Coinbase Ordered To Report 14,355 Users To the IRS (theverge.com) 141
Nearly a year after the case was initially filed, Coinbase has been ordered to turn over identifying records for all users who have bought, sold, sent, or received more than $20,000 through their accounts in a single year. The digital asset broker estimates that 14,355 users meet the government's requirements. The Verge reports: For each account, the company has been asked to provide the IRS with the user's name, birth date, address, and taxpayer ID, along with records of all account activity and any associated account statements. The result is both a definitive link to the user's identity and a comprehensive record of everything they've done with their Coinbase account, including other accounts to which they've sent money. The order is significantly narrower than the IRS's initial request, which asked for records on every single Coinbase user over the same period. That request would also have required all communications between Coinbase and the user, a measure the judge ultimately found unnecessarily comprehensive. The government made no claim of suspicion against individual users, but instead argued that the order was justified based on the discrepancy between Coinbase users and U.S. citizens reporting Bitcoin gains to the IRS.
S'all good man (Score:5, Funny)
They told me cryptocurrencies were anonymous :^)
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They lied... The weak link has *always* been the exchanges and nothing will change that.
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Almost correct.
The weak link was when the first BTC was tied to a traditional currency.
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Incorrect. If you earn bitcoin and spend bitcoin, you never need to exchange anything.
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So, "the weak points" are not the "exchanges", they are businesses that deliver.
There are plenty of products and delivery options that do not involve giving out your physical address.
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Since both earning and spending involve exchanging currency for something else, your assertion seems unlikely to be true.
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In theory, you can mine your own bitcoin and buy stuff with bitcoin and stay away from exchanges.
In theory.
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In practice, you can also work for your Bitcoin. There aren't a lot of jobs yet that pay in Bitcoin, but more will likely be coming:
https://www.google.com/search?... [google.com]
And, yeah, this will likely be used a lot by people wanting to avoid income tax. Why should people in Italy, Germany, and France have all the fun [reuters.com]?
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You do work, you get paid in Bitcoin.
You spend Bitcoin at a store, you get products.
Where exactly is "currency" involved, other than Bitcoin itself?
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They are. Just like everything is anonymous until you tie a real identity to it. Do nothing but buy and sell bitcoins in bitcoins that you mined youself on websites with no identifying information about you and they'll never know who the bitcoins belong to.
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We need a Patriot act for finance. What do people have to hide?
Untaxed money?
And the fatal flaw of Bitcoin becomes visible (Score:5, Interesting)
and the IRS jail you for cheating on your taxes! (Score:2)
and the IRS jail you for cheating on your taxes!
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and the IRS jail you for cheating on your taxes!
That's no joke. The US Government considers cheating on taxes to be a very serious offense. In fact, the tough penalties for tax crimes are so well known that prosecutors sometimes elect to go after the tax charges, rather than other chargeable offenses, because the penalties are so much higher. There was a case in Las Vegas some years back where instead of busting a pimp for running prostitutes, which had a 2 year prison sentence, they prosecuted the guy for tax evasion because he didn't declare and pay ta
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Capone is similar but sufficiently different. With the Las Vegas pimp they had the evidence and witnesses to pursue the pimping charges or the tax evasion charges but elected for tax evasion because of the higher sentencing to keep him off the streets for longer. With Capone they lacked the evidence and witnesses to nail him for the organized crime charges but were able to eventually get the evidence to make the tax evasion charges stick to him to get him off the streets. The former is a little more egregio
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I have a hard time feeling bad for a pimp.
Re: and the IRS jail you for cheating on your taxe (Score:4, Insightful)
I thought transactions that are "Paid-In-Kind" are exempt. Money for money should not be taxed.
The IRS would argue that bitcoin is not money. It's no different than if you bought and sold gold coins for a monetary gain. You owe tax on the gains.
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correct, so the follow-up is that since they also are going after transfers, at what point do they consider you having cheated.
Using stocks as an example:
1) I buy one share of MegaCorp for $100 in an eTrade account.
2) The stock goes up to $1000: I have a paper gain of $900, but no real gain, so no taxes are due.
3) I transfer that stock to Merryl Lynch, still no gains
4) I sell the stock and after commissions etc. I pocket an $850 gain. I owe taxes on the $850.
It sounds like the IRS is considering taxing at
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ah, didn't think about that angle... and ooooh that's a tangled mess!
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Transactions paid in kind are exempt, but they stop being paid in kind if the transaction from one currency to another and then back results in a net gain or loss.
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As long as money is being exchanged for money that has equal value it should not be taxed. If you pay $5 USD and receive the equivalent value of $5 USD in BTC then there's nothing to tax.
However, if you spend $5 USD and received $10 USD worth of BTC then you should be reporting the difference of $5 USD as income. Further, if you purchase $5 USD worth of BTC with $5 USD and the value of BTC relative to USD rises so your $5USD worth of BTC is now $500 USD worth of BTC then you would be required to file the di
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You have however gained financial wealth over time. That's either a capital gain, or an income. Both are taxable.
How you gained it is only of interest when working out which aspect of the tax legislation applies.
Re:And the fatal flaw of Bitcoin becomes visible (Score:5, Informative)
The fatal flaw of blockchain is that all transactions are 100% traceable
The whole point of the blockchain is there is a public, verifiable ledger.
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Re: And the fatal flaw of Bitcoin becomes visible (Score:5, Informative)
Nope. Whenever you send any money the entire amount gets sent and the change goes to a newly created address. It's impossible to tell which address is the change and which is the actual payment, because the order in the transaction is randomized.
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I think you are totally wrong, but I want to be sure I understand Bitcoin processing correctly first.
Whenever you send any money the entire amount gets sent and the change goes to a newly created address.
Just to be clear, it sounds like you're saying the following:
In every Bitcoin transaction, the entire balance of the wallet is tendered. The financial transaction is considered complete when (1) the agreed-upon payment is given to the seller's wallet, (2) the remaining balance is returned to the buyer's wallet, and (3) cryptographic validation of this exchange has been added to the blockchain.
If that is the case, it should be trivial for the authorities to audit the blockchain and correlate payments.
E.g., if I have a wallet with 50 BTC and buy an ounce of a controlled substance, it should be really easy to figure out which wallet belongs to the me vs the seller because the change returned to me will be the much, much larger quantity.
It
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Only if your 50 BTC happens to be in one unspent input (which, by necessity, is also at one address). If you have multiple unspent inputs that add up to your total or (better yet) if your total is spread across multiple addresses, the smallest input (or combination of inp
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Because one of them (unknown which one) does not belong to you. And then at the next layer you have 4 addresses, only one of which belongs to the original owner. And so forth.
Not that inferences can't ever be made and ownership probabilistically deduced (often with enough surety to justify additional non-blockchain investigation). E.g. if two distinct addresses are used as inputs to a single transaction, they likely belonged to the same person.
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Every time you receive coins you can use a brand new address. Until you spend it in on a traceable transaction, nobody knows it's yours.
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A user doesn't have a unique identifier. A wallet has.
A user can have many wallets and create new ones out of thin air for any transaction, in fact it is what already happens by default.
For example, if police gets an address where a drug dealer receive payments and sees a transaction from that address to the exchange, then it can be reasoned that the guy who cashed the bitcoin is involved. But as the chain of transaction becomes longer, the connection becomes harder and harder. For example the dealer could
Re:And the fatal flaw of Bitcoin becomes visible (Score:4, Insightful)
Cash may not be as anonymous as you think.
Larger cash transactions will most certainly attract greater scrutiny.
You're likely to be on multiple cameras during or en-route to / from the transaction.
Your cell phone, when GPS is running, ( your knowledge or not ) is accurate to six digits past the decimal point.
License plate scanners will know where you were at any given time if you drive.
This list can go on and on and on.
Point is, we can minimize it to the best of our ability, but what we do these days is far from anonymous.
Bitcoin and all the crypto-currencies will skyrocket in value, right up to the point where the governments get serious about it and bring in the regulation hammers. It is at that point those investing in such things will learn what the term " risk " truly means.
Re: And the fatal flaw of Bitcoin becomes visible (Score:2)
Panoptic surveillance FTW! Go, Stasi, go!
Fatal only for some types of uses (Score:2)
Most people are just fine with using a bank account to store money, and credit cards to purchase items where all sorts of people and agencies can review transactions.
Why would any of those people care if transactions could be traced forever? Lots of people already sign up with bitcoin exchanges giving as much information as they would a bank.
The only people that is a "fatal flaw" for are people who do not want anyone to review transactions, and long term they will not make up more than a small percentage o
Re:And the fatal flaw of Bitcoin becomes visible (Score:5, Informative)
Make ONE association of a transaction to an individual, and then you have ALL transactions that individual has ever made
You can have as many 'wallets' as you want. Some people use a different wallet for every transaction (useful for giving a different address to each customer, and then you can tell which customer paid).
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MOD PARENT UP.
This is exactly correct. It's amazing how many users don't understand this property of the block chain. For the last time people, the master ledger of all Bitcoin transactions made by everybody for all time is completely public. Professional spies cannot maintain 100% perfect trade craft indefinitely, how much less the average Bitcoin user? Just about every Bitcoin user, either by choice or mistake, will eventually make a transaction that links their wallets to their RL identity. For this reas
Re:And the fatal flaw of Bitcoin becomes visible (Score:5, Informative)
Coinbase user here:
This should not be surprising to any user for two reasons:
1) Most of the *coins* are not anonymous. Or rather, they're not private. The ledgers are public, which means that:
2) You're only anonymous if you *never* do anything that connects to you. And as any Coinbase user knows, you have to supply a bunch of identifying and relatively-hard-to-fake info when you sign up. So as soon as you trade on their platform(s?) you are tying your coins to the info they have on you. If you don't want to give up your privacy in exchange for the services they provide, the time to bring out the pitchforks is during signup. After you give your SSN and/or gov. ID, you can't really feign shock and horror when they supply the info to the IRS just like they warned they might in their ToS. I mean, personally I'm cool with that since I do report my cap. gains to the IRS, but yeah, if you're dodging taxes I can see how this is terrible news. But the answer isn't "hate on Coinbase", it's "pay your damn taxes." Shit, cap. gains are a joke in the US anyways... it's not gonna eat into your mad Bitcoin profits that much to pay them... And if you think it is, read on:
3) There are anonymous ways to cash out BTC (not so sure about ETH or LTC). You'll pay a fat premium for them though, and honestly I can't think of any reason to do so aside from strict adherence to libertarian philosophies or ill-gotten gains. Personally my cryptocurrency involvement has been strictly speculation and all above-board, so I'm already de-anonymized as soon as I buy the coins. But I'll grant you if you mine them the equation might be different... if you do, I can at least see the argument for keeping your identity anonymous, if only because anonymity is a nice thing to have in general.
But yeah, no Coinbase user should be surprised by this. They all but come out and warn you that they'll report to your country's tax agency on demand during signup. You can't be pissed when they go and do just that!
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Make ONE association of a transaction to an individual, and then you have ALL transactions that individual has ever made, all recorded
No, you have all transactions that particular address has ever made. An individual may have any number of addresses.
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close...
Make ONE association of a transaction to an individual *wallet*, and then you have ALL transactions that individual has ever made *with that wallet*, all recorded.
FTFY
That's why multiple wallets and remixers are important.
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Why is not being able to dodge taxes a flaw?
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Cash is still anonymous ...
BTC was never anonymous. That was a myth that seems to have gained legs from people who don't understand how a blockchain works.
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The exchanges will STILL be the issue here. Anyplace that matches a digital ID to a real person, real money or products/services will be a security issue for any crypto currency.
The gig is up! (Score:3)
Re:The gig is up! (Score:4, Funny)
It's the IRS, lol. Those miners about to be taxed, hope they didn't spend it all - they might need some of it + penalties.
Unless they:
:-)
- Recorded the closing bitcoin price on the day they received mining proceeds. (basis)
- Recorded the sale price of the bitcoins on the day(s) they sold them. (gain/loss)
- Recorded the power consumed during mining those coins and kept their power bill. (variable cost)
- Kept receipts for the mining hardware and the watt meter. (fixed costs)
- Reported the basis, gain/loss and expenses (costs) on their taxes.
If they did this they might not have any problems.
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I just claimed zero basis cost when I reported the ones I've sold, and I didn't deduct anything for power or equipment. It was all straight long term capital gains at the price I sold them for.
I'd love to get audited. Figuring out the basis and expenses is trivial. Tedious, but trivial. It wasn't worth my time to figure it out, but if the IRS wants to send someone around to figure out how much they owe me in overpaid taxes, I'm game.
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Nah, they won't send someone around. They'll send you a letter stating that you owe them $X, unless you can prove to them otherwise, and the burden of proof is on you. Been there, done that...more than once.
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The court order is necessary because coinbase told customers it would respect their privacy. They are not a bank, not a brokerage, the IRS has ruled that bitcoin is an asset. Coinbase is under no more regulations to report than a website trading Magic The Gathering cards.
Most of us do things legit (Score:5, Insightful)
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Re: Most of us do things legit (Score:4, Funny)
Thank you, Dr Pedant, for your learned and enlightening commentary.
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All of which begs the question of why you're clearly wrong, as demonstrated by my usage of the phrase in question.
who knew this ruling came down and when? (Score:2)
Taxing Virtual money?? Eh? What? (Score:2)
Makes Perfect Sense (Score:1)
All gun owners must be murderers because why else would someone need a gun ... uh ... uh ... Okay well not ALL users just the ones who bought more than $20k because that sounds like a really big number to [edited] people who are afraid of spooky numbers and computers and stuff
All Italians must be affiliated with the Sicilian mafia because Sicily is part of Italy
All beautiful women must be promiscuous because why else would they be beautiful
All coinbase users must be tax evaders simply because
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All coinbase users must be tax evaders simply because ... uh ... uh ... Okay well not ALL users just the ones who bought more than $20k because that sounds like a really big number to [edited] people who are afraid of spooky numbers and computers and stuff
Actually, given the figures, that's not that unreasonable. The estimated figures say under 900 users reported bitcoin earnings from 2013-2015, during which time 14,000 users at Coinbase sold, sent or received more than $20k worth. Now, clearly not all of those users are committing tax fraud. But that's not the point of a tax probe. It's likely that enough are to make a review worth it. Transactions of that magnitude are routinely monitored in the world.
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Actually it *is* unreasonable because the net would identify the business operators who use Coinbase to cash out to fiat every night. And it would catch investors who simply moved their bitcoins off of coinbase into mobile wallets or cold storage and still have them. No capital gains to report, but identified anyway. Though they did nothing wrong, those folks who are cleared remain on some list and somehow get a higher chance than others at being audited or detained crossing a border or something. They will
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There are already regulations requiring financial institutions to report transactions of $10k (or multiple smaller transactions adding up to more) or more. Why should this be any different? So, if your argument is that they should be able to collect that information at all, then you probably don't much care about tax evasion, and money laundering. Otherwise, your only logical argument is with respect to the figure. Too small of a number just isn't worth the IRS's time. $10 - $20k seems perfectly reason
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There are legally-valid regulations in force on the use of *fiat* as granted by constitutional amendment. Crypto is not issued by any central bank and not controllable by any government. In short: They didn't create it, they don't own it and they don't control it.
The Ninth Amendment says the government does not automatically get control over new things. Here we have a new thing: not currency, not stocks, not real property. I haven't heard of any recent constitutional amendments granting the govt new power.
A
Cryptocurrency is just bartering ... nothing new (Score:2)
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What we still have is a citizen who is responsible for paying taxes [on taxable items] and a government that is constitutionally authorized to collect taxes [within the scope of the law].
Nope. Bitcoin/etc is definitely new, a way of storing value that can't be seized. It's better than burying gold in the back yard.
And the fishing expedition is still illegal whether or not capital gains taxes are lawful.
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What we still have is a citizen who is responsible for paying taxes [on taxable items]
and income, whether fiat or barter or bitcoin
Bitcoin/etc is definitely new, a way of storing value that can't be seized.
Actually it already has been seized. Seize a wallet and the coins are seized. The FBI seized 40% (?) of the bitcoin wallets at the Russian exchange BTC-e.
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> Actually it already has been seized. Seize a wallet and the coins are seized. The FBI seized 40% (?) of the bitcoin wallets at the Russian exchange BTC-e.
The keys in a personal wallet, on a cellphone for example. are encrypted with a PIN/passhphrase and can be backed up. So even if someone loses the phone, s/he can restore the keys on a different device.
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> Actually it already has been seized. Seize a wallet and the coins are seized. The FBI seized 40% (?) of the bitcoin wallets at the Russian exchange BTC-e.
The keys in a personal wallet, on a cellphone for example. are encrypted with a PIN/passhphrase and can be backed up. So even if someone loses the phone, s/he can restore the keys on a different device.
Hence the 60% not seized, but the point remains coins were seized via the wallet. Coins are also lost accidentally due to the loss of a wallet. We all know how good the average user is with their backups, and their PINs and passwords for that matter. Also when the government wants your coins they will likely get a warrant for all your computers, phones, backups, etc.
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can't argue with the barrel of a gun, for sure, nor should one try
Warrant? (Score:1)
I have never understood why the tax authorities in the US (or, indeed, almost anywhere else) should be exempt from the requirement to get a warrant.
If the government suspects you of wrongdoing, they are supposed to present evidence to a judge, in order to get the right to invade your privacy. Yet tax authorities have direct access to your banking information, your salary, your investments - and now, of course, they want your cryptocurrency transactions. Why should they have this right?
Sure, some people woul
So, only transactions where $ were exchanged? (Score:2)
Move to a Tax Haven Before Cashing Out (Score:1)
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or:
Cash out in tax haven. Don't repatriate the money.
Problem solved.
If you were on a platform and a US resident, then open a swiss or german bank account, have the cash-out in Francs or Euros and deposited into said account.
Declare the account on your IRS statement (required by tax code, so they can identify if you move the money into the US)
Pay no taxes on that money as long as it's not sent into or spent in the US.
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I'm going to strongly suggest that you run that by a tax lawyer before trying it. Corporations don't just leave money in other countries; they leave it in other corporations. Microsoft Ireland is not the same company as Microsoft in the US, so Microsoft Ireland can hold money that isn't held by anyone or any corporation in the US.
The government has to have "their" SHARE (Score:1)
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You're an idiot.
Alleged democracies, like the us, belong to "we, the people", and use our tax dollars for provide things.
And if *you* don't want to pay taxes, then get the fuck off the highways *my* taxes paid for, don't walk on the street *my* taxes paid for, don't use city water or sewer. In fact, get the hell out of the country that *my* taxes paid for.
And take your guns with you, to protect you against any invading army., navy, or air force.
Too high (Score:2)
If you write a check for $10k or over, the banks have to hold it for 10 days, and report it. The judge should have chosen $10k... and this should be true for ALL cryptocurrencies.
Cryptocurrencies: avoid paying taxes (and stick the rest of us with your damn taxes), and helping crime (ransomware? money laundering anyone?)
Ugh... (Score:1)
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