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…
It's the exact same as if you'd be paid in a foreign currency right before it depreciates signifcantly.
IRS sends warning letters to more than 10k cryptocurrency holders
291–300 of 416 posts
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#292Re: IRS sends warning letters to more than 10k cryptocurrency holders
#293Earlier quoted context omitted.
> 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.)
https://www.acceleratedfi.com/real-world-options-example-how...
(Check the details of your contracts with an attorney and financial advisor; I've heard that some lock-outs now explicitly forbid trading in derivatives of the stock to prevent doing what Cuban did. With financial engineering being as advanced as it is, though, it's always possible to create a "synthetic" derivative that is nearly guaranteed to have the same value as a particular options strategy without mentioning the particular asset involved.)
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#294Re: IRS sends warning letters to more than 10k cryptocurrency holders
#295> 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…
Alternatively, we see politicians walking back false statements or changing stance daily because the thing they said previously was what they believed based on the facts present at the time -- and they are never held to account.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#296Earlier 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…
What if you get paid in meat, $100k worth of meat, but then you spoil all of them so they're now worth $0. It's not government's problem if your currency is volatile. You can find a job that doesn't pay you in BTC.
If you are paid in meat, you get something like 100 kg of pre-formed frozen ground beef patties. That doesn't have a dollar value unless you can find a buyer for it. Which is pretty easy to do if it's a commodity.
So let's try a more broken example. You get paid in sandstone triangular prisms machined to be 31 mm on the two longer sides, 19 mm on the short side, and 9mm in height. These then have a square(-ish) hole drilled in them, slightly off center, and then the sides are grooved, and the faces engraved. These triangles are called fubaar.
Fubaar have no fixed exchange rate with the dollar. For a job, you are paid 1000 fubaar. The value of a fubaar is very stable. One has been able to purchase the traditional formal attire of Barbazia for exactly 5 fubaar, for over 800 years. But you can't buy much with them on the international market except quuxfruit--which bruises easily, and smells like durian crossed with feet after four days.
At the end of the year, I could report that I earned 1000 fubaar since last year, and mail about 250 of them to the treasury. It's not my problem if the government can't convert them to dollars. They can go buy quuxfruit with it. But the treasury won't take anything but dollars. My only recourse is to say the fubaar represent $0 in income, because they really are essentially worth $0, having no inherent value.
The problem is that the gov't is levying taxes in dollars on income that is not dollars, and exporting the inconvenience of conversion to those least able to get a good conversion rate. Congress has the enumerated power to regulate the value of foreign coin. Why not use it? The Treasury also has the ability to accept foreign coin. For a good length of US history, much commerce was conducted in Spanish silver dollars, not US-minted coin. Those were acceptable for payment of taxes.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#297Earlier quoted context omitted.
> The IRS on the other hand with these kinds of notices is not out to get you. Citation needed. The IRS can be among the most vicious of any federal agency. Having dealt with FATCA situations with overseas Americans, Treasury is, in my experience, nobody’s friend.
The IRS is in the business of getting money for the federal government. People in federal prison don't have much in the way of income, nor do they pay much in the way of taxes. They're a net drain on the federal budget. The IRS will generally take the most effective tack it can in getting the money it is owed. For honest mistakes, that usually means sending you a formal notice that it believes you are out of complian…
If you pay them, they go away. Or sometimes they pay you and go away. (My first IRS letter was after my first semester of college, which was a bit disturbing since my whole income that previous year was ~$1k, but opening it revealed that I had neglected some sort of new education credit and they were giving me a small check to account for it.) My only remaining "fear" of the IRS is the scary Audit, because I know my record keeping is terrible and I don't want the anxiety of calling places and hunting down receipts or getting sworn letters from people that such-and-such checks were used for rent sharing not income/paying for services, and so I only hope that any audit could just be resolved by paying a lump sum even if with a bunch of effort that could get reduced...
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#298Earlier 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.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#299Earlier 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…
Exactly. It falls in line with similar to "don't talk to the police". Just keep quiet. This applies to everything when dealing with any government agency. The government is not your friend.
Anecdote time. Having been stopped by police in the States four times (that I can recall offhand) over the years -- with a legitimate justification in each case -- my experience has been that courtesy and cooperation have served me well. On a couple of occasions when I could quite reasonably have been ticketed and fined, I have instead been sent on my way with a friendly warning to be more careful. I strongly suspect taking a strict "don't talk to the police" line would have cost me quite a bit more stress, time, and money.
Re: IRS sends warning letters to more than 10k cryptocurrency holders
#300This 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.
Just like any other good, there is a fluid rate of demand for money. If the supply of money is unable to increase with the demand for money, the relative value of the money increases.
This is exactly why USD is a poor store of value (it reliably depreciates by 1-3% annually) and a good currency (well-managed supply vs demand results in long-term predictability about the value of 1 USD, making it reliable to transact in).