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IRS sends warning letters to more than 10k cryptocurrency holders

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

#261

Post by tyre »

opportune wrote: post #239
tyre wrote: post #169

Earlier quoted context omitted.

This is not different. Coincidentally, I was the engineer at Zenpayroll (now Gusto) who was working on enabling employees to be paid in crypto back in 2013/2014. We never got to the implementation phase because of precisely this scenario. Bitcoin is so volatile that it's a very scary way to be paid. The downside risk (you can't pay rent because bitcoin did something weird that week) is really really bad for users and…

What about setting up partial compensation on a sliding scale? If my rent+bills+other fixed expenses is X% of my income, I could just take as much as cash as will pay for that and take out the rest of the 1-X% in crypto That said, unless there are tax implications of paying/getting paid in BTC that cause you to e.g. not realize gains, it's really no different than just paying the employee in all cash and letting them…

Not a bad idea.

There were other issues as well that contributed to the decision, namely:

- Legality: there are specific regulations around how employees can be paid. These stem, historically, from companies paying employees in coupons only redeemable at other company stores (think: railroad workers paid in coupons for the general store owned by the railroad.

- Reversibility: What happens if the payroll needs to be reversed? With bitcoin you can't. This is important for cases of fraud (e.g. stolen credentials), user error (e.g. mistyping hours worked), or bugs on our end.

- Anti-money laundering: We needed to be reasonably sure you weren't laundering money. In case you were, having a bank account makes tracing the money much easier. Coin tumblers and the like make obfuscation and cleaning dirty money trivial.

- User adoption and education: How many people really want this feature versus others in the pipeline? If we ship it, what load does this put on our support team to handle calls about bitcoin? About losing their private key?

These are a subset. There are many concerns. I hear you about employees taking that money and buying it anyway, but we did have additional concerns to think about. We weren't against crypto, but it wasn't a good fit for our platform, userbase, size, priorities, etc.

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

#262

Post by JumpCrisscross »

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.

> prior to 2018 this was not the case with crypto

This is "far from certain" [1]. After 31 December 2017, like-kind exchanges are limited to real estate transactions. Before that date, it's ambiguous.

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

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

#263

Post by quickthrower2 »

umvi wrote: post #45
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.

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.

I’m not sure there can ever be a perfect value store. Because such a store is a future promise to “look after you”, but the world is so damn unpredictable! Food prices could soar, land prices too, etc. How does the perfect value store keep up or know what will happen?

The impression I get is you need to invest in things that are short term risky and long term safeish like stocks to even attempt to store value. If you look at how pensions are usually reallocated from stocks to cash as you near retirement this is a clue.

But even then who is to say the ratio of Vangard to 1 months rent or 1000 calories of nutritious food will be the same in 20 years time?

Gold hasn’t performed too well over the last few years by the way.

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

#264

Post by xamuel »

sowbug wrote: post #246
xamuel wrote: post #213

Earlier quoted context omitted.

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 Pub…

Not a tax lawyer, but reporting of lot identification is a tax-time decision, at least for the things being discussed in this thread.

If it's transaction-time then that's totally unenforceable since this discussion applies to things as diverse as trading physical goods for other physical goods in an ad hoc unrecorded environment. It would make no sense for it to automatically be FIFO anyway, for example a person with amnesia might temporarily forget their ownership of longer-term holdings.

And for just one example where FIFO would be suboptimal despite a rising market, merely suppose that you know you're about to die and your children are about to inherit everything with a higher cost basis, but you need a bit of cash right now. (I highly doubt tax optimizer software has achieved the strong AI that would be necessary to know if you're about to die.)

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

#265

Post by AdrianB1 »

This will be a very unpopular opinion, but it is true: USA is much better than 200 years ago; if 200 years ago you were a slave, 100% of your output belonged to your master. Now your government owns only 40-50% of your output and you feel totally free. The only bad thing is that almost 100% of the population is now a half-slave. You don't chose what to pay, how much and what for, you just have to pay up, or else. Yes, you get some services, whatever the governments wants to, same as slaves got shelter and food, as much as the master wanted to. I see some similarities, tell me they don't exist.

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

#266

Post by topmonk »

ca98am79 wrote: post #182
dawhizkid wrote: post #46

So long as this is the case how can it possibly make sense to use bitcoin to actually transact e.g. fulfill the vision of bitcoin as "digital money" if every time you buy a cup of coffee with bitcoin the expectation is that you'd have to calculate capital gains and report every year?

There is a bill that has been introduced which would make it so that you don't have to report BTC transactions less than $600: https://www.ccn.com/u-s-bill-would-ease-bitcoin-tax-regulati...

That story is from 2017. I don't think it passed.

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

#268

Post by wpietri »

AdrianB1 wrote: post #265

This will be a very unpopular opinion, but it is true: USA is much better than 200 years ago; if 200 years ago you were a slave, 100% of your output belonged to your master. Now your government owns only 40-50% of your output and you feel totally free. The only bad thing is that almost 100% of the population is now a half-slave. You don't chose what to pay, how much and what for, you just have to pay up, or else. Yes…

This is just foolishness. Are some rich people still exploiting others and rigging the system? Sure. But chattel slavery was an extraordinary evil. It's at best vacuous to put it in the same moral bucket as a democracy where people vote to, say, make sure old people don't starve in the streets.

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

#269

Post by the_narrator »

berberous wrote: post #205
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

Basically, these all say the same thing and aren't _that_ scary aside from the fact they are from the IRS: Amend your prior returns if you owe money. I am curious if they expect the same if you lost money.

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

#270

Post by cortesoft »

colecut wrote: post #258
navigatesol wrote: post #166

Earlier quoted context omitted.

How is this any different than selling a house for $1 million, putting that $1 million into a different house, and then the value of that new house falls to $100k? If you sell the second house for $100k, you're on the hook for the tax on the net capital gains.

I guess it's just more likely in crypto, and with crypto your money was a "currency" the whole time, not an asset.

This is the same thing that all currency traders need to deal with, and there are a ton of rules and regulations already in place with how to file taxes for it.

https://www.investopedia.com/articles/forex/09/forex-taxatio...

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