The IRS collects data on Coinbase account holders • Hacker News Board

Re: The IRS collects data on Coinbase account holders

#51

Post by patio11 » Fri, Mar 16, 2018, 1:50 PM UTC

dsacco wrote: post #36

patio11 wrote: post #14

Earlier quoted context omitted.

As HN has a lot of people who have complicated financial situations and will eventually get one, I'd like to point folks in the direction of what the IRS' typical first play is if they think you underpaid taxes. They do not send you a threatening letter. They do not throw you in prison. They send you a bill; more formally, a CP3219A. (The IRS says it is not a bill, it is a proposal. In practice, it's a bill you can a…

Can confirm this. I run a consulting company and received a letter like that in 2016. They sent a bill with corroborating documentation indicating I’d underpaid by about $2,600. I reviewed my own records, concluded they were right, checked in with my accountant and paid it. It wasn’t threatening at all, nor did I feel like I’d be imminently prosecuted. The IRS, for all its public perception, has actually been sort of…

For the limited purpose of helping another entrepreneur sleep easy, and not to offer accounting advice: The IRS has to recover ~$1k per IRSian hour to make it worth their time, for reasons which fall fairly straightforwardly from consulting math that you're very familiar with.

Consider the set of all companies in the economy which spent $15k last year on "computer hardware." How many IRS hours would be required to read all their returns, given that they are sitting in a pile. How many would, on examination, show a deficiency? How much would those deficiencies be worth, on average? What's your ballpark estimate for how long it takes a government employee to put through a single routine non-trivial work order?

Suppose the IRS sits down with a randomly selected small business for a site visit audit. Suppose they budget 2 hours onsite and 8 hours offsite for the audit. How many of those minutes do you think they will spend on that line item, specifically? Does it allow them to do more than ask "I see your return shows $15k on computer hardware. What was the hardware? Can you show me your records?"

Re: The IRS collects data on Coinbase account holders

#52

Post by sp332 » Fri, Mar 16, 2018, 1:55 PM UTC

bpicolo wrote: post #49

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…

> I would be worried that the IRS would claim you should have recognized a tax gain with every trade They explicitly do consider crypto-to-crypto transactions as a taxable event now, as of the recent tax bill. You are required to pay taxes on it.

But that's new with the new tax bill. It wouldn't apply to 2017 taxes.

Re: The IRS collects data on Coinbase account holders

#53

Post by fapjacks » Fri, Mar 16, 2018, 1:55 PM UTC

AskewEgret wrote: post #41

fapjacks wrote: post #31

Earlier quoted context omitted.

Just pray they don't give you a 1099 with grossly incorrect values like they generously did for me.

Was it a 1099-K? [1] It reports gross payments, not profits. The IRS knows this; it's their form. [1] https://www.irs.gov/businesses/understanding-your-1099-k

I know that this is the total transactions and not profits, and the numbers are way, way off. I have a local copy of all my trades, of course, and they match perfectly with the transaction history available on GDAX. But the numbers that Coinbase reported on this 1099-K are completely wrong. They literally put the wrong numbers in the 1099-K. And as one would expect, dealing with Coinbase support is about as much fun as being set on fire. I fear that Coinbase is going to end up costing me a lot of time and money because of their botched accounting.

Re: The IRS collects data on Coinbase account holders

#54

Post by ng-user » Fri, Mar 16, 2018, 1:56 PM UTC

malikNF wrote: post #32

What would happen if someone was to lose access to their wallets? Would they still have to pay taxes? If my memory serves me right, close to 4 million bitcoins are missing.

If I'm correct, I believe you only pay taxes when you realize the gain. So if you never sell you'll never owe taxes? Can someone confirm this?

Re: The IRS collects data on Coinbase account holders

#55

Post by charlesdm » Fri, Mar 16, 2018, 1:56 PM UTC

overcast wrote: post #48

coldcode wrote: post #2

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.

You're either trolling, or just being completely naive not to fear the IRS. If there is ANY agency you should fear, it's the Internal Revenue Service. They have infinite resources, and it might take a while, but they will get their money in the end.

If you declare taxes, you have very little to fear. If you use potential loopholes, be aware you might need to consult a tax lawyer and go to court. But again, if you are aware of this, aside from your final legal bill, you have nothing to fear.

Re: The IRS collects data on Coinbase account holders

#56

Post by lkbm » Fri, Mar 16, 2018, 1:57 PM UTC

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.

Re: The IRS collects data on Coinbase account holders

#57

Post by ulkesh » Fri, Mar 16, 2018, 1:58 PM UTC

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.

I'll be quite happy to pay them $11. :) Here's hoping that's all it would end up being.

Re: The IRS collects data on Coinbase account holders

#58

Post by arbie » Fri, Mar 16, 2018, 1:58 PM UTC

patio11 wrote: post #51

dsacco wrote: post #36

Earlier quoted context omitted.

Can confirm this. I run a consulting company and received a letter like that in 2016. They sent a bill with corroborating documentation indicating I’d underpaid by about $2,600. I reviewed my own records, concluded they were right, checked in with my accountant and paid it. It wasn’t threatening at all, nor did I feel like I’d be imminently prosecuted. The IRS, for all its public perception, has actually been sort of…

For the limited purpose of helping another entrepreneur sleep easy, and not to offer accounting advice: The IRS has to recover ~$1k per IRSian hour to make it worth their time, for reasons which fall fairly straightforwardly from consulting math that you're very familiar with. Consider the set of all companies in the economy which spent $15k last year on "computer hardware." How many IRS hours would be required to re…

The Automated Under-Reporter program does this on-the-fly with no recurring cost, and provides corroborating evidence to the auditor. In fact, an analysis of AUR showed that the IRS is too-lenient in prosecuting claims with automatically-trawled evidence!

https://www.treasury.gov/tigta/auditreports/2015reports/2015...

Re: The IRS collects data on Coinbase account holders

#59

Post by sp332 » Fri, Mar 16, 2018, 1:59 PM UTC

IAmEveryone wrote: post #5

pulse7 wrote: post #3

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

How is that even a prediction? > store the history of all Bitcoin transactions Bitcoin conveniently does this for them > and try to identify all wallet owners That’s the headline here > check if profits were reported and if taxes were paid Which is the IRS’ job

The bitcoin blockchain does not keep a record of trades you make on Coinbase though.

Re: The IRS collects data on Coinbase account holders

#60

Post by YCode » Fri, Mar 16, 2018, 2:01 PM UTC

malikNF wrote: post #32

What would happen if someone was to lose access to their wallets? Would they still have to pay taxes? If my memory serves me right, close to 4 million bitcoins are missing.

Regardless of whether you lose them you pay taxes when you make a taxable transaction, being either exchanging FIAT to crypto or crypto to a different crypto.