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IRS sends warning letters to more than 10k cryptocurrency holders

wsj.com

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Re: IRS sends warning letters to more than 10k cryptocurrency holders

#11

Post by cortesoft »

mtgx wrote: post #3

It's not sustainable to tax regular Joe for each and every cryptocurrency transaction due to the nature of cryptocurrencies, especially in the US where people have to do all of their taxes on their own. I believe Canada has something like 20% tax on the profits you get out of cryptocurrencies for the year, which I think is a much simpler system that makes much more sense.

They wouldn't be taxed on every transaction, it would work like any investment where you claim capital gains and/or capital losses.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#12

Post by nostrademons »

ilovecaching wrote: post #5

So under the current laws does a person only pay taxes when converting to and from fiat to crypto, or does it apply to crypto transactions of any kind?

Applies to crypto transactions of any kind. This is a major impediment to use of crypto for its intended purpose, and there are bills currently proposed in Congress to reverse this.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#13

Post by hcurtiss »

I'm sure there's a lot to know about this topic, but it's odd to me that they'd treat a "currency" as an appreciating asset. If I'm given a dollar (or peso) as change, and if between the time I receive the dollar and the time I spend it the currency purchasing power increases, I do not pay taxes on that gain. I can just buy more stuff with that dollar (including other currencies). In this instance, where it's increasingly true that bitcoin can be used as currency to purchase goods and services, it's odd to me that those are realizing events that require you calculate gain. I get it that shares of stock work that way, but I can't buy a hamburger with shares of stock.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#14

Post by jeromegv »

LannisterDebt wrote: post #6
mtgx wrote: post #3

It's not sustainable to tax regular Joe for each and every cryptocurrency transaction due to the nature of cryptocurrencies, especially in the US where people have to do all of their taxes on their own. I believe Canada has something like 20% tax on the profits you get out of cryptocurrencies for the year, which I think is a much simpler system that makes much more sense.

> I believe Canada has something like 20% tax on the profits you get out of cryptocurrencies for the year, which I think is a much simpler system that makes much more sense. This is wrong. Canada is taxed very similarly to USA meaning if it's an investment it may be capital gains and if it's a business then it's income.

I'm always impressed by how people make up statements online without any kind of research that would take less than 30 seconds. No Canada has no special tax rate for cryptocurrency, what kind of non-sense is that.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#15

Post by harlanji »

dev_dull wrote: post #2

The math behind crypto doesn’t magically make you immune to government oversight. All they have to do is ask, and you better not lie.

Exactly. I am happy to say I’ve 0 crypto currency. Waiting until that is more tested. Meanwhile other investments are under-valued.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#16

Post by popotamonga »

mtgx wrote: post #3

It's not sustainable to tax regular Joe for each and every cryptocurrency transaction due to the nature of cryptocurrencies, especially in the US where people have to do all of their taxes on their own. I believe Canada has something like 20% tax on the profits you get out of cryptocurrencies for the year, which I think is a much simpler system that makes much more sense.

In Portugal, the IRS stated it was tax-free because nothing in the law fitted it.

Source: http://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/in...

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#17

Post by mtw »

dev_dull wrote: post #2

The math behind crypto doesn’t magically make you immune to government oversight. All they have to do is ask, and you better not lie.

It depends where you do your transactions. If you do it on CoinBase, yes, you are going to be tracked. There are many other options though where you don't have to provide ID.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#18

Post by dsfyu404ed »

dev_dull wrote: post #2

The math behind crypto doesn’t magically make you immune to government oversight. All they have to do is ask, and you better not lie.

Obviously no, the math doesn't prevent them from shooting your dog and carting you away to a jail cell but your assumptions about enforcement are naive.

The typical MO for tax evasion is to just not report your side gig (crypto or otherwise), hope you don't get caught and play dumb and pay up if you do get caught. This doesn't change whether it's crypto or doing under the table work which is the point I'm trying to make here. You either pay up front the right way or have a chance of not paying at all (tax evasion) but if you get caught doing that you pay slightly more for not paying up front. Anyone who is being charged with tax evasion is doing something very stupid.

It should be obvious but the people who've revived these letter should play dumb (if applicable) and pay up at this point since clearly the IRS knows that they owe more than they've paid.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#19

Post by cortesoft »

olliej wrote: post #9
mtgx wrote: post #3

It's not sustainable to tax regular Joe for each and every cryptocurrency transaction due to the nature of cryptocurrencies, especially in the US where people have to do all of their taxes on their own. I believe Canada has something like 20% tax on the profits you get out of cryptocurrencies for the year, which I think is a much simpler system that makes much more sense.

They are treating cryptocurrency as they do any other investment: you are taxed on each transaction for stock as well. If you were day trading you would have just as much pain come tax season. That some people insist on trying to use crypto currencies as an expensive environmentally horrific currency is kind of irrelevant when the majority of users recognize that at best it’s a long term hodl investment

That isn't true... you aren't taxed on every transaction. You are taxed on your gains and losses... if you make $1000, it doesn't matter if you made 1 big trade or 100 small ones, you get taxed on the total (either long or short term capital gains)

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#20

Post by rolltiide »

Having talked to many people I do believe there is low tax compliance, but having read how the IRS rationalized the Coinbase subpoena to the judge I realize they have no idea to tell if they have compliance or not.

They merely did a search string for 2015 for "bitcoin" in tax filings and found 800 people filed that way. So I checked my 2015 tax filings and saw I had manually entered "LTC" for closing a litecoin trade to US dollars. Hm okay, so one of the most compliant US citizens isn't counted as one of the 800 people, got it.

So then Coinbase's compliance with the subpoena now has them automatically sending Schedule D information to the IRS and to users based on a net value of any holdings in their account. But Coinbase doesn't know what any of the holdings or transactions represent, just like your bank doesn't know what your deposits and transfers represent. A third party is now assuming that its users are on the hook for capital gains, causing a filed accounting discrepancy for everyone.

Fascinatingly incompetent.

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