IRS Sending Warning Letters To More Than 10,000 Cryptocurrency Holders (wsj.com) 171
The Internal Revenue Service has begun sending letters to more than 10,000 cryptocurrency holders, warning about penalties for failing to report income and pay tax on transactions involving virtual currencies. From a report: The agency expects its mailing to be completed by the end of August [Editor's note: the link may be paywalled; alternative source]. It is sending three variations of one letter, depending on the information it has about the recipient. "Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency, including increased use of data analytics," said IRS Commissioner Chuck Rettig. An IRS spokesman declined to say whether the letters stem from information turned over by digital-currency platform Coinbase. In mid-March of 2018, Coinbase provided data -- under a federal court order -- on about 13,000 accounts requested by the IRS.
They will never find me (Score:4, Funny)
-Satoshi Nakamoto
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They will never find me.
-Satoshi Nakamoto
Sure they will find you . . . they know that you work for the NSA.
and money laundering = federal pound me in the ass (Score:1)
and money laundering = federal pound me in the ass prison
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The agreement these people have is with their US citizenship. If they don't wish to pay taxes to the US they are free and able to go to a US consulate and renounce their citizenship. This removes any future tax liability they might have to the US.
Ummm...renouncing your citizenship does not get you out from under any current tax bill you might owe. I have read several articles about former U.S. citizens that work outside the country for their job and have done the same thing. If you owe, you have to pay or get bounced to the big house.
Tax evasion charges have brought down criminals like Al Capone and others when other criminal charges wouldn't stick.
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But if the crypto currency was purchased outside of USA and never brought into USA, then 'sold' outside of USA, then what USA tax liability or even jurisdiction can there be? It is the same as buying property in another country, the USA cannot tax you or a non-citizen on that unless item or proceeds return or go thru the USA.
If you are a U.S. citizen or permanent resident, you owe tax on all income regardless of where in the world that income is earned. You can generally get a credit if you already paid tax on the income to another government, so if you live in a high tax country you will probably not owe anything extra to the USA.
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The IRS is quickly going to find out that the number of people who made big money on bitcoin is very low, despite what people claim in their online fish stories
Re: What agreement do they have with these people (Score:1)
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Miners may be more likely to have reported (Score:2)
The IRS will quickly learn the effort will probably net refunds when people start claiming power consumption as an expense... =)
That only applies to the few miners. And miners are probably more likely than regular bitcoin holders/users to have already reported coins. Well, at least the coins received from mining, for the very expense reason you state. Reporting capital/gains losses later when spending/selling coins is a different matter.
and then you risk an IRS audit that can be painful (Score:2)
and then you risk an IRS audit that can be painful!
Code of Laws of the United States (Score:2)
What contract/arrangement have they mutually engaged in with all of these people that would necessitate such or even make such at all enforceable or legal/ethical?
The Code of Laws of the United States of America plus residing in or operating a business within the jurisdiction of the United States of America. It is unlikely the IRS is contacting people who have done neither and as a result have no tax obligation to the US.
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If you use a wallet service you may as well just use a bank account. The trouble with crypto is converting it to cash anonymously.
Or if you did business with a merchant that pays their taxes. They too may provide data on you.
Long Term Investment HODLers (Score:2)
If your income is $0-$39,375 for fiscal year 2019 and you owned the crypto for more than one year you pay 0% tax.
https://www.fool.com/retiremen... [fool.com]
Pays to quit your job if you have a lot.
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Legally, the income received through cryptocurrency was always required to be reported. The only thing that has really changed is that the IRS is now starting to follow up on it.
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Presumably if you put money into Coinbase you already paid tax on that money.
If you mined it then you pay tax on the income when it paid out into your Crypto wallet. For those that mined when it was $2 per Bitcoin 9 years ago that is below reporting threshold.
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And if you put money into a regular bank account, you've already paid tax on that money too.... you still have to declare any interest received as additional income, however.
Similarly, any increase in the dollar value of cryptocurrency has to be recorded.
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If you put your money into an exchange, there is a good chance they have run off with it, so you can get the luxury of writing off your currency off your taxes. Even the fabled, stable MtGox fell to that.
Add late payment penalties (Score:2)
Legally, the income received through cryptocurrency was always required to be reported. The only thing that has really changed is that the IRS is now starting to follow up on it.
Coincidentally they follow up a year and a half after an exponential rise and sell off. Add late payment penalties. :-)
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You pay taxes on interest earned in a bank account too, even if you didn't take anything out of that bank account in the past year.
To the best of my understanding, it appears to me that they are doing something similar with cryptocurrency.
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You pay taxes on interest earned in a bank account too, even if you didn't take anything out of that bank account in the past year.
To the best of my understanding, it appears to me that they are doing something similar with cryptocurrency.
You don't understand it then. You've compared a capital gain to interest payments multiple times in this thread but they aren't the same thing and are not taxed the same. You are only taxed on a capital gain once you've realized the gain -- i.e. you've sold the asset. To quote the IRS: [irs.gov]
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If your income is $0-$39,375 for fiscal year 2019 and you owned the crypto for more than one year you pay 0% tax.
https://www.fool.com/retiremen... [fool.com]
Pays to quit your job if you have a lot.
But selling bitcoin seems to be taxable income? You don't earn money by making less money so you can pay a lower (or no) margin tax.
Less is not more, it does not make sense. More is more.
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But wouldn't your capital gains income count as "taxable income" for purposes of that "$0-$39,375" figure? (I don't actually know the answer to this, but from what I can find, it does *seem* to be included.)
So if you made less than $40k in your capital gains then indeed, you'd pay no taxes ... *but you're trying to live on less than $40k*.
Quitting your job to reduce your tax liability sounds great, but ... *you're also giving up your paycheck*.
Ultimately, if somebody is in a situation where they actually n
Why when Taxes are voluntary (Score:2)
https://www.youtube.com/watch?... [youtube.com]
Till they come after you....
Weird things (Score:2)
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It isn't income until you sell it. Otherwise it is just some crap you bought that may be increasing or decreasing in value.
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So, they recognize crypto-currencies as an investment vehicle yet they want to outlaw it? Makes so much sense.
What did they get Al Capone on again? Oh yeah, tax evasion. Even if it's income from illegal activities, it's still income, and you still owe taxes on it.
Trump might go down the same way. Just need to get him out of the White House. He can't dance around releasing his taxes forever. What does he have to hide? What's that thing you Trumptards and Conservitards like to say? If you're not guilty, you have nothing to fear? Yeah, that's it.
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So, they recognize crypto-currencies as an investment vehicle yet they want to outlaw it? Makes so much sense.
No. They recognize cryptocurrencies as an *asset* but not as a *currency*. Hence all the required reporting of capital gain/loss every time you sell or "spend" a crypto coin (the "spend" is really an asset bartering transaction from their perspective). Outlawing its use as a currency, requiring reporting due to money laundering, etc are consistent with this asset status.
But Trump doesn't pay taxes, why should they? (Score:3, Funny)
Seriously, I'm not joking.
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How do you know? He hasn't released his returns. He is fighting it though, so he probably has a few skeletons he wants to keep in the dark.
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I can neither confirm nor deny that I know what I know.
Re:But Trump doesn't pay taxes, why should they? (Score:5, Informative)
How do you know? He hasn't released his returns. He is fighting it though, so he probably has a few skeletons he wants to keep in the dark.
He basically admitted it to Hillary during the debates: https://www.youtube.com/watch?... [youtube.com] she claimed he paid no taxes, nothing for troops, vets, schools, health, which would still be just a claim if Trump hadn't responded: "that makes me smart". So we basically have the admission that he pays no taxes for for troops, vets, schools, health, from the laughing lips of Trump himself.
Re:But Trump doesn't pay taxes, why should they? (Score:5, Insightful)
You don't really know anything about running a business, do you?
He asked what evidence there was that Trump did not pay any taxes, I presented a video of him admitting he did not pay any taxes. That being said I'm well aware that in America a well run business cheats on it's taxes to the point where it does not pay any while feeling entitled to make copious use of taxpayer funded infrastructure to make their profits. Apparently people who pay their taxes in the USA are considered a bunch of suckers by their plutocrat overlords.
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"Cheats" implies, by definition, breaking the rules. Unfortunately the United States corporate tax code has all sorts of loopholes, so there is just a lot of "playing by the rules", that means no taxes paid. That is not cheating, that is playing.
Semantics and hairsplitting ... these people are thieves.
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"We don't pay taxes. Only the little people pay taxes.” -- Leona Helmsley
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Seriously, I'm not joking.
No you are just poorly informed.
No, I'm not.
Don't forget gain/loss on that coffee ... (Score:4, Interesting)
Why yes that does seem like a crazy thing to have to do but you did choose to buy that coffee with an *asset* not a *currency*.
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Don't forget to calculate the capital gain or loss and report it for the small daily purchases you make with bitcoin
Well my guess is that if that became something that was common, then the apps would keep tabs for that for you.
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Don't forget to calculate the capital gain or loss and report it for the small daily purchases you make with bitcoin
Well my guess is that if that became something that was common, then the apps would keep tabs for that for you.
Absolutely, but they have not to date. Hence the problem for people who "buy" (actually they are bartering) goods and services, who believe they are outside the domain of governments and tax agencies.
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IRC 988(a)(1)(A)
Loss or gain due to currency exchange when purchasing goods or services is treated as income.
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Effectively we are. No government agent has ever come to me and demanded taxes on my Bitcoin.
Did you miss the title of this slashdot post:
"IRS Sending Warning Letters To More Than 10,000 Cryptocurrency Holders"
Barter is not the right word either because neither party is negotiating over the price of a good when 'asset's are exchanged. There is an exchange rate and that is what gets used.
"Barter" is the word the IRS uses. Also the exchange is bartering, a negotiation. It is merely that someone else is negotiating the current value of your asset. That you have delegated this negotiation to someone else makes it no less of a negotiation, a barter.
You don't call the Euro an asset just because your in the US. If you were to pay for goods in the US with Euros you wouldn't say it is an asset and not a currency.
A fiat currency is only legal tender within the jurisdiction of the authority issuing that fiat currency. The Euro is not legal tend
Tax? (Score:5, Insightful)
So if you have $5,000 worth of Bitcoin sitting in a wallet, what's the tax implication? From what I understand, there is none until you do something with it. Once you sell it - that's income. If you buy something with it, that's also income. But if it's sitting in a wallet, how is that different than sitting on a stock that doesn't pay dividends? It could go up in price, it could go down in price, you are taxed on it when you sell it and turn some sort of profit.
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First, cryptocurrencies have so much volatility that anyone who buys and holds them is probably an idiot. If they are selling, it's probably subject to short-term capital gains taxes. Does that mean most cryptocurrency investors are tax evaders? Yes, unless they report their sales transactions. Which I would believe the majority aren't.
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Does that mean most cryptocurrency investors are tax evaders?
No. You don't pay taxes on investments where you lost money. But you should be filing your taxes anyway, since you can apply that loss to your future tax burden.
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This is a good question. Hope mods will mod the parent up. My guess is that the IRS would view it as a wash transaction (no tax implications) but I am not sure. You would definitely want to retain records and be able to prove that the transfer was to another wallet you control in case the IRS challenged it.
Re:Tax? (Score:5, Informative)
You are supposed to pay taxes on any increase in value over the year, regardless of whether you sell it or otherwise use it.
That is wrong. The taxable event is the sale of an asset. Until then, the asset can go up or down in value and there is not tax due.
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Slashdot is full of jealous armchair morons.
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no, it's full of people dispensing incorrect income tax advice even though the published rules on the subject are quite clear and easily found.
Capital assets have taxable events upon sale.
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Nope, when the taxman comes for his share of the record baseball you caught, he don't care if you sold it, but you'll have to in order to pay the bill. Gambling should be tax free, given there is about twice as much lost as won, but they don't care about anything but their payday, don't like it, leave (but keep paying tax until 2030)
While it is true that winning a prize (like a lottery or raffle, I don't know about the baseball catch) results in the IRS being due their cut, for things like casino gambling, stock speculation, or cryptocurrency the gains are generally not taxable until they the chips are cashed or are given to someone else.
For trips to the casino and other gambling, if you keep track of both your winnings and losses, losses are usable as deductions against winnings in any one year, but losses cannot be carried forward ye
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You are supposed to pay taxes on any increase in value over the year, regardless of whether you sell it or otherwise use it.
This is painfully wrong for personal taxes.
Re:Tax? (Score:4, Informative)
It's simple. You pay the capital gains when you cash out. Just like everything else considered an asset.
If you mined it you pay income tax on the value of the Bitcoin at the time it was deposited into the wallet. If that was 9 years ago and the value was $2 per Bitcoin you owe about 30 cents on the income tax and now you'd owe capital gains on about 10k or whatever the value was when you cashed out. If you actually owned it for that long though it's considered a long term investment which has its own rules.
https://www.fool.com/retiremen... [fool.com]
The rules around this are really only complicated if you day trade.
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So if you have $5,000 worth of Bitcoin sitting in a wallet, what's the tax implication? From what I understand, there is none until you do something with it. Once you sell it - that's income. If you buy something with it, that's also income. But if it's sitting in a wallet, how is that different than sitting on a stock that doesn't pay dividends? It could go up in price, it could go down in price, you are taxed on it when you sell it and turn some sort of profit.
Unless... crypto-currency is actually treated like fiat money for the purposes of taxation.
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So if you have $5,000 worth of Bitcoin sitting in a wallet, what's the tax implication? From what I understand, there is none until you do something with it. Once you sell it - that's income. If you buy something with it, that's also income. But if it's sitting in a wallet, how is that different than sitting on a stock that doesn't pay dividends? It could go up in price, it could go down in price, you are taxed on it when you sell it and turn some sort of profit.
Unless... crypto-currency is actually treated like fiat money for the purposes of taxation.
Its not. The IRS declared it an asset long ago. So as the GP indicates there is only a taxable event on sale or barter ("buying" goods or services with an asset). Also, fiat currency is not taxed when held. Perhaps you are thinking of interest *actually paid* to an account holder.
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As the cryptocurrency advocates are insisting that cryptocurrencies should be usable like currency (i.e. paying for bills and transactions with them), the IRS is simply
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Not at all. Taxes on forex investing [pocketsense.com] are treated similarly to gains and losses on assets and asset-to-asset swaps.
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Your understanding is correct. As long as you don't sell or trade the bitcoin (or whatever) for something else (including a different crypto-currency) then it is an unrealized capital gain and there is no tax due. When you sell or trade for a profit, that is a realized capital gain, and you need to pay capital gains tax on the increased value only. If you have many purchases at different prices, I am not sure how they decide how to calculate the initial cost. I am sure the IRS has memos on this.
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You're right... and you don't *have* to follow speed limits either, or for that matter, obey any law that you don't really want to.
There may be, however, quite lasting consequences for doing so if you are caught.
Yea and when the lefty loons running the (Score:2)
Just my 2 cents
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Mean while Federal Employees who (Score:2)
Federal employees owe $3.3B in back taxes [usatoday.com]
Over 300k hard working public servants cough, cough. Our new protected class over lords.
Just my 2 cents
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"But federal workers are better at paying their taxes than the average taxpayer. Their delinquency rate of 3.19% is far lower than the 8.7% for the population at large."
You missed that part, free-riding average taxpayer.
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+1.
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Aside from the ease of avoiding special cases, it allows proper accounting of trust funders who join the government and make money on stocks and lets other workers deduct mortgages and charity, etc.
The same old story (Score:2)
quote (Score:2)
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I love the quote at the bottom of the page for this story: The wages of sin are unreported.
This is proof that every once in a while the universe laughs at us.
Rich Uncle Pennybags is concerned (Score:2)
The taxes are due when you sell (Score:3)
Tax liability is incurred when you sell for more than you paid. This is called a capital gain. Capital gains are taxable in the US.
As far as the IRS is concerned, if you trade one cryptocurrency for another, that was a de-facto sale followed by a purchase. So if you trade ether for lightcoin or whatever, the IRS views that as a sale followed by a purchase. If you did that in the past and didn't record it, the IRS may fine you and assess back taxes.
But if you have never sold, then you will not be in trouble with the IRS. Keep track of all your purchases so you can establish a cost basis later. Only the gains are taxable.
I am amazed at how many people were day trading on coinbase or whatever and had NO IDEA about any of this.
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Tax liability is incurred when you sell for more than you paid. This is called a capital gain. Capital gains are taxable in the US.
Yup, people sell something for more than they paid for it and don't realize that it's taxable income. For little stuff it doesn't matter but if you're making any serious money it's taxable just like any other income. If you get caught it's almost certain you'll go through the wringer.
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I bought a few at $500, sold just past the peak. I'm definitely glad I recorded all of it and handed it all to my tax guy to handle. Yeah, I paid taxes on it but am not clenching right now if I hadn't.
Translation (Score:2)
The IRS is expanding efforts involving virtual currency, including increased use of data analytics," said IRS Commissioner Chuck Rettig.
TRANSLATION: "We're monitoring your bank accounts, credit cards, traffic on crypto sites, phone calls and texts, and we're cross-indexing it all so we can catch you."
Alright, who's the knucklehead? (Score:2)
God I hope Rassah got one (Score:2)
So sick of hearing that buffoon wank on about how Bitcoin and blockchain are the next big thing.
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Only if "wealth" is measured in:
* hypocrisy
* bankruptcies
* hairplugs
* # of divorces
* amount of time spent looking for homosexual hookups in airport bathrooms