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The IRS collects data on Coinbase account holders

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Re: The IRS collects data on Coinbase account holders

#91

Post by GuB-42 »

icelancer wrote: post #74
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…

>> Should I be concerned that they'll try to get their $10 from me and then pile on a bunch of penalties? No, despite their reputation, the IRS is pretty reasonable about stuff like this, at least in my experience. They're relentless if they think you owe a ton or were malicious, but they don't intentionally trump up penalties on the every day person.

I guess it makes sense. The IRS is profit-driven. The state wants to maximize the amount of money recovered minus how much it costs.

It makes more sense to go after the targets they can get the most money from. They won't bother you with your $10, it is a waste of their time compared to the thousands they can recover on larger scale, well established fraud.

Re: The IRS collects data on Coinbase account holders

#92

Post by krrrh »

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…

It isn’t 100% clear because there hasn’t been an explicit ruling from the IRS but it’s very unlikely that crypto to crypto would be considered a 1031 like-kind trade. They didn’t even allow trades between precious metals or gold coins with different grades of gold to qualify.

I think the bigger issue for US taxpayers is that the IRS doesn’t allow individuals to carryback losses. From what I’ve read, corporations in the US and individual taxpayers in Canada can carry back losses for up to 3 years. The way the crypto market exploded up until late Dec, and then has crashed hard since then could leave some traders with a big tax liability from 2017 that they could end up having to work off for years. The good news is that they might be able to carry 2018’s losses forward to offset future capital gains, but that could be cold comfort to the kids that lost it all on leverage when the bubble popped.

IANAA IANAL, seek professional advice.

Re: The IRS collects data on Coinbase account holders

#93

Post by fpgaminer »

While generally I tend to favor less government involvement, especially when it comes to privacy, I find myself on the other side of the fence here.

Ignoring the arguments about what Coinbases is _legally_ required to hand over, it seems like Coinbase withholding this information from the IRS really only favors criminals. If you're a law abiding citizen you're already giving all this information to the IRS yourself. Every Coin-fiat transaction is taxed and must be reported. So there's not much difference for you. It's only if you aren't following the laws that this has an impact on you. So I find myself in _favor_ of the IRS snooping around in Coinbase's business. More compliance means less average taxes.

That said, there are nuances. What information exactly gets provided to the IRS is important. Exchange/transaction events? Sure. Money in/out? Ehhh, maybe not. Bitcoin address data? Definitely not.

(To be perfectly clear, this is _not_ an instance of "if you have nothing to hide". This is an instance where we're _already_ giving this data to the government, and that's _necessary_ because of our tax laws. There is no equivalence to other privacy cases.)

Re: The IRS collects data on Coinbase account holders

#94

Post by clay_to_n »

ng-user wrote: post #54
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?

Yes, these are capital gains taxes. If you buy a bunch of crypto in a year, and sell none, you owe no capital gains taxes for that year.

You only pay capital gains taxes on them in the years where you sell.

Keep in mind that in the IRS's eyes, any exchange (like BTC -> LTC) counts as a sale, and so does buying goods with crypto (like buying a video game with BTC).

Re: The IRS collects data on Coinbase account holders

#95

Post by elif »

jjeaff wrote: post #82
lkbm wrote: post #56

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.

I'll calculate my own taxes thank you very much. If big brother doesn't agree, then I'll show my work and sources. Otherwise, the less they know the better.

Having been there, big brother doesn't care to see your work.

They just send you another bill, plus interest.

I think you'd need to get a lawyer for them to even look at your work.

Re: The IRS collects data on Coinbase account holders

#96

Post by dopamean »

dnautics wrote: post #87
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…

Think about it this way: you place a trade on December 28th or so that is valued at a few million, then make a series of disastrous trades that bring your account down to 10k in February. You owe taxes to the feds and state of about 500,000, which you don't have anymore. That is of course carried forward as a loss for the next year, but that only results in reducing taxable income at a potentially lower bracket.

I'm almost certain there was a guy on r/CryptoMarkets (or one of those crypto currency subs) who this happened to. He apparently traded a few bitcoin up to a few hundred in 2017. Then closed out his positions near the end of the year. Reinvested everything after the new year and lost almost all of it. If that's all true he could be on the hook for a lot of money.

Re: The IRS collects data on Coinbase account holders

#97

Post by nokcha »

daveguy wrote: post #70
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…

Not an accountant, but I think you should recognize gains with every trade just like Intel and Google trades that liquidate or forex trades. Key point here is that you also recognize every loss . Which means in effect you are only paying tax on the amount your wealth increased over the tax period. It could still be huge, but only proportional to huge overall gains. Not sure about the trading fees for frequent traders…

>Not sure about the trading fees

I believe they factor into calculating the gain/loss. E.g., if you buy 100 units for $99 plus a $1 fee, then your cost basis is ($99 + $1)/(100 units) = $1.00/unit. If you later sell them all for $111 with a $1 fee, then your capital gain is ($111 - $1) - ($100) = $10.

Re: The IRS collects data on Coinbase account holders

#98

Post by chanfest22 »

lkbm wrote: post #56

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.

The IRS won't, but tools like https://www.cointracker.io can

Re: The IRS collects data on Coinbase account holders

#99

Post by [deleted] »

GuB-42 wrote: post #91
icelancer wrote: post #74

Earlier quoted context omitted.

>> Should I be concerned that they'll try to get their $10 from me and then pile on a bunch of penalties? No, despite their reputation, the IRS is pretty reasonable about stuff like this, at least in my experience. They're relentless if they think you owe a ton or were malicious, but they don't intentionally trump up penalties on the every day person.

I guess it makes sense. The IRS is profit-driven. The state wants to maximize the amount of money recovered minus how much it costs. It makes more sense to go after the targets they can get the most money from. They won't bother you with your $10, it is a waste of their time compared to the thousands they can recover on larger scale, well established fraud.

[deleted]

Re: The IRS collects data on Coinbase account holders

#100

Post by chanfest22 »

castratikron wrote: post #26

Does that mean Coinbase will give me a 1099 at the end of the year?

They'll start doing this more and more. Just be careful though because the moment you have a single transaction outside of Coinbase, their reports will be incorrect. You may want to consider checking out cross-platform tools like https://www.cointracker.io which help you keep track of all your cost basis across exchanges and wallets automatically.
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