Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

IRS sends warning letters to more than 10k cryptocurrency holders

wsj.com

Post reply on HN
Print view View original

121–130 of 416 posts

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

#121

Post by Jach »

lizknope wrote: post #43
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…

How practical is bitcoin as a currency for day to day use. I thought the transaction time was 10 to 30 minutes. I get frustrated at the checkout counter when my credit card takes longer than 10 seconds. 10 to 30 minutes seems a lot closer to how long it takes for a stock sale to go through on E-Trade so I can see why the IRS would classify it more like a stock than currency.

Ignoring the periods in the past with very high transaction fees and network congestion, for the most part it's been as practical as a card and often faster since I can just use my phone to scan a QR code and click a verify button. We can also ignore the lightning network in the calculation of practicality. Normally if I send you a payment you'll see the notification of a pending transaction with the amount on your side pretty much immediately. There is a risk that I could after walking off with the goods create a new transaction with a higher fee (especially if the replace-by-fee flag was part of the original send, and one might want to be more cautious if that was the case) to send them to myself instead, though even if I try it's not guaranteed to succeed. If you wait around for on average ten minutes (could in actuality be a few seconds, could be more than ten minutes) for the transaction to get one confirmation in a block you can be a lot more certain no shenanigans will occur. Most merchants will use a third party system that will take on this risk for you. I don't know if third party systems like Stripe do the same for credit cards, but credit cards have the same risk profile. (I can call up my card company and claim a fraudulent charge after getting the goods. They'll then in turn not honor the charge. It takes something like 180 days before a CC charge becomes much harder for the payer to dispute, vs. bitcoin's 10 minutes for very hard and 60 minutes for basically impossible. Seems like an ok tradeoff to me.)

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

#122

Post by slg »

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.

>The bitcoin / crptyo currency... ethos? (not sure what word to use there) seems to contentiously collide into the reality of living in a society.

That technolibertarianism is rampant throughout the tech industry and not just in the crypto space. Ignoring laws is viewed as being perfectly fine as long as you label it "disruption". I don't see much difference in peole running unlicensed hotels out of their condo with the help of Airbnb compared with a crypto trader dodging taxes.

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

#123

Post by pcwalton »

todipa wrote: post #41

Chuck Rettig, the new IRS commissioner comes from a tax litigation background. He's got a lot of experience and is preparing for one of the next big tax battles which is how to bring crypto under compliance with the current tax regime. I still think they lack the technical knowledge to understand crypto and as a result, you'll start to see an increase in information being requested. In any case, I willing to bet that…

> I still think they lack the technical knowledge to understand crypto and as a result, you'll start to see an increase in information being requested.

On the contrary, I think that the IRS knows cryptocurrency very well. The reason why the IRS requests information is that they want to prove to a court that they went out of their way to give taxpayers the benefit of the doubt. They want to be able to tell a judge "we gave this person ample opportunity to explain the situation and correct any misunderstandings before taking enforcement action". The IRS will go through the motions of requesting information even if—especially if—they know full well that fraud has occurred, just to strengthen their case.

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

#124

Post by duxup »

wrong_variable wrote: post #92
fooey wrote: post #82

Earlier quoted context omitted.

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 ?

They want to do business in the US and work with US banks.

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

#125

Post by EGreg »

hcurtiss wrote: post #77
arcticbull wrote: post #68

Earlier quoted context omitted.

Yes, because you as a US person track your gains/losses relative to the USD so if you buy Pesos and the value of the Peso changes relative to the US Dollar over the time period you held them that is in fact a capital gain and reportable to the IRS for tax purposes. Every country that taxes capital gains operates the same way to the best of my knowledge. > Because I know for a fact nobody pays taxes (or carries forwar…

This is helpful. Thank you. The whole thing is a little odd to me. I'm used to thinking about paying taxes on marginal increase in value, and I had never considered that to be defined exclusively in dollars. I suppose it is. If I buy for $10 and sell for $20, I pay taxes on $10 even if the value of the dollar dropped by half in the intervening period.

Basically inflation is taxed. However, few people report trinkets. Inflation in a certain sector (whether due to speculative bubbles or not) is taxable.

The real question is — what if there is huge volatility and it goes down after it went up? Surely you don’t pay taxes on just the hands you win in a casino without deducting the losses first? But when does a casino session end with markets?

another BIG question I have is, do you really now have to pay for EVERY TRADE of one cryptocurrency to another? What if you have a capital loss and gain etc.?

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

#126

Post by beefalo »

bb88 wrote: post #99
AlexandrB wrote: post #90

Earlier quoted context omitted.

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.

It is the same as using anything other than USD to trade for something. Wether that is Stocks, Euros, GBP, goats, if you bought it at one price and traded it for something else based on a different price, you owe taxes for your capital gains from holding that asset.

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

#127

Post by cortesoft »

colecut wrote: post #100
refurb wrote: post #57

Earlier quoted context omitted.

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..

You can carry over capital losses to some extent

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

#128

Post by whatshisface »

jeffk_teh_haxor wrote: post #98
duxup wrote: post #76

Earlier quoted context omitted.

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.

If cryptocurrencies saw serious use, Bitcoin would self-limit at a sustainable level and new currencies would be invented to deal with those issues. The biggest problem with cryptocurrencies is that US dollars are actually pretty good.

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

#129

Post by kentm »

lallysingh wrote: post #103
wrong_variable wrote: post #92

Earlier quoted context omitted.

What prevents Coinbase to go offshore then ?

Plenty of offshore exchanges. People use coinbase because it's working within the US system.

Exactly this. From a consumer perspective, being subject to the US legal system is a big advantage.

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

#130

Post by fooey »

wrong_variable wrote: post #92
fooey wrote: post #82

Earlier quoted context omitted.

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 ?

That's not the kind of business they want to be. Coinbase want to be seen as legit, not an offshore tax haven.
Post reply on HN