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
Maybe the rich old baddies are using Bitcoin to evade taxes.
IRS sends warning letters to more than 10k cryptocurrency holders
241–250 of 416 posts
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#242Earlier 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…
And easily mitigated by converting the amount you owe in tax at the time your are paid. I don't see how this would be different than getting paid in any other currency. The problem in your scenario is not really to do with tax, it's that one has effectively expended $10,000 worth of effort for $100. If someone was worried about this, they shouldn't be accepting BTC as payment, or they should convert it to fiat curren…
Agreed, its analogous to being paid $10k and immediately buying BTC.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#243I'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…
> 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 someone tells you to walk 1,000 miles to get somewhere you need to be, would you really respond with anything except "I can't"? It's an acceptable shortening of "well that's a really long way, and it's really hot, and it would take a long time, and I don't have that kind of time, and I'm not in very good shape, and my knees are bad"
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#244Earlier quoted context omitted.
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 it's a store of value, then the value of that value can go up and down relative to the rest of the economy. Just like gold does. (Money supply is not the only factor in price level, despite what everyone seems to think in crypto space)
It's always fun to try to convince people there is no such thing in nature as a perfect store of value.
Houses decay, land can erode or land uses can shift destroying the social value.
If your friend asks you to help him move, next week he'll return the favor, but try going back after not talking to him for thirty years and cashing that favor it.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#245Earlier quoted context omitted.
Come on; if you do Forex trading, you will pay taxes on your gains. If you earn a dollar for your labor, and then hold on to it while its purchasing power increases before making a purchase, that increase is not taxable of course. It's not even quantifiable. Purchasing power can increase faster relative to a specific commodity that gets cheaper faster than other goods. If you buy a currency and sell it later at a pro…
Where can I obtain these magical dollars whose purchasing power increases over time? The purchasing power of all my dollars seems to go down the longer I hold onto them.
That’s not relevant to the point you’re responding to - the point is, if the purchasing power of your dollars went up (and assuming it’s your native currency), you don’t get taxed on it because the number of dollars you hold did not change as a result. If you are holding a different currency, it’s value goes up, and you convert it back to spend, you made capital gains and it will be taxed even though that foreign currency is not an “investment” instrument.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#246So why do we have to file? Why cant the IRS just tell us every year if we owe or not and how much?
A serious answer that isn't just "lobbyists": Even if the IRS had perfect info about all your income and investments, there are decisions you can make which effectively make taxes non-deterministic. Suppose on two different dates, you bought shares of a company. Then on a later date, you sold one share. You get to choose which purchase date to count the sale as being against. This is important because you pay on the…
Lot identification actually isn't a tax-time decision; it's a transaction-time decision. If you don't identify the specific lot you're selling (or more specifically if your broker isn't given or doesn't follow instructions which lot to sell), then in general sales are treated as FIFO, which might not be surprising because that characterization leads to maximum gain in a rising market. See Internal Revenue Service Publication 550 for more. This means that the tax treatment of a stock sale is in fact fixed at the time of transaction; moreover, it's entirely automatable by standing instructions to the brokerage, which most brokerages routinely offer as a feature ("tax optimizer" or "tax-lot optimizer" or similar language).
(This of course is all US tax code, not applicable to US states or other countries.)
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#247So 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…
https://www.coindesk.com/got-free-crypto-fork-heres-tell-irs
Summary of article: nobody knows.
You could be conservative and be either paying the right amount or overpaying.
Or you could be aggressive, and be either paying the right amount or underpaying.
Nobody seems to know what the right way to treat these common situations, but the IRS wants you to figure it out and they’ll decide if you were right or wrong.
I did like the story’s example of buying a pregnant cow though.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#248Earlier quoted context omitted.
> 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.
I like to post this video a couple times a year, because it's so relevant and on point.
It's also quite entertaining.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#249Earlier quoted context omitted.
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.
Never, ever talk to the authorities directly. Always hire an attorney. Exercise your fifth amendment rights.
This is so overkill. What if I am just moving and reporting my new address? What if I am 20 years old and never had any income?
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#250Earlier 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?
Massive social engineering mean the IRS would need every financial and legal transaction you've ever participated in. Which they clearly do not.
For example, we don't have a simple tax system based on a percentage of salary. The amount they want as a tax depends on your marital status, how many kids, how much your spouse earns, and if you itemize deductions it gets even worse WRT every medical provider's bill you've ever paid and weird details of interest payments on mortgage loans.
Honestly the error rate of trying to gather all that big brother data is almost certain to be higher than the fraud rate of people in general.
Also people push agendas, so if you want to spread the idea that fraud is rampant, if I get free coffee at church and starbucks has proven 52 coffees per year is about five hundred bucks, not declaring that coffee as income is fraud; with paper money and barter the IRS can't get all "weird" about little details, but with digital currency if you buy a donut, there will be a reckoning simply because its possible.