hand over all your info to the IRS or do they only do it upon request? Like the IRS has to call them to ask for yours in particular?
What about exchanges like foreign exchanges like kraken or kucoin? I hear they are less likely to cooperate with the US gov? Idk. anyone have much info on that?

If they can't prove that you bought/sold crypto, how are they going to tax you or punish you? They can't do neither of those. (At least I hope)

Sooner or later the Governments are going to figure that out and probably force the exchanges to ban anonymous coins.

They can already see everyone who bought and sold anonymous coins on the exchanges like coinbase. The problem rises when people do P2P trades and nobody can see the XMR trades because there isn't a public blockchain. While they can track down the traces on the bitcoin blockchain and find your transactions, they can't do this on XMR. That's why XMR is way more dangerous than BTC. (to the govs ofc)

They wont if they dont know what you own. The issue is when you want to cash out or buy something big. They'll ask "Where did you get this from?"
You can say I bought the bitcoin at 50k but if you cant prove it, I assume they'll treat it as if you bought it for 0 dollars.

Although, I do wonder how gifts, or even better, art works? Like ... idk.

The biggest fear is them not believing that you saved up a ton of money to buy it when you did. "I used my literal life savings"

Idk.

As far as the block chain goes. I think the blockchain trail ends when its converted to XMR, from my understanding, the only thing they can do is try to find where a new btc entity from XMR came from. So if like .74 btc vanished into XMR, trying to see if .74 or .73 shortly later "appeared" out of XMR. But afaik it's only speculative and there is no solid proof that was "you" who did that. They can only at best, if they found that, guess it might be you. But it could be anyone. This is why they hate privacy coins and want KYC for everything.

[Anonohmon]

2nd question btw. Any idea how many people are buying/selling bitcoin and have not paid taxes? I've heard it's a lot but idk what percentage of the population. Like a lot of people I know who are into bitcoin didn't even know you had to pay taxes on trades. I, like them, thought it was only when you cashed out. I heard the IRS sent a crap ton of people letter reminding them of taxes.

Also, do exchanges like coinbase automatically hand over all your info to the IRS or do they only do it upon request? Like the IRS has to call them to ask for yours in particular?
What about exchanges like foreign exchanges like kraken or kucoin? I hear they are less likely to cooperate with the US gov? Idk. anyone have much info on that?

Not one well-known cryptocurrency exchange in the world will contradict the policy of US financial regulators. If data about you is required, the exchange will provide it. This is written in the user agreement. No need to be so naive, all your data about the actions on the exchange is not protected.
I trade through decentralized bridges
https://app.rango.exchange/

Try it, more information in my topic
https://bitcointalk.org/index.php?topic=5389259

In case you're wondering, you might want to check out the incognito wallet/exchange. No KYC, you can privately convert to XMR and there is no info they can give to the gov even if they wanted to but the best part is they're not located in the US so they wont be getting shut down. I think they're located in some South Asian nation and another part of it in Russia I think? If in Russia, I'm pretty sure any exchange there is not going to cooperate with the US right now lol.

I wish there were more Russian crypto exchanges.

[zasad@]

2nd question btw. Any idea how many people are buying/selling bitcoin and have not paid taxes? I've heard it's a lot but idk what percentage of the population. Like a lot of people I know who are into bitcoin didn't even know you had to pay taxes on trades. I, like them, thought it was only when you cashed out. I heard the IRS sent a crap ton of people letter reminding them of taxes.

Also, do exchanges like coinbase automatically hand over all your info to the IRS or do they only do it upon request? Like the IRS has to call them to ask for yours in particular?
What about exchanges like foreign exchanges like kraken or kucoin? I hear they are less likely to cooperate with the US gov? Idk. anyone have much info on that?

Not one well-known cryptocurrency exchange in the world will contradict the policy of US financial regulators. If data about you is required, the exchange will provide it. This is written in the user agreement. No need to be so naive, all your data about the actions on the exchange is not protected.
I trade through decentralized bridges
https://app.rango.exchange/

Try it, more information in my topic
https://bitcointalk.org/index.php?topic=5389259

In case you're wondering, you might want to check out the incognito wallet/exchange. No KYC, you can privately convert to XMR and there is no info they can give to the gov even if they wanted to but the best part is they're not located in the US so they wont be getting shut down. I think they're located in some South Asian nation and another part of it in Russia I think? If in Russia, I'm pretty sure any exchange there is not going to cooperate with the US right now lol.

I wish there were more Russian crypto exchanges.

There are no Russian crypto exchanges in Russia, because there is no legislation that regulates the operation of these crypto exchanges.
Binance and other large exchanges operate in Russia, but they are located in a different jurisdiction, and Russian law does not prohibit citizens from trading on foreign exchanges.
There is a proposal in Russia to allow trading in cryptocurrencies on stock exchanges, but in fact it will be trading in futures without the possibility of withdrawing coins to your wallet.

[bitmover]

What about exchanges like foreign exchanges like kraken or kucoin? I hear they are less likely to cooperate with the US gov? Idk. anyone have much info on that?

I believe this depends a lot on your specific situation and on the foreign exchange situation.

Some people have more than one citizenship,  or if you have an address in a foreign country.. in those situations it is very unlikely your trading information will end up with US IRS.

I also think exchanges that are not operating in US  are very unlikely to send any data to US. Binance had some operations in US  such as binance.us, for example.

I am not from US, I am from Brazil but I do trade in Kraken and bitstamp.  I don't think they send any information to  Brazil.

[zasad@]

What about exchanges like foreign exchanges like kraken or kucoin? I hear they are less likely to cooperate with the US gov? Idk. anyone have much info on that?

I believe this depends a lot on your specific situation and on the foreign exchange situation.

Some people have more than one citizenship,  or if you have an address in a foreign country.. in those situations it is very unlikely your trading information will end up with US IRS.

I also think exchanges that are not operating in US  are very unlikely to send any data to US. Binance had some operations in US  such as binance.us, for example.

I am not from US, I am from Brazil but I do trade in Kraken and bitstamp.  I don't think they send any information to  Brazil.

You are doing it for nothing. Maybe you are lucky, or maybe in a couple of years these exchanges will want to work officially in Brazil and will transfer all customer data from Brazil to your tax office. No one likes the tax people here, but you may have problems.

[BlackHatCoiner]

You can say I bought the bitcoin at 50k but if you cant prove it, I assume they'll treat it as if you bought it for 0 dollars.

This is not how taxes work. Whatever you gain, whether that's bitcoin, gold, paintings, NFTs, cars, houses, cash etc., is considered estate. You don't need to buy bitcoin to get taxed or oppositely: If you don't buy bitcoin, but simply receive it, you're supposed to state it. How will they know? That's another story, and if you use centralized exchanges you can't get away with it.

So if like .74 btc vanished into XMR, trying to see if .74 or .73 shortly later "appeared" out of XMR. But afaik it's only speculative and there is no solid proof that was "you" who did that.

And so is bitcoin. If I use a mixer or coinjoin my outputs or simply transfer my coins from each address to another, there's no solid proof that I'm the owner of the new UTXOs.

They can only at best, if they found that, guess it might be you. But it could be anyone. This is why they hate privacy coins and want KYC for everything.

There's a difference here: Privacy can be invaded on-chain within certain limits, but KYC is for direct control. The ledger is public and chain analysis companies can investigate each user's activity, but that's a tiny friction of the power one can have with millions of users' data. Without the latter, the former can't harm much.

[hugeblack]

Talking about topics such as taxes requires identifying:

 - Country.
 - Tax regulations in that state.
 - How do countries view digital currencies “is it an asset or a commodity”
 - Capital and earning taxes.
 - Taxes on alternative currencies.

Thus, there is no unified global standard for cryptocurrency taxes and therefore you cannot ask someone to pay taxes for something that does not exist.
The more the state is able to track bitcoins, the more difficult it will be to hide them from taxes, and therefore you must assume that your use of all central platforms means that you are forced to submit them to taxes and therefore it is better to keep those records.

[Poker Player]

Any idea how many people are buying/selling bitcoin and have not paid taxes?

I'm sure there is a trend here. The first few years nobody would pay taxes, unless it was huge amounts that they wanted to legalize. As time has gone on and there are more and more centralized exchanges, more KYC etc, more and more people pay taxes.

If you have low undeclared amounts it is easy not to get caught. For example, let's say a friend sold you $200 in Bitcoin some time ago, which today is $800. It is easy to spend those bitcoins and the IRS will not find out. But if you have 10 undeclared Bitcoins you have a problem, especially if you want to spend them.

[Anonohmon]

Any idea how many people are buying/selling bitcoin and have not paid taxes?

I'm sure there is a trend here. The first few years nobody would pay taxes, unless it was huge amounts that they wanted to legalize. As time has gone on and there are more and more centralized exchanges, more KYC etc, more and more people pay taxes.

If you have low undeclared amounts it is easy not to get caught. For example, let's say a friend sold you $200 in Bitcoin some time ago, which today is $800. It is easy to spend those bitcoins and the IRS will not find out. But if you have 10 undeclared Bitcoins you have a problem, especially if you want to spend them.

Thanks, yeah how about like 1 entire bitcoin? Lets say someone bought bitcoin every couple weeks over time and has 1 bitcoin. Bought via exchange, and ATMs that don't require ID and just converted to XMR, sent to another address and converted out to bitcoin. So there aren't many records.

And lets say the individual is not going to spend or sell the bitcoin until it reaches 1 million dollars... which could be in the far far future, 20 30 maybe 40 or 50 years from now. Something that makes it possible that records held by the ATM and exchanges could be gone if those exchanges go out of business.



And, if someone had 10 anonymous bitcoins.... I'm thinking they should wait till it goes up past 70k again and move to a more tax forgiving country, or a country that will not be afraid to tell the US to go F-off... And honestly there are few nations that will do that, maybe Russia? Although being prepared to follow all the laws of this new country you have moved to because you've burned your bridges.

[Poker Player]

Thanks, yeah how about like 1 entire bitcoin? Lets say someone bought bitcoin every couple weeks over time and has 1 bitcoin. Bought via exchange, and ATMs that don't require ID and just converted to XMR, sent to another address and converted out to bitcoin. So there aren't many records.

And lets say the individual is not going to spend or sell the bitcoin until it reaches 1 million dollars... which could be in the far far future, 20 30 maybe 40 or 50 years from now. Something that makes it possible that records held by the ATM and exchanges could be gone if those exchanges go out of business.



And, if someone had 10 anonymous bitcoins.... I'm thinking they should wait till it goes up past 70k again and move to a more tax forgiving country, or a country that will not be afraid to tell the US to go F-off... And honestly there are few nations that will do that, maybe Russia? Although being prepared to follow all the laws of this new country you have moved to because you've burned your bridges.

What you are asking has been discussed in several threads, for example this one:

https://bitcointalk.org/index.php?topic=5355749.0

The answer to your question depends a lot on where you live, but to summarize.

Showing up with a Bitcoin when it's worth $1M before tax authorites is the same as suddenly showing up with $1M in dollars that you can't justify.

In the best case scenario you will be charged a tax, which could be capital gains tax with 0 purchase cost in the case of Bitcoin and I am not so sure in the case of cash. It could be the same or it could be income tax.

But I am inclined to think that you would be investigated for tax evasion. Think Al Capone was put in jail for tax evasion: they couldn't prove that he murdered, extorted money, etc. The only thing they could prove was that he had more money than he could legally justify.

So, $1M seems to me a considerable amount of money to open such an investigation. If you have $1k in Bitcoin that you can't justify you're not going to have problems but when the amount gets big you risk ending up in jail.

[zasad@]

Any idea how many people are buying/selling bitcoin and have not paid taxes?

I'm sure there is a trend here. The first few years nobody would pay taxes, unless it was huge amounts that they wanted to legalize. As time has gone on and there are more and more centralized exchanges, more KYC etc, more and more people pay taxes.

If you have low undeclared amounts it is easy not to get caught. For example, let's say a friend sold you $200 in Bitcoin some time ago, which today is $800. It is easy to spend those bitcoins and the IRS will not find out. But if you have 10 undeclared Bitcoins you have a problem, especially if you want to spend them.

Thanks, yeah how about like 1 entire bitcoin? Lets say someone bought bitcoin every couple weeks over time and has 1 bitcoin. Bought via exchange, and ATMs that don't require ID and just converted to XMR, sent to another address and converted out to bitcoin. So there aren't many records.

And lets say the individual is not going to spend or sell the bitcoin until it reaches 1 million dollars... which could be in the far far future, 20 30 maybe 40 or 50 years from now. Something that makes it possible that records held by the ATM and exchanges could be gone if those exchanges go out of business.



And, if someone had 10 anonymous bitcoins.... I'm thinking they should wait till it goes up past 70k again and move to a more tax forgiving country, or a country that will not be afraid to tell the US to go F-off... And honestly there are few nations that will do that, maybe Russia? Although being prepared to follow all the laws of this new country you have moved to because you've burned your bridges.

If bitcoin is popular in 20-30 years, then there will always be shadow markets in the world.
In Russia, there are no problems with exchanging cryptocurrencies for fiat and vice versa, and in other countries there are groups in telegram channels where you can exchange cryptocurrencies for fiat. There are many exchange offices in Turkey.

[Poker Player]

If bitcoin is popular in 20-30 years, then there will always be shadow markets in the world.
In Russia, there are no problems with exchanging cryptocurrencies for fiat and vice versa, and in other countries there are groups in telegram channels where you can exchange cryptocurrencies for fiat. There are many exchange offices in Turkey.

And how would you exchange $1M in Bitcoin for fiat? You live in France, go with your Bitcoins to Turkey and come back to France on the plane with $1M? There is a limit of €10,000 to travel in Europe. The same applies to Telegram groups: Would you meet in person with someone from Telegram to get €1M (or $1M) for your bitcoins? With the cash payment limits in many European countries it is highly unlikely that anyone would have that amount in banknotes.

Exchanging or spending small undeclared amounts is not a problem, when the amount starts to be big it starts to be a problem, and the bigger the amount the bigger the problem.

[Anonohmon]

Thanks, yeah how about like 1 entire bitcoin? Lets say someone bought bitcoin every couple weeks over time and has 1 bitcoin. Bought via exchange, and ATMs that don't require ID and just converted to XMR, sent to another address and converted out to bitcoin. So there aren't many records.

And lets say the individual is not going to spend or sell the bitcoin until it reaches 1 million dollars... which could be in the far far future, 20 30 maybe 40 or 50 years from now. Something that makes it possible that records held by the ATM and exchanges could be gone if those exchanges go out of business.



And, if someone had 10 anonymous bitcoins.... I'm thinking they should wait till it goes up past 70k again and move to a more tax forgiving country, or a country that will not be afraid to tell the US to go F-off... And honestly there are few nations that will do that, maybe Russia? Although being prepared to follow all the laws of this new country you have moved to because you've burned your bridges.

What you are asking has been discussed in several threads, for example this one:

https://bitcointalk.org/index.php?topic=5355749.0

The answer to your question depends a lot on where you live, but to summarize.

Showing up with a Bitcoin when it's worth $1M before tax authorites is the same as suddenly showing up with $1M in dollars that you can't justify.

In the best case scenario you will be charged a tax, which could be capital gains tax with 0 purchase cost in the case of Bitcoin and I am not so sure in the case of cash. It could be the same or it could be income tax.

But I am inclined to think that you would be investigated for tax evasion. Think Al Capone was put in jail for tax evasion: they couldn't prove that he murdered, extorted money, etc. The only thing they could prove was that he had more money than he could legally justify.

So, $1M seems to me a considerable amount of money to open such an investigation. If you have $1k in Bitcoin that you can't justify you're not going to have problems but when the amount gets big you risk ending up in jail.

That's crazy they wont take "I bought bitcoin back when it was around 20k and held onto it for years" approach! What are the probably many other people who still have bitcoin from 2013 and so on when it was only a few thousand but they bought from one of the plentiful non KYC exchanges?

So is it if you just show up with 1 mil out of no where? Or is it so long as they can see that the bitcoin has sat in a wallet for a long time but is just not connected to a paper trail, would that matter?

Either way, something tells me the totalitarian states of America is not the place to be when you want to cash out.