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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

#81

Post by arcticbull »

impostir wrote: post #73
arcticbull wrote: post #58

Earlier quoted context omitted.

1 USD always equals 1 USD and you pay taxes on gains relative to the USD as a US person. It's not possible for your USD to be an appreciating asset relative to the USD and that's how capital gains are defined. However, if you go to a store in America (and hypothetically) they give you change in Euros, then you take that to another store, and redeem the Euros there, you do in fact owe taxes on the increase in value of…

At one point in time and at one location. At different places in the US, 1 USD can purchase more or less. So on the internet, the purchasing power of the dollar is fairly nebulous. So, I agree, but with more nitpickiness.

Yeah, capital gains are not adjusted for purchasing power parity within a country otherwise it'd be difficult to do business in both high and low PPP regions like SF vs the midwest.

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

#82

Post by fooey »

gcbw2 wrote: post #74
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.

> 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 don't turn over their records to the IRS

US based coin exchanges like Coinbase do

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

#83

Post by PKop »

lgeorget wrote: post #10
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?

At least, if I understood correctly the article, it's considered like stocks. What's the law on that?

That you pay taxes on capital gains. There are also taxes on dividend income in the case of stocks.

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

#84

Post by icebraining »

lizknope wrote: post #43
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…

How practical is bitcoin as a currency for day to day use. I thought the transaction time was 10 to 30 minutes. I get frustrated at the checkout counter when my credit card takes longer than 10 seconds. 10 to 30 minutes seems a lot closer to how long it takes for a stock sale to go through on E-Trade so I can see why the IRS would classify it more like a stock than currency.

All cryptocurrencies get treated the same, regardless of whether a transaction takes 10 minutes or 10 milliseconds.

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

#86

Post by mrbonner »

arcticbull wrote: post #78
mrbonner wrote: post #72

Earlier quoted context omitted.

I am not sure if you're obligated to pay US federal income tax or not (either non-US resident/citizen living in the USA or US's resident/citizen in expat). If the IRS sends a formal letter to you, their intention is pretty clear that they found something wrong with your tax situation. I have had a couple of official letters from them for the last 4 - 5 years. Some of which I owed them money and I had to either pay (w…

They've even got flexible payment options ^_^ some of which are mandatory.

It make sense in cases where people get rich overnight (vested options, bitcoin gains or what nots) and they already spent a huge chunk of that income without setting aside for tax. If that is the case, they will soon realize they need a sizable portion of that overnight gain to pay tax soon.

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

#87

Post by jtbayly »

mieseratte wrote: post #27
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…

> 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.

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

#88

Post by PKop »

mtw wrote: post #21
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?

It applies if there are gains. What's not clear if you have to report the value of the gain when you did your transaction, or the current value. Crypto prices change a lot

You report the value of the gain at time of taxable event. Trading crypto for other crypto, or fiat, or buying real goods with it.... are taxable events. The capital gain is the appreciation in value at time of transacting.

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

#89

Post by Scoundreller »

So how does BitCoin Cash distribution get handled in USA?

Is it like a dividend? A stock split? A spin-off?

What about all of these airdropped tokens? Are they dividends, with tax payable even if you didn’t “collect” them in some way? Or splits?

Can you deduct the Day1 value of the new token from the capital gain on the first token? Or do you assume the cost of the new token was $0 and any sale is a total capital gain?

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

#90

Post by AlexandrB »

bb88 wrote: post #85

This is a question I don't know. And I was wondering if HN could shed some light on this. The IRS treats bitcoin as an investment property. What happens when one trades investment property for a car, or a boat, say?

I’m not an accountant, but based on what I know about stocks you would get taxed on you financial gains (if any) based on the market value of the bitcoin at the time you trade it for the car.
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