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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

#91

Post by AznHisoka »

For what it's worth, Gemini doesn't report everything to the IRS. This is the response I got from them when I asked last year:

"Gemini is required to report gross proceeds paid to US customers from bitcoin or ether sales on the Gemini exchange on IRS Forms 1099-K when applicable reporting thresholds are met. Typically, Form 1099-K reporting will be required by Gemini where the number of bitcoin or ether sales transactions on the exchange exceeds 200 transactions per year AND the total sales proceeds from all sales transactions exceeds $20,000 per year."

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

#92

Post by wrong_variable »

fooey wrote: post #82
gcbw2 wrote: post #74

Earlier quoted context omitted.

> All they have to do is ask, and you better not lie. because asking everyone how much they have in offshore tax havens is working so well. heck, not even when the information is given to the IRS anything happens: https://en.wikipedia.org/wiki/Panama_Papers#United_States

Offshore tax havens don't turn over their records to the IRS US based coin exchanges like Coinbase do

What prevents Coinbase to go offshore then ?

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

#93

Post by bb88 »

Scoundreller wrote: post #89

So how does BitCoin Cash distribution get handled in USA? Is it like a dividend? A stock split? A spin-off? What about all of these airdropped tokens? Are they dividends, with tax payable even if you didn’t “collect” them in some way? Or splits? Can you deduct the Day1 value of the new token from the capital gain on the first token? Or do you assume the cost of the new token was $0 and any sale is a total capital gai…

My understanding is they're still investment property. So probably more like a stock split. IOW, there wasn't a sale and a re-buy. You had 1000 shares of bitcoin and now you have 2000 shares, some of which are in bitcoin-A and some of with are in bitcoin-B.

As to the cost you would probably assume the Day-1 value after the split for the new coins. The price of the split of the old coins should have been reflected in the price.

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

#94

Post by fooey »

modeless wrote: post #52

> 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.

According to the IRS news release, and posts in r/bitcoin, what they're getting are Letter 6173, Letter 6174 or Letter 6174-A

https://www.irs.gov/newsroom/irs-has-begun-sending-letters-t...

https://www.reddit.com/r/Bitcoin/comments/chupoe/irs_we_have...

https://www.irsmind.com/audits/irs-begins-targeting-taxpayer...

> Letter 6174– this is a soft notice informing the taxpayer that there is a likelihood that they did not report their virtual currency transactions. The notice asks them to check their return and, if necessary, file an amended return to correct the misreporting. The taxpayer is not required to respond to the notice and the IRS intends not to follow up on these notices. In short, this is information only to the taxpayer and education on how they comply.

> Letter 6174-A– this is a “not so soft notice” from the IRS. As in Letter 6174, this letter tells the taxpayer that there is potential misreporting of virtual currency transactions. However, this notices states that the IRS may follow-up with future enforcement action. Again, no response is required if the taxpayer believes that they are in compliance. Taxpayers who receive this notice should be aware that they have been put on “notice” that they have been identified as a noncompliant taxpayer for potential future enforcement.

> The last notice requires a response – Letter 6173. This notice requests a response from the taxpayer about the alleged noncompliance. The letter provides instructions on responding to the IRS. The IRS intends to follow up on these responses to determine if the taxpayer is in compliance.

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

#95

Post by jrumbut »

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…

I'm not a lawyer or accountant but I'm fairly sure if someone pays you in cryptocurrency (or beer or gift cards or frozen shrimp or anything else) you owe taxes on the dollar value of that cryptocurrency in the year that you earn it, and of course if no withholding was taken out of it by the one who paid you you also probably owe quarterly estimated taxes.

I can't tell if you're acknowledging this, or if I am mistaken about this but I don't think you can legally avoid income taxes by being paid in kind. My understanding is if you're a US citizen you have to pay Uncle Sam on everything you earn not just every dollar. Otherwise we'd all just take our paychecks in krugerands.

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

#96

Post by x3n0ph3n3 »

AznHisoka wrote: post #91

For what it's worth, Gemini doesn't report everything to the IRS. This is the response I got from them when I asked last year: "Gemini is required to report gross proceeds paid to US customers from bitcoin or ether sales on the Gemini exchange on IRS Forms 1099-K when applicable reporting thresholds are met. Typically, Form 1099-K reporting will be required by Gemini where the number of bitcoin or ether sales transac…

Coinbase didn't "report" these account holders, they were given a subpoena to turn it over.

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

#97

Post by AlexandrB »

jtbayly wrote: post #87
mieseratte wrote: post #27

Earlier quoted context omitted.

> but I can't buy a hamburger with shares of stock. Sure you can, you just have to convince someone it's worth the hassle. That it is atypical doesn't mean you can't.

If you do, how do you figure out if the investment appreciated or depreciated? I mean, if I use BTC as a currency to buy things, I don't understand how I would evaluate every purchase at the end of the year to figure out whether I owe capital gains.

This is why most people don’t buy hamburgers with securities and why you’re gonna have a bad time come tax season.

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

#98

Post by jeffk_teh_haxor »

duxup wrote: post #76
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.

The bitcoin / crptyo currency... ethos? (not sure what word to use there) seems to continuously collide into the reality of living in a society. That doesn't make them incompatible, but it does perhaps provide some lessons for everyone on why financial systems are the way they are as it is, and how you can't just jump on a technology and escape. At the very least it has all been an interesting thing to learn from.

At the very worst it is a blight on the environment.

27kWh of energy burned per transaction, with a maximum scaling limit on the order of 5 or 6 transactions per second. If everybody in the world used Bitcoin, then you'd be entitled to your one transaction every few decades.

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

#99

Post by bb88 »

AlexandrB wrote: post #90
bb88 wrote: post #85

This is a question I don't know. And I was wondering if HN could shed some light on this. The IRS treats bitcoin as an investment property. What happens when one trades investment property for a car, or a boat, say?

I’m not an accountant, but based on what I know about stocks you would get taxed on you financial gains (if any) based on the market value of the bitcoin at the time you trade it for the car.

So that would probably hold true with bitcoin since the IRS sees bitcoin as an "investment property" more akin to stocks and bonds.

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

#100

Post by colecut »

refurb wrote: post #57
cortesoft wrote: post #19

Earlier quoted context omitted.

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.

Where things get bad is when you buy a coin, it goes up 10x, at the beginning of the next tax year you sell and buy some other coin, it goes down to where you bought the first coin, and now instead of being where you started, you owe 2-4x..
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