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The IRS collects data on Coinbase account holders

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Re: The IRS collects data on Coinbase account holders

#111

Post by klenwell »

kerng wrote: post #86
lkbm wrote: post #56

Could the IRS do me a solid and send me what the capital gains on my crypto currency are? I'll pay the taxes--I just don't want to have to calculate the taxes. I know, I know. Intuit and H&R Block refuse to allow that to happen, but if we could stop prioritizing entrenched industries, that'd be really nice.

This. It could be so simple. Have the IRS suggest what they think I owe - they can have all the metadata, and I'll happily just pay the taxes. If someone doesn't agree, they can do their own return. The current system is so inefficient and wastes a lot of people's time.

> Have the IRS suggest what they think I owe - they can have all the metadata, and I'll happily just pay the taxes.

What's funny is that they will. After the fact. I got a notice last year from the IRS about some back taxes I owed because I forgot to include some stock I sold in my taxes for that year.

They were right. I had overlooked it. But their figure for what I owed was a little higher than what I calculated it to be. I sent back a revised tax return with a check and an explanation for how I arrived at my number and the matter was closed.

So just to reaffirm: the obstacle is more political than technical.

Re: The IRS collects data on Coinbase account holders

#112

Post by [deleted] »

lovich wrote: post #83
cmpxchg wrote: post #77

Earlier quoted context omitted.

It's not just Intuit and H&R Block. A lot of us small business owners don't want the IRS knowing every detail of our businesses in order to just magically send us a pre-filled return each year. The current tax system places responsibility on you, the investor, to tabulate all of your gains and losses, but it also gives you the freedom to invest in complex and unusual transactions like coins in the first place. Don't…

That sounds like you're arguing that you want the ability to continue avoiding taxes by not letting the IRS know the whole truth. That's fine, but if I have to pick one entity to extract money from me id rather it go to the government which at least has a tiny chance of benefiting me rather than going to a private company who has no reason to do anything to benefit me

[deleted]

Re: The IRS collects data on Coinbase account holders

#113

Post by jmalicki »

godelski wrote: post #79
otoburb wrote: post #68

Earlier quoted context omitted.

>>Could the IRS do me a solid and send me what the capital gains on my crypto currency are? I'll pay the taxes--I just don't want to have to calculate the taxes. Unlike stocks which seem to be entirely traded on exchanges, bitcoin could have been obtained through mining (unlikely, but possible) or a true person-to-person trade/barter. In order to calculate capital gains, one needs to know the cost-basis (i.e. the pri…

Couldn't you use the cost of operation? I figure you could either keep track of it yourself or use a standard depreciation rate on equipment and electricity costs (since probably few people tracked that). Would be like running a business, which you kind of are as a miner. But you do make a point that this is a difficult thing and coinbase can't really track it. BUT from what I understand, people leave a lot of coins…

"Couldn't you use the cost of operation?" - that's pretty inconsistent with other IRS rules... you probably need to convince the IRS you're mining bitcoin as a business with the intent to profit with all the proof that entails, and then it's likely deductible as a business expense, not a cost basis, similar to how margin interest is not part of your cost basis for buying a stock.

See "Basis of Assets" https://www.irs.gov/pub/irs-pdf/p551.pdf and "Investment Income and Expenses" https://www.irs.gov/pub/irs-pdf/p550.pdf

None of that covers cryptocurrency directly yet, but looking at how more traditional investments are treated can inspire you to try to do your taxes in the spirit of the rules to avoid likely problems.

Re: The IRS collects data on Coinbase account holders

#114

Post by otoburb »

jmalicki wrote: post #110
otoburb wrote: post #68

Earlier quoted context omitted.

>>Could the IRS do me a solid and send me what the capital gains on my crypto currency are? I'll pay the taxes--I just don't want to have to calculate the taxes. Unlike stocks which seem to be entirely traded on exchanges, bitcoin could have been obtained through mining (unlikely, but possible) or a true person-to-person trade/barter. In order to calculate capital gains, one needs to know the cost-basis (i.e. the pri…

"Unlike stocks which seem to be entirely traded on exchanges" - no. You could have bought stock directly from the company, in an IPO or secondary offering (where it does not go through an exchange), from an individual or broker not intermediated by an exchange, etc. You can keep stock certificates in a safe deposit box, and then later transfer them into your brokerage account, they have no idea what you paid for them…

Thanks for the clarification. To whit, the few retail equity US and Canadian trading platforms I've used (Schwab's, Interactive Brokers, Scottrade before they became TD Ameritrade, Questrade) also do not provide an explicit feature that purports to calculate capital gains, so Coinbase seems to be exhibiting feature parity with equity retail exchanges. Coinbase and other retail equity trading platforms do provide an easy to calculate gains/losses made from your trades, but as we are both saying, gains/losses shown in the accounts may not necessarily correspond to the actual capital gains at the end of the year in certain situations.

>>This is a solved problem, cryptocurrency is not special. If they have the cost basis they can tell you, if not, they can leave it blank.

We're in agreement - this is a solved problem that the retail investor or their accountant needs to calculate manually via aggregation of the entire lifecycle of the asset(s) to properly account for capital gains (or losses).

Re: The IRS collects data on Coinbase account holders

#115

Post by cinquemb »

This is not surprising at all, and it's been a long time coming.

It will be more interesting when the IRS starts trying to get your electric consumption data (assuming people aren't using solar panels, and/or live in a jurisdiction whose electric companies don't have to hand over such information about their customers to another governmental body) because more people are mining (inflationary) cryptocurrencies and trading that for other "assets" without going through 3rd parties like Coinbase (i.e. needing to upload any forms of government ID).

I wonder if this is the kind of stuff the G20 finance ministers will talk about at their upcoming meeting[0], though I kind of doubt it.

[0] https://asia.nikkei.com/Politics-Economy/International-Relat...

Re: The IRS collects data on Coinbase account holders

#116

Post by jmalicki »

krrrh wrote: post #92
davidgh wrote: post #27

One of the tax implications I’ve often thought about is those that heavily trade among different cryptos. If I buy $10k of Intel, it grows to $15k and I sell it to buy $15k of Google, I owe tax on the $5k gain. Now, perhaps one could argue that there is no “liquidity” event by trading one crypto for another. But perhaps the IRS argues there is a phantom liquidity event during such a trade. The IRS generally doesn’t l…

It isn’t 100% clear because there hasn’t been an explicit ruling from the IRS but it’s very unlikely that crypto to crypto would be considered a 1031 like-kind trade. They didn’t even allow trades between precious metals or gold coins with different grades of gold to qualify. I think the bigger issue for US taxpayers is that the IRS doesn’t allow individuals to carryback losses. From what I’ve read, corporations in t…

As of 2018 it's now statute that it's not a like-kind trade, for 2017 it's still uncertain.

Re: The IRS collects data on Coinbase account holders

#117

Post by Terretta »

alyandon wrote: post #39
ulkesh wrote: post #34

So if I made a whole $32 off of my experiment on Coinbase (invested $50 when the price was around $273.59/bitcoin and then sold when the price was around $459.69/bitcoin), will the IRS really care about their cut? I honestly expected some kind of documentation from Coinbase with respect to taxes, such as a 1099-B. I never received such a document. I also read somewhere that the IRS is only coming after people who mad…

The IRS once sent me a letter because I had slightly underpaid my taxes where they informed me of the amount I had underpaid and assessed a 10% penalty.... for a grand total of ~$8. They weren't jerks about it but they do seem to have a weird attention to detail for certain matters.

For an individual, it’s a detail. At scale, real money.

With 150 million tax payers, if they had a $10 cut off everyone underpaid, that’s a potential loss of $1.5 billion, over half of the annual national parks budget. Not so weird.

Re: The IRS collects data on Coinbase account holders

#118

Post by ceejayoz »

skellera wrote: post #107
kerng wrote: post #86

Earlier quoted context omitted.

This. It could be so simple. Have the IRS suggest what they think I owe - they can have all the metadata, and I'll happily just pay the taxes. If someone doesn't agree, they can do their own return. The current system is so inefficient and wastes a lot of people's time.

That creates a one way correction relationship. You will always let them know if you owe them less but never if you owe them more.

I'd imagine there'd be a "do you have unreported income or other unusual situations to disclose" step that'd open you to prosecution if you deliberately omitted stuff. It's not like they wouldn't do audits any more.

Re: The IRS collects data on Coinbase account holders

#119

Post by aggronn »

redspectre wrote: post #108
davidgh wrote: post #27

One of the tax implications I’ve often thought about is those that heavily trade among different cryptos. If I buy $10k of Intel, it grows to $15k and I sell it to buy $15k of Google, I owe tax on the $5k gain. Now, perhaps one could argue that there is no “liquidity” event by trading one crypto for another. But perhaps the IRS argues there is a phantom liquidity event during such a trade. The IRS generally doesn’t l…

The problem is, USD is the only legal tender. When I sell Intel stock, that where I made profit in USD. I pay tax on that. But if I trade BTC for DOGE, I haven't made any money. All I have done is swap tokens. And just because someone would pay X dollars for tokens, doesn't mean I made any money. I mean where does it end? If I tell you I'll pay you 10000 dollars for the pocket lint in your pocket, did you just make a…

Lets say you make a 50% gain on btc. You have made money, but haven't realized the gain. You pay taxes when you realize a gain. You're argument is based on semantics, and not convincing.

At the end of the day, whether you traded BTC for DOGE or for IKEA couches, you were able to buy more of the second thing after you traded your BTC. You sold it. You realized your 50% gain.

Its farcicle to argue that by trading BTC for DOGE you're not realizing your gain. You're no longer tied to BTC, and your purchasing power increased at the time of the trade. Your wealth converted to USD went up. You sold your asset. You owe taxes.

> If I tell you I'll pay you 10000 dollars for the pocket lint in your pocket, did you just make a gain of 10k?

Yes. this is exactly how it works. you made a $10k profit. Its not a capital gain, but you made a profit and owe taxes. You dont owe them 10k, but you owe them part of it. If you then go and invest that 10k on physical capital in order to make more lint, then you can deduct that again as a business expense because you've essentially lost 10k on an investment (assuming 100% depreciation).

> The value of something is completely relative, speculative, and ever-changing.

This is why the thing that matters is when you realize your gain by selling the asset. It doesn't matter what you sold it for, you either realized a gain or a loss and that has tax implications.

Re: The IRS collects data on Coinbase account holders

#120

Post by s73v3r_ »

cmpxchg wrote: post #77
lkbm wrote: post #56

Could the IRS do me a solid and send me what the capital gains on my crypto currency are? I'll pay the taxes--I just don't want to have to calculate the taxes. I know, I know. Intuit and H&R Block refuse to allow that to happen, but if we could stop prioritizing entrenched industries, that'd be really nice.

It's not just Intuit and H&R Block. A lot of us small business owners don't want the IRS knowing every detail of our businesses in order to just magically send us a pre-filled return each year. The current tax system places responsibility on you, the investor, to tabulate all of your gains and losses, but it also gives you the freedom to invest in complex and unusual transactions like coins in the first place. Don't…

You're saying that like they don't already know those details.

And your second paragraph makes no sense whatsoever.

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