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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

#51

Post by arcticbull »

dsfyu404ed wrote: post #18
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 m…

It's hard to prove intent after you receive a letter from the IRS telling you to do something then you don't?

The nice thing about the IRS is that intent is pretty irrelevant. You make money, you don't pay taxes, your wages get garnished and your bank accounts seized for taxes, fees, penalties and interest. There's no messing around with the IRS, intent not required. If they can show intent you go to prison.

[edit] The difference with under the table work is that you get cash, then you spend the cash and not a record was made, then you've got the IRS forensic accountants on your ass if you do it too much. With crypto if you want to get your purchasing power back you pretty much have to go through a fiat gateway, every transaction there is logged, and likely reported.

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

#52

Post by modeless »

> One version of the letter recently uploaded to the IRS website asks recipients who believe they have followed the law to sign a statement

Does anyone have a link to the letters? It drives me mad that journalists refuse to link to primary sources.

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

#53

Post by zcrackerz »

dsfyu404ed wrote: post #18
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 m…

Intent or playing dumb maybe only matters as a defense against tax evasion charges, but everyone is liable to pay taxes and associated penalties for late/non-payment, even on an under the table side gig.

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

#54

Post by jedberg »

mtw wrote: post #38
jedberg wrote: post #23

Earlier quoted context omitted.

Right now it's pretty hard to live on cryptocurrency alone. Which means at some point you will need dollars (or Euros or whatever), and that transaction is almost always traceable to a person.

I don't know a lot of people who only have cryptocurrency income. Most people have a regular job, but then decide to put a % of their savings into crypto. You can use your job income to pay for transactions. If there are any cryptocurrency income, it's then up to you how to manage that. Put that into traditional finance (then declare it), hold (not selling, so there are no capital gains, so no tax), or use crypto to…

This is true with cash too. You can take part of your income into cash and make anonymous transactions with cash, and maybe even profit from them in an untraceable way.

But you better hope it is truly untraceable, and that no one else involved in that transaction makes it traceable, otherwise the IRS will come for you.

Same with crypto, except it is a lot easier for someone else to make you traceable since all the transactions can be traced to their origin on the blockchain. If someone you transacted with files US taxes, it's not that hard for the IRS to trace that back and ask who the BTC came from. It would only take one person turning on you for you to get caught.

It's really not worth it.

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

#55

Post by [deleted] »

harlanji wrote: post #15
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.

[deleted]

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

#56

Post by msbarnett »

hcurtiss wrote: post #13

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 increas…

If you exchange your money for a foreign currency, and that foreign currency appreciates in value vs the US Dollar such that you realize a profit, that’s absolutely taxable profit.

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

#57

Post by refurb »

cortesoft wrote: post #19
olliej wrote: post #9

Earlier quoted context omitted.

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)

But your gains and losses are just a sum of all your transactions.

If you had 100 shares of GOOG and sold one share each day, over 100 transactions, your gains and loses are the sum of each individual transaction.

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

#58

Post by arcticbull »

hcurtiss wrote: post #13

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 increas…

1 USD always equals 1 USD and you pay taxes on gains relative to the USD as a US person.

It's not possible for your USD to be an appreciating asset relative to the USD and that's how capital gains are defined. However, if you go to a store in America (and hypothetically) they give you change in Euros, then you take that to another store, and redeem the Euros there, you do in fact owe taxes on the increase in value of the Euro relative to the US dollar over that time period spanning those two transactions.

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

#59

Post by fortran77 »

umvi wrote: post #45
fortran77 wrote: post #4

This is no different from any other profit or gain. The Government isn't specifically targeting these people; it just wants them to make sure they realize it's like any other investment.

I hate that people treat currencies as an "investment". In my mind, crypto concurrency is the perfect value-store (like gold used to be), not an appreciating asset. Yet because people treat it like stocks, it behaves like stocks.

If I bought and sold gold or British Pounds, I'd still be subject to taxes on my gains. I'm not sure I see your point.

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

#60

Post by amerine »

rolltiide wrote: post #20

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…

> Fascinatingly incompetent.

Wonderfully said, haha! ️

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