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

141–150 of 416 posts

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

#141

Post by sdinsn »

cwkoss wrote: post #138

As far as I understand it, IRS wants cryptocurrency traders to report USD profit on every trade. This gets extremely ugly if you are trading one cryptocurrency for another, as these trades are unclear as to whether they are an entry or an exit. Now, I simply recommend that everyone only trades USD-to-crypto and back, never crypto-to-crypto if you want to comply with tax law - it gets very complicated fast.

> This gets extremely ugly if you are trading one cryptocurrency for another, as these trades are unclear as to whether they are an entry or an exit.

Trading one crytocurrency for another is a taxable event. Just like how trading one real currency for another is a taxable event. It's not unclear and trading platforms provide tax tools that solves this problem

I traded crypto and paid my taxes

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

#142

Post by crypto_throwa »

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.

Here's one situation where it is very different.

Say I get paid 100 BTC for doing a job worth $100/BTC at the time or $10000. Now, say BTC drops to $1/BTC. I owe income tax on the $10000. Let's say I owe $2000 (20%) in taxes. However, I only have $100 now. My effective tax rate is 2000%.

This does allow for a small deduction of capital gains each year. However you can only deduct $3000 a year in capital gains. In a larger scenario, this would take decades to fully receive your total deduction.

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

#143

Post by crispsquirrel »

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.

Well technically it does. Just not if you buy from coinbase where they need a lot of your personal information plus you'll be most likely buying with a debit/credit card.

If you pay someone for cryptocurrency in cash and they send to a wallet you have set up by yourself there is not really any way to prove that it's yours.

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

#144

Post by PeterisP »

EGreg wrote: post #125
hcurtiss wrote: post #77

Earlier quoted context omitted.

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 hav…

If you have a capital gain on one transaction and a loss on other, in general the net gain is taxed, and usually losses in one tax period can be used to offset gains in other periods - there are all kinds of accounting rules on how to properly document the transactions and these gains. In general, everything you worry about in this post isn't new, it's been argued and resolved decades ago, you "just" have to follow all the regulations. Or, alternatively, chartered accountants make a living by following the details of these regulations so that their clients don't have to.

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

#145

Post by navigatesol »

Jach wrote: post #121
lizknope wrote: post #43

Earlier quoted context omitted.

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 s…

>for the most part it's been as practical as a card and often faster

Have you ever used a card? If you think that opening your phone, scanning a QR and then hitting "verify" is faster than a tap or swipe of your credit card, I'm not sure what to tell you. Best case scenario, they're about the same.

>I can call up my card company and claim a fraudulent charge after getting the goods

And they'll investigate and determine you committed fraud, and you'll be fined or go to prison. What's the equivalent with Bitcoin?

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

#146

Post by [deleted] »

popotamonga wrote: post #16
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...

[deleted]

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

#147

Post by yyyk »

Jach wrote: post #121
lizknope wrote: post #43

Earlier quoted context omitted.

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 s…

"I can call up my card company and claim a fraudulent charge after getting the goods... 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."

Yes, because obviously what we need is less power to the consumer.

So what if it takes you 60 minutes to get home just to test the product you just bought? Or that you can't dispute frauds that target seniors (i.e. grandma), because she won't tell you what she bought within 60 minutes but only the next time you call her?

The digital nature + relative untracability + no chargebacks makes Bitcoin scammer heaven.

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

#148

Post by [deleted] »

buzzert wrote: post #134
yellowstuff wrote: post #117

Earlier quoted context omitted.

Two reasons: * H&R Block and Intuit have good lobbyists who prevent it from happening. * Republicans want to make filing taxes difficult so that people won't like taxes. In particular Grover Norquist has managed to get essentially all federal level Republican politicians to sign a pledge not to raise taxes, and Norquist considers making filing simpler to be effectively raising taxes. https://www.politico.com/agenda/s…

I'm sure those aren't the only reasons. Quite a lot of people get away with tax fraud. If the IRS really knew everything and filing taxes was just a pointless exercise, why is fraud so prevalent?

[deleted]

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

#149

Post by PeterisP »

crypto_throwa wrote: post #142
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.

Here's one situation where it is very different. Say I get paid 100 BTC for doing a job worth $100/BTC at the time or $10000. Now, say BTC drops to $1/BTC. I owe income tax on the $10000. Let's say I owe $2000 (20%) in taxes. However, I only have $100 now. My effective tax rate is 2000%. This does allow for a small deduction of capital gains each year. However you can only deduct $3000 a year in capital gains. In a l…

It's the exact same as if you'd be paid in a foreign currency right before it depreciates signifcantly.

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

#150

Post by navigatesol »

crypto_throwa wrote: post #142
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.

Here's one situation where it is very different. Say I get paid 100 BTC for doing a job worth $100/BTC at the time or $10000. Now, say BTC drops to $1/BTC. I owe income tax on the $10000. Let's say I owe $2000 (20%) in taxes. However, I only have $100 now. My effective tax rate is 2000%. This does allow for a small deduction of capital gains each year. However you can only deduct $3000 a year in capital gains. In a l…

>My effective tax rate is 2000%.

Sounds like a pretty good reason not to get paid in Bitcoin, no? How is the ridiculous volatilty the government's problem?

Post reply on HN