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The IRS collects data on Coinbase account holders

wsj.com

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Re: The IRS collects data on Coinbase account holders

#11

Post by purple-again »

jmngomes wrote: post #4
coldcode wrote: post #2

Why fear a government agency with aging equipment and lack of employees due to continuous budget cuts by politicians who don't want their buddies audited? The IRS can't keep up with tax law changes and collect much of what they are supposed to collect already much less add new and more complex things to track.

Maybe it's different where you live, but my experience is that the only people that can afford to not fear the IRS are precisely the "politicians and their buddies"...it wouldn't surprise me at all to see task forces being formed just to identify under-reporting via Bitcoin and issue threatening letters (e.g. pay what is due or say goodbye to any assets you have) to whoever comes up on that list.

You are right and wrong. It's not 'politicians and their buddies', the line is much much lower than that but there is absolutely a bright line between who pays the IRS and who hires people like I use to be (I sat across from the IRS times innumerable cutting them to shreds) to make sure they pay almost nothing.

Anyone that can afford accounting services from the Big 4 (PwC, Deloitte, EY, KPMG) is getting this golden glove treatment. I am sure that there are numerous mid market firms with significant amounts of ex big4 staff that are also helping their clients just as much. Small CPA shops will be hit or miss with mostly misses. My results were 20% experience, 20% skill, 50% training by my Big 4 employer, and 10% fear of my employer escalating the situation if they didn't get a sign off from me (I'm not the one that would get sent to represent the client in tax court).

The vast majority of the IRS's work is based on incompetency and fear. Nearly all of the charges they tried to leverage against my clients were false and due to paperwork errors (more often on the client's side than the IRS but not always...not even close to always) that were easy to resolve with minimal penalties and interest.

To be clear, they didn't get to throw the middle finger at the IRS and pay nothing, they paid what they owed which was practically never even in the same ballpark as the bill the IRS came at them with. The people who can't hire a professional Tax CPA to sort it out for them get fucked not because they are the only ones paying what they owe but because they are the only ones paying way fucking more than they owe. That's a whole other ethical problem that should be addressed with the IRS.

Re: The IRS collects data on Coinbase account holders

#12

Post by IAmEveryone »

zzz157 wrote: post #6
IAmEveryone wrote: post #5

Earlier quoted context omitted.

How is that even a prediction? > store the history of all Bitcoin transactions Bitcoin conveniently does this for them > and try to identify all wallet owners That’s the headline here > check if profits were reported and if taxes were paid Which is the IRS’ job

>Which is the IRS’ job Ever heard of the 4th Amendment?

Sure. And so has the IRS, which “persuaded a federal judge”, according to the article.

I guess they thought it was a reasonable request to get the data of the 25,000 US citizens who made significant profit with bitcoin in those years, when only a few hundred reported such earnings in total.

Re: The IRS collects data on Coinbase account holders

#13

Post by maxerickson »

IAmEveryone wrote: post #7
coldcode wrote: post #2

Why fear a government agency with aging equipment and lack of employees due to continuous budget cuts by politicians who don't want their buddies audited? The IRS can't keep up with tax law changes and collect much of what they are supposed to collect already much less add new and more complex things to track.

So, if you were American, had a coinbase account, and made significant capital gains in the years under investigation, would you not be worried? Because it seems to me like they are very much capable of enforcement, as exemplified by the article. Rich people in the US don’t avoid taxes by stymying investigations they give 5% of their income to Republican candidates and PACs, and have the law changed for them.

Lots of people in the circumstance you describe will have made a good effort to pay appropriate taxes.

Re: The IRS collects data on Coinbase account holders

#14

Post by patio11 »

jmngomes wrote: post #4
coldcode wrote: post #2

Why fear a government agency with aging equipment and lack of employees due to continuous budget cuts by politicians who don't want their buddies audited? The IRS can't keep up with tax law changes and collect much of what they are supposed to collect already much less add new and more complex things to track.

Maybe it's different where you live, but my experience is that the only people that can afford to not fear the IRS are precisely the "politicians and their buddies"...it wouldn't surprise me at all to see task forces being formed just to identify under-reporting via Bitcoin and issue threatening letters (e.g. pay what is due or say goodbye to any assets you have) to whoever comes up on that list.

As HN has a lot of people who have complicated financial situations and will eventually get one, I'd like to point folks in the direction of what the IRS' typical first play is if they think you underpaid taxes.

They do not send you a threatening letter. They do not throw you in prison. They send you a bill; more formally, a CP3219A. (The IRS says it is not a bill, it is a proposal. In practice, it's a bill you can argue with.)

You can see the not-so-hair-raising copy here: https://www.taxaudit.com/irs-letters/irs-letter-cp3219a-samp...

If you ever get one, you will simply call up your accountant and follow their advice. It's less annoying than owning a bank money...

... providing you didn't commit tax fraud.

Here's an example of tax fraud, taken directly from a case where the IRS did, indeed, refer to prosecution: Joe Smith owns a small business. Joe Smith, Inc. paid a Japanese technology company $600k for "technology services", per his tax return.

Joe Smith received a $600k wire from Japan, which he did not declare as income.

Can you guess the nature of the "technology service"? Yep, it was "Mt. Gox, please technologically service me by buying Bitcoin and then wiring the money back to me. Hah hah hah we are so clever hah hah hah."

Re: The IRS collects data on Coinbase account holders

#15

Post by roel_v »

pulse7 wrote: post #3

My prediction: they will store the history of all Bitcoin transactions and try to identify all wallet owners; when identified they will check if profits were reported and if taxes were paid; if not -> good luck; the same for other countries in the world

I would say this a very natural and logical thing to do - with the blockchain storing the history of transactions for eternity, you just need to get some programmers to write some code to cross reference a few systems and leave it running for the years to come, catching people as soon as they make a single mistake. The business case and expected ROI for this project must be the easiest one any inspector ever had to write.

Re: The IRS collects data on Coinbase account holders

#17

Post by verelo »

IAmEveryone wrote: post #5
pulse7 wrote: post #3

My prediction: they will store the history of all Bitcoin transactions and try to identify all wallet owners; when identified they will check if profits were reported and if taxes were paid; if not -> good luck; the same for other countries in the world

How is that even a prediction? > store the history of all Bitcoin transactions Bitcoin conveniently does this for them > and try to identify all wallet owners That’s the headline here > check if profits were reported and if taxes were paid Which is the IRS’ job

I’ve got from good sources that in Canada the RCMP is (...was several years ago) already doing exactly this. And it’s very easy to do since the exchange in question requires ID to create your account.

Re: The IRS collects data on Coinbase account holders

#19

Post by pmorici »

koboll wrote: post #10
IAmEveryone wrote: post #7

Earlier quoted context omitted.

So, if you were American, had a coinbase account, and made significant capital gains in the years under investigation, would you not be worried? Because it seems to me like they are very much capable of enforcement, as exemplified by the article. Rich people in the US don’t avoid taxes by stymying investigations they give 5% of their income to Republican candidates and PACs, and have the law changed for them.

Coinbase has already issued tax forms for those who owe capital gains taxes because of cryptocurrency sales. So this isn't in any way new or unexpected.

I don't think that is correct. They are issuing 1099-K's for people who are accepting Bitcoin payments through Coinbase. They haven't issued any 1099's for people who only have a capital gain from buying and selling.
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