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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

#31

Post by nradov »

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…

From a legal standpoint, it's a commodity not a currency. And US citizens who trade foreign currencies are subject to tax on their gains.

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

#32

Post by ABeeSea »

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…

Making money from currency exchange rates is absolutely taxable.

https://www.investopedia.com/articles/forex/09/forex-taxatio...

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

#33

Post by acjohnson55 »

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…

You do owe taxes on gains from currency exchange rates: https://smallbusiness.chron.com/foreign-currency-exchange-ta...

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

#34

Post by jedberg »

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…

This is the IRS's way of saying that it isn't a currency. It's the government's way of saying that only the US government makes valid currency in the US, and everything else is an investment.

They even treat foreign currency that way now. If you buy a bunch of Euros and then convert back to dollars later, you're supposed to pay tax on the gain.

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

#35

Post by [deleted] »

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…

[deleted]

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

#36

Post by avocado4 »

dsfyu404ed wrote: post #18
dev_dull wrote: post #2

The math behind crypto doesn’t magically make you immune to government oversight. All they have to do is ask, and you better not lie.

Obviously no, the math doesn't prevent them from shooting your dog and carting you away to a jail cell but your assumptions about enforcement are naive. The typical MO for tax evasion is to just not report your side gig (crypto or otherwise), hope you don't get caught and play dumb and pay up if you do get caught. This doesn't change whether it's crypto or doing under the table work which is the point I'm trying to m…

Failing to report income is federal crime. It's not more complicated than that.

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

#37

Post by starbugs »

teej wrote: post #25
ilovecaching wrote: post #5

So under the current laws does a person only pay taxes when converting to and from fiat to crypto, or does it apply to crypto transactions of any kind?

I believe this is where a lot of the confusion comes from. If you use Coinbase to directly trade crypto (e.g. BTC for ETH) this is a taxable event on your BTC even though you never touch fiat in the process.

And that's quite logical if you think about it. How else can you explain the amount of your gains/losses when trading crypto for crypto and then back to fiat again.

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

#38

Post by mtw »

jedberg wrote: post #23
mtw wrote: post #17

Earlier quoted context omitted.

It depends where you do your transactions. If you do it on CoinBase, yes, you are going to be tracked. There are many other options though where you don't have to provide ID.

Right now it's pretty hard to live on cryptocurrency alone. Which means at some point you will need dollars (or Euros or whatever), and that transaction is almost always traceable to a person.

I don't know a lot of people who only have cryptocurrency income. Most people have a regular job, but then decide to put a % of their savings into crypto. You can use your job income to pay for transactions. If there are any cryptocurrency income, it's then up to you how to manage that. Put that into traditional finance (then declare it), hold (not selling, so there are no capital gains, so no tax), or use crypto to buy products that are outside traditional finance

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

#39

Post by habosa »

keltex wrote: post #7
mtgx wrote: post #3

It's not sustainable to tax regular Joe for each and every cryptocurrency transaction due to the nature of cryptocurrencies, especially in the US where people have to do all of their taxes on their own. I believe Canada has something like 20% tax on the profits you get out of cryptocurrencies for the year, which I think is a much simpler system that makes much more sense.

The U.S. works the same way. You are taxed on the net short or long term capital gains not on every transaction. So if you made $1000 on one trade and lost $500 on another you would only be taxes on the net $500 profit.

That's actually not true right now. Every time you trade it's a taxable event. So if you went USD --> BTC --> ETH --> BTC --> USD you would need to show 4 transactions to the IRS.

The total tax burden will look a lot like (Final USD - Total USD) * (Short Term Cap Gains Rate) but you can't just report it that way.

In 2017 I mucked around with Crypto and accumulated about 50 transactions over ~5 currencies. Reporting was a monster pain in the ass.

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

#40

Post by umvi »

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…

I'm pretty sure if you make a business out of switching currencies, you have to pay taxes on your profits.

1. Buy Euros with dollars 2. Value of dollar drops 3. Buy back more dollars than you started with 4. Pay taxes on your gains

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