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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
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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…
I did this by myself without a CPA but I knew what I was doing. The IRS was pretty understanding the whole way and quickly understood my situation. They never tried to threaten me or anything like that. It didn’t help that their mail to china kept getting lost, however.
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>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.
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.
I really don't see the big deal here. People who were thinking that crypto was going to magically be exempt from taxes were delusional. The only open question is if the IRS may change crypto->crypto trades to like kind. As of today with the current guidance though, no - crypto is property similar to a stock.
Only a problem if you’re trying to evade paying taxes. Otherwise it’s the same as any other security trading platform.
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 like someone to be able to trade assets without recognizing a gain, otherwise it breaks down the fundamental framework upon which the entire tax system is based. The law provides a few provisions for tax free trades, but they are specifically prescribed by the tax law, such as a 1031 exchange between real estate holdings.
If you’ve heavily traded between cryptos over the past year with massively appreciating values, I would be worried that the IRS would claim you should have recognized a tax gain with every trade. For some, the ramifications for such a perspective could be huge.
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.
Well since I wouldn't have committed tax fraud (and potentially other felonies) by not reporting capital gains, I wouldn't be the slightest bit worried, no.
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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.
Earlier quoted context omitted.
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.
That's an estimate at best. How many if tbise who profitted actually cashed out?