News IRS Warns Cryptocurrency Owners About Possible Tax Violations

[Admin]

The IRS sent "educational letters" to 10,000 people who "potentially failed to report income and pay the resulting tax from virtual currency transactions."


IRS Warns Cryptocurrency Owners About Possible Tax Violations : Read more

 

[derekullo]

Monero/MTP/Ethereum mining ... never heard of it.
I used all that electricity prototyping an emp ... for a school project.
The BMW up front was from a series of below $1000 casino winnings.

 

[hotaru251]

TBH to get their point across 1st time is a warning.

anything after that? fined ontop of having to pay the value (at the time of taxes) of crypto they hid. (basically they lose most/all of the crypto's value on top of the fine for hiding it)

 

[bit_user]

I didn't even start trading until the IRS released reporting rules. Once they did that, I took it as a sign that it was kosher and opted for an exchange that was in full compliance with my state's regulations.

So, yeah, of course I reported it!

 

[perfectdarksky]

It's not difficult to know who had been trading in cryptocurrencies but it difficult to know the amount traded and to whom and what was it exchanged for. And how are they supposed to tax an extremely volatile currency? today (ex: before the tax filing) 1 bitcoin might be 20Grand USD but tomorrow (ex: the day after submitting the tax form) it may be 5Grand, so how much should they pay for tax? What the IRS is doing now is just fearmongering.

 

[Gam3r01]

It's not difficult to know who had been trading in cryptocurrencies but it difficult to know the amount traded and to whom and what was it exchanged for. And how are they supposed to tax an extremely volatile currency? today (ex: before the tax filing) 1 bitcoin might be 20Grand USD but tomorrow (ex: the day after submitting the tax form) it may be 5Grand, so how much should they pay for tax? What the IRS is doing now is just fearmongering.

One would have to assume you get taxed on the value of the transaction.
Dosent matter if I buy a 2000 dollar TV and it goes on sale for 500 bucks next week, I paid tax on 2000.

 

[AllanGH]

And how are they supposed to tax an extremely volatile currency?

You pay tax on the amount you receive AFTER the crypto is converted to US dollars (less your original US dollar crypto investment), because at that point, it's income.

 

[bit_user]

It's not difficult to know who had been trading in cryptocurrencies but it difficult to know the amount traded and to whom and what was it exchanged for.

Well, places you buy and sell crypto-currencies are subject to financial reporting regulations. So, the IRS can find out how many you bought and sold, how many you transferred, and how much you hold. Then, if you get audited, you have to show the IRS that the taxes you paid can account for all of that.

And how are they supposed to tax an extremely volatile currency?

If you read the IRS reporting rules, they're taxed just like any other asset, such as stocks, bonds, precious metals, etc. What you pay taxes on is the change in value between when you bought and sold. You should likewise be able to write down losses, if you sold for less than you bought at. If you make a financial transaction other than for $USD, I guess the spot price is taken as the value, for tax purposes.

today (ex: before the tax filing) 1 bitcoin might be 20Grand USD but tomorrow (ex: the day after submitting the tax form) it may be 5Grand, so how much should they pay for tax?

You're not taxed on holdings. Only sales (which includes exchanging crypto currency for goods or services).

What the IRS is doing now is just fearmongering.

You really want to call their bluff? If you get audited, you're screwed. Before you decide to fight it, maybe ask Wesley Snipe how that worked out for him.

https://en.wikipedia.org/wiki/Wesley_Snipes#Income_tax_conviction

Maybe you can fight the IRS if you're a billionaire. But, if you're a mere mortal, the IRS pretty much always wins.

 

[bit_user]

One would have to assume you get taxed on the value of the transaction.
Dosent matter if I buy a 2000 dollar TV and it goes on sale for 500 bucks next week, I paid tax on 2000.

Well, if we separate the issue of sales tax (charged by the merchant) and your trading of the asset (i.e. crypto coin) for the TV, which (for tax purposes) counts as a sale, then yes. If you spend $2000 worth of crypto coin on the TV, then you take the spot price for that amount of currency that you exchanged and you incur a tax liability on it.

You pay tax on the amount you receive AFTER the crypto is converted to US dollars (less your original US dollar crypto investment), because at that point, it's income.

Well, if you're talking about investing in crypto, it's not taxed as income, but rather a capital gain (or loss).

This stuff is really no more complicated than other financial assets. The only thing harder about crypto is the volumes are potentially much greater. There are tools to help with that, but I had few enough trades that I could compute my tax liability with a spreadsheet.

 

[AllanGH]

Well, if you're talking about investing in crypto, it's not taxed as income, but rather a capital gain (or loss).

IF that crypto asset has actually been held for more than one year before divestiture (long-term capital gains). For assets held for under one year, it's short-term capital gain and is taxed as normal income.

 

[thegriff]

Monero/MTP/Ethereum mining ... never heard of it.
I used all that electricity prototyping an emp ... for a school project.
The BMW up front was from a series of below $1000 casino winnings.

If you are in the US, try that with the IRS. They aren't as stupid as you think, they will work to trace everything. So, if you can't show where your income came from you are going to pay. Also, below $1000 winnings are taxable, only the casino doesn't have to report it, but again you would have to explain how you bought the BMW.

 

[AllanGH]

It is one thing to say it in a message board (perhaps in jest), but it is quite another thing to try to pull that off in any credible manner in an audit. Not happening.

 

[ss202sl]

It's not difficult to know who had been trading in cryptocurrencies but it difficult to know the amount traded and to whom and what was it exchanged for. And how are they supposed to tax an extremely volatile currency? today (ex: before the tax filing) 1 bitcoin might be 20Grand USD but tomorrow (ex: the day after submitting the tax form) it may be 5Grand, so how much should they pay for tax? What the IRS is doing now is just fearmongering.

They pay the tax based on the last day of the reporting period. So Dec 31 price. If it tanks on Jan 1, the IRS doesn't care because the drop did not happen in the reporting period.

 

[AllanGH]

Which is immaterial to holding the crypto, because you cashed-out and no longer have an investment tied-up, so you are still paying tax on the capital gains which is no longer volatile.