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IRS sends warning letters to more than 10k cryptocurrency holders

wsj.com

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

#131

Post by hockeybias »

jeffk_teh_haxor wrote: post #98
duxup wrote: post #76

Earlier quoted context omitted.

The bitcoin / crptyo currency... ethos? (not sure what word to use there) seems to continuously collide into the reality of living in a society. That doesn't make them incompatible, but it does perhaps provide some lessons for everyone on why financial systems are the way they are as it is, and how you can't just jump on a technology and escape. At the very least it has all been an interesting thing to learn from.

At the very worst it is a blight on the environment. 27kWh of energy burned per transaction, with a maximum scaling limit on the order of 5 or 6 transactions per second. If everybody in the world used Bitcoin, then you'd be entitled to your one transaction every few decades.

Agreed. What a joke.

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

#132

Post by PeterisP »

jtbayly wrote: post #87
mieseratte wrote: post #27

Earlier quoted context omitted.

> 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 you do, how do you figure out if the investment appreciated or depreciated? I mean, if I use BTC as a currency to buy things, I don't understand how I would evaluate every purchase at the end of the year to figure out whether I owe capital gains.

It's certainly possible - one way would be to do like some people who do some casual stock trading where you record all the transactions in an excel sheet with the amounts and dates, and then submit the appropriate reporting to IRS. Similar measures apply if you do significant amounts of barter; e.g. if you as a farmer trade a truckload of produce for an old vehicle without any cash involved, then you may have (all kinds of legal caveats apply) to appraise the transaction at some dollar value and justify that appraisal. For bitcoin it's a bit simpler than barter since just taking daily reference prices from a major exchange is an objectively reasonable method of pricing.

It's not that hard, but takes some work and skill - it may be prudent to hire a certified accountant to do that for you properly.

In any case, the fact that in some circumstances the reporting is labor-intensive, or expensive, or unclear isn't a valid excuse to not do it. You can ask IRS or a CPA for assistance, and if you do your best then even if IRS eventually disagrees with something, then it's going to just be a correction (which may go in both directions).

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

#133

Post by g00s3_caLL_x2 »

TuringNYC wrote: post #106
gcbw2 wrote: post #74

Earlier quoted context omitted.

> All they have to do is ask, and you better not lie. because asking everyone how much they have in offshore tax havens is working so well. heck, not even when the information is given to the IRS anything happens: https://en.wikipedia.org/wiki/Panama_Papers#United_States

Offshore tax havens are for the wealthy, who are largely immune to these things.

The 'wealthy' and corporations have the finances to pay for accountants and attorneys to set these things up. Most of them are taking advantage of what is legally already there, but no where near common knowledge. Wading through tax code is a struggle at best.

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

#134

Post by buzzert »

yellowstuff wrote: post #117
donclark wrote: post #64

So why do we have to file? Why cant the IRS just tell us every year if we owe or not and how much?

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?

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

#135

Post by [deleted] »

fooey wrote: post #94
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.

According to the IRS news release, and posts in r/bitcoin, what they're getting are Letter 6173, Letter 6174 or Letter 6174-A https://www.irs.gov/newsroom/irs-has-begun-sending-letters-t... https://www.reddit.com/r/Bitcoin/comments/chupoe/irs_we_have... https://www.irsmind.com/audits/irs-begins-targeting-taxpayer... > Letter 6174– this is a soft notice informing the taxpayer that there is a likelihood that they did n…

[deleted]

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

#136

Post by quotha »

zielmicha wrote: post #118
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?

I think it shouldn't be hard to do that automatically in software - you only need to know exchange rates at time of every transaction.

That software did not exist in 2013!!

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

#137

Post by JudgeWapner »

pard68 wrote: post #101

So the real question is, what exchange can I use as an American that doesn't report to the IRS?

No, the real question is how much is it to set up a "trust" or some other bullshit entity in the US Virgin Islands and do all your trading that way - completely legal, completely tax-free, just like the 1%.

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

#138

Post by cwkoss »

As far as I understand it, IRS wants cryptocurrency traders to report USD profit on every trade. 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.

Now, I simply recommend that everyone only trades USD-to-crypto and back, never crypto-to-crypto if you want to comply with tax law - it gets very complicated fast.

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

#139

Post by mindfulgeek »

hcurtiss wrote: post #13

I'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…

There is some discussion of changing cryptocurrency to be treated like currency instead of property. When that happens, it will behave like you are describing. https://www.wsj.com/articles/lawmakers-push-for-new-bitcoin-...
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