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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

#201

Post by JumpCrisscross »

jpmattia wrote: post #194
crypto_throwa wrote: post #142

Earlier quoted context omitted.

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…

> Here's one situation where it is very different. Good god, no it is not different. When the internet bubble collapsed in 2000, it literally bankrupted some people who had been compensated with stock options because of taxes. Exercising the options not only had resulted in greater income, but it caused AMT to kick in. Moreover, some of the exercised options yielded stock that was still in lock-up due to IPO agreemen…

> When the internet bubble collapsed in 2000, it literally bankrupted people who had been compensated with stock options

Best practice is to sell stock sufficient to pay for taxes when exercising options. (Same for workers subject to U.S. taxation being paid in a foreign currency.)

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

#202

Post by olliej »

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.

and each trade will have a separate line item in your tax return, and strictly speaking you are mean to withhold in the period you make the sale

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

#203

Post by JumpCrisscross »

171243 wrote: post #196
teej wrote: post #25

Earlier quoted context omitted.

I believe this is where a lot of the confusion comes from. If you use Coinbase to directly trade crypto (e.g. BTC for ETH) this is a taxable event on your BTC even though you never touch fiat in the process.

Didn't this recently change? Prior to 2018 was it not considered a "like for like" transaction?

> Prior to 2018 was it not considered a "like for like" transaction?

It's "far from certain" [1]. Tax diligence is part of investing; these questions should be approached before one trades an asset, not after.

[1] https://www.coindesk.com/owe-irs-crypto-crypto-trades

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

#205

Post by berberous »

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.

IRS News release: http://src.bna.com/KeG

Letter 6174-A: http://src.bna.com/KeH

Letter 6173: http://src.bna.com/KeI

Letter 6174: http://src.bna.com/KeJ

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

#206

Post by ascagnel_ »

banachtarski wrote: post #159
a_bitcoin wrote: post #115

Sure, it makes sense to tax earnings from cryptocurrency trading. But aren't there bigger fish to fry, richer people more flagrantly evading taxes? Let's sort that out first, k

There are two separate matters here. Defining the law and enforcing the law. Misreporting capital gains on crypto violates existing law and is illegal today. Tax evasion by legitimate means (401ks, IRAs, writing off losses) is perfectly legal, and if you or I have complaints, this should be taken up with policy makers and at voting booths.

> Tax evasion by legitimate means

A nitpick on your language: "tax evasion" specifically refers to _illegal_ actions (eg misreporting capital gains); "tax avoidance" is the term to describe _legal_ actions that reduce a tax burden.

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

#207

Post by [deleted] »

mtw wrote: post #17
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.

[deleted]

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

#208

Post by verdverm »

171243 wrote: post #187
sdinsn wrote: post #141

Earlier quoted context omitted.

> 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

I believe prior to 2018 this was not the case with crypto.

Weren't they treated more like property then?

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

#209

Post by caseysoftware »

bilbo0s wrote: post #161
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.

> One version of the letter recently uploaded to the IRS website asks recipients who believe they have followed the law to sign a statement... Just a word of advice to anyone who may be receiving letters like this in the future. Do not, under any circumstances, sign a statement that you have followed the law without consulting with qualified counsel first. You should know that every time you sign off on something to…

This is why "lying to investigators" is such a bs charge.

It's incredibly easy to do what you think is the right thing but still "lie" because you didn't know/understand all the facts, implications, and details.

Always, always, always, get qualified legal/accounting counsel involved.

No, your uncle the family law attorney is not qualified.

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

#210

Post by adamson »

msandford wrote: post #183
arcticbull wrote: post #58

Earlier quoted context omitted.

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…

So that's why we can't ever have some deflation here in the modern US, it would reduce tax revenue! I always wondered about that. In this light it makes perfect sense.

I’m not aware of any evidence that that’s actually the motivation behind preventing deflation. Just about every economist will tell you that deflation is undesirable because it incentives hoarding accumulated currency rather than investing it in productive capital because of the decreasing value of production relative to currency.
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