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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

#361

Post by rphlx »

sangnoir wrote: post #172
bdcravens wrote: post #120

Earlier quoted context omitted.

The fact that they have a ton of VC they're already beholden to that is here in the US, and who aren't interested in IRS scrutiny themselves.

Also, the fact that Coinbase is in the US legal jurisdiction gives its clients confidence they would be made whole if anything untoward were to happen.

If the untoward event is solely in USD, perhaps, but not if it's in crypto. Exit scams, hacks, rogue employees, etc, could still hit a US exchanges' crypto holdings and the government probably cannot or will not compell a roll back, supply expansion, etc, on a major blockchain.

If anything is actually protecting clients against crypto theft, it's the exchange's privately-purchased insurance rather than the government. Although I wouldn't rely on that for much either as insurers are rarely eager to pay out.

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

#362

Post by alkonaut »

BeetleB wrote: post #336
tracker1 wrote: post #286

Earlier quoted context omitted.

IANAL, I'm not a tax expert, but I believe you can deduct losses when converting to/from fiat currency (US dollars). Which is where taxation would take effect. If you invested $10k in crypto mining equipment, you can deduct that investment (over 5 years or something similar), you then successfully mine 5 coins. These coins are/were worth whatever exchange rate you could get. Until you use/exchange them, you aren't ta…

The IRS treats BTC as commodities like stocks, not as foreign currencies. If you mine any coins, that is income you have to pay taxes on. Just like when my RSU stocks vest, I pay (regular income) taxes on the vested amount. It's treated as if my company gave me the money to buy these stocks I now have. Later when I sell them, I'll pay capital gains tax on the gain/loss. Now if I buy coins, then I will only be taxed o…

If you trade an asset, any costs you have in the transactions are deduced (real estate agents fees deducted from house selling price, fees/commissions when buying selling stock etc) and you are only taxed for the net. I wonder if taxes from mining coins are for net gains? That is, can you deduce the electricity cost?

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

#363

Post by alkonaut »

xamuel wrote: post #213
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?

A serious answer that isn't just "lobbyists": Even if the IRS had perfect info about all your income and investments, there are decisions you can make which effectively make taxes non-deterministic. Suppose on two different dates, you bought shares of a company. Then on a later date, you sold one share. You get to choose which purchase date to count the sale as being against. This is important because you pay on the…

Simplify the question: why can’t the vast majority who don’t trade in any instruments at all have pre-filled tax forms they can sign online, like in many other countries?

That stocks and some types of deduction means it needs amending to be “optimal” is pretty clear.

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

#364

Post by iaw »

My experiences with the IRS have been nothing but positive over the years. They were always polite and clear in their positioning. They either made corrections in my favor or sought more information to identify what if any additional taxes I owed due to a mistake in my filing.

What I suspect is happening here is that the IRS is figuring out how to prioritize it's investigations. Sign or don't, it only determines when you are investigated. Once they've identified a holder of bitcoin it's likely that an investigation will be forthcoming.

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

#365

Post by codesushi42 »

SilasX wrote: post #279
iso-8859-1 wrote: post #249

Earlier quoted context omitted.

This is so overkill. What if I am just moving and reporting my new address? What if I am 20 years old and never had any income?

People parrot that line to sound edgy and virtuous, not because they've thought through the implications.

The implication is that you avoid self implication.

So you're telling me, if you are ever wrongfully arrested or detained, you are going to be dimwitted enough to talk freely to the cops like they're your good buddies? Because it sounds like you are just that dimwitted and naive.

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

#366

Post by rphlx »

caymanjim wrote: post #278
JudgeWapner wrote: post #137

Earlier quoted context omitted.

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%.

It's not legal for Americans to completely avoid taxes simply by operating in a jurisdiction with different tax laws. You still have to report your foreign income to the IRS, you still have to pay taxes to the IRS. If you try to take the extreme step of acquiring a citizenship elsewhere and then renouncing your US citizenship, you even have to pay taxes to do that. The notion that "tax shelter" countries are a way to…

> It's not legal for Americans to completely avoid taxes simply by operating in a jurisdiction with different tax laws.

This is not correct, and pretty much all of the US Elite, above a certain wealth level, have some offshore structure(s), because there actually are major, legal benefits - including ones that can zero out the US individual tax liability for that activity, at least in some years.

As a result it's only the legally- & financially- relatively unsophisticated middle classes, and perhaps the lower-upper-class, that has literally every single transaction subject to US taxation.

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

#367

Post by rphlx »

AdrianB1 wrote: post #265

This will be a very unpopular opinion, but it is true: USA is much better than 200 years ago; if 200 years ago you were a slave, 100% of your output belonged to your master. Now your government owns only 40-50% of your output and you feel totally free. The only bad thing is that almost 100% of the population is now a half-slave. You don't chose what to pay, how much and what for, you just have to pay up, or else. Yes…

Slavery was not fully eliminated in the US; it was just fractionalized, and the terms - which groups are enslaved, which groups are entitled to their output, and how much of it, etc - were obviously heavily modified. For instance you are able to change employers now, but no matter which one you pick - even if it's your own firm - in most highly-valued fields 40-70%+ of your output will be taken by various layers of government - by force if necessary. Your children are subject to the same obligation so "fractionalized chattel slavery" is a decent first-order description.

It is true that acts of extreme violence are less common than they were in the 19th century South, but that alone does not make the system "not slavery" given that a threat of overwhelming force still underpins it.

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

#368

Post by t3soro »

parliament32 wrote: post #237
crypto_throwa wrote: post #142

Earlier quoted context omitted.

Here's one situation where it is very different. Say I get paid 100 BTC for doing a job worth $100/BTC at the time or $10000. Now, say BTC drops to $1/BTC. I owe income tax on the $10000. Let's say I owe $2000 (20%) in taxes. However, I only have $100 now. My effective tax rate is 2000%. This does allow for a small deduction of capital gains each year. However you can only deduct $3000 a year in capital gains. In a l…

I agree with you, but "My effective tax rate is 2000%" is a huge stretch. No, you got taxed 20% when you generated the income. Just because the place-you-keep-your-money blew up doesn't increase your "effective" tax rate or any other. It's a you problem if your mattress-full-of-cash burns down, or your bank goes out of business, or whatever -- you were taxed at the time you generated the income, and if you didn't set…

You can't exactly set aside the cash when you receive illiquid assets, such as restricted stock or options, in compensation. It makes it a huge risk to even get equity in that situation, unless you are the founder who has an 83(b) on file.

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

#369

Post by t3soro »

bduerst wrote: post #342
logfromblammo wrote: post #296

Earlier quoted context omitted.

The problem there is that meat doesn't come in dollars; it comes in kilograms. If you are paid in meat, you get something like 100 kg of pre-formed frozen ground beef patties. That doesn't have a dollar value unless you can find a buyer for it. Which is pretty easy to do if it's a commodity. So let's try a more broken example. You get paid in sandstone triangular prisms machined to be 31 mm on the two longer sides, 1…

Whether the unit of measure is kg or bits or unicorns doesn't make a difference since the value at the time of the transaction is what is taxed. Also your example is very convoluted, and with all due respect, I can't tell if it's satire or not.

Imagine you receive $10,000 worth of meat, with a legal restriction that prevents you from selling that meat before it spoils. You have to keep it in the freezer for two years before you can sell it. What was the value of the meat you received?

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

#370

Post by rootusrootus »

jfk13 wrote: post #299
anonymous5133 wrote: post #191

Earlier quoted context omitted.

Exactly. It falls in line with similar to "don't talk to the police". Just keep quiet. This applies to everything when dealing with any government agency. The government is not your friend.

I'm guessing you're American. It saddens me that so many of you over there seem to have this view of your own government and institutions. Anecdote time. Having been stopped by police in the States four times (that I can recall offhand) over the years -- with a legitimate justification in each case -- my experience has been that courtesy and cooperation have served me well. On a couple of occasions when I could quite…

As a general rule, if your sole interaction with the police is traffic enforcement (and it helps if you are white), then being courteous and honest is generally the most successful strategy. Anecdotally, aside from a few newsworthy examples, almost every traffic situation that escalates into a significant confrontation got that way because of unnecessary belligerence.

When "never talk to police" comes into play is when they are doing a criminal investigation. And even then, when to pull out the fifth amendment card depends on individual circumstances. It can definitely escalate an otherwise innocuous situation if you overuse it.

Also, try to remember that what makes the news is newsworthy for a reason.

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