IRS requests Bitcoin users pay them back
A government court has requested Coinbase, which works the biggest U.S. trade for purchasing and pitching Bitcoins, to hand over data to IRS on more than 14,000 clients associated with dodging charges.
The decision by U.S. Justice Judge Jacqueline Scott Corley, calls for Coinbase to furnish the expense organization with the name, birth date, address and citizen recognizable proof number of clients who had what might as well be called $20,000 or more in their records in any one year in the vicinity of 2013 and 2015.
As indicated by Coinbase, the request will just influence its most elevated executing customers, around 1 percent of its aggregate client base of about 6 million record holder. The IRS initially requested records of all Coinbase clients.
The battle comes as Bitcoin costs are swinging fiercely. Not long ago, the cost topped $11,400 before diving underneath $10.000, just to hop 10 percent on Friday to $10,905.90.
This is where it starts. It's a game of inches when it comes to central power. It will start with a select few and then more and more will be added. Before you know it, everyone will be in the IRS database.
I question the entire concept of income tax especially on cryptocurrencies. Should it be taxed while it is still in its virtual state or should it be taxed when it is withdrawn and used in the physical (exchanged for fiat) world. Taxes represent levies to provide services such as infrastructure, education, health and security. Historically this was based on excise and import tariffs. Another way to pay for expenditures would be to increase the money supply. Many countries now have central banks and the government "borrows" money from the central bank to cover their shortfalls. This is just stupid. Why pay interest on money which you have the power to create. Just print more money and use that to pay for government expenditures. This does cause a disadvantage for "Savers". Since the money supply increases then the principal held by saving individual is eroded. Of course this will affect the ability of people getting mortgages but this process also needs to be re-evaluated. It is not outside of the realm of possibility that homes could be crowd funded or crowd invested.
This is a good point. On the other hand, if you have enough money earning interest in a regular bank or financial account, you get a 1099 even if you don't spend it. You only get to defer with an IRA or similar product. I mean, I'm not in favor of this move, but I can understand their logic. I mean, if they're treating crypto like money in the bank. If they're treating like an asset - like stocks, then you would only have paper profits until you sell. If the IRS wants a piece of this, they need to clarify the rules.
There are certain things that a society needs in order to function properly: Infrastructure (roads, utilities, water), Healthcare (hospitals, medicines), Education (schools, research funding), Security (fire departments, policing, military). It is problematic when the power to decide these things are put into the hands of a couple hundred people representing millions of people. In Canada "someone" decided that it would be a good idea to spend billions of dollars to upgrade our military equipment of the next several years. While I am fully committed to support our Service members in salaries, healthcare and to make us paramount in disaster assistance and even in the roles of peace keepers, I am less interested in buying ships, airplanes and increasing the standing army just to appease the USA wanting us to waste our money or a few government bureaucrats wanting to play with toy solders.
Fortunately in Canada digital currencies are considered Capital Gains. As I live in the province of Ontario, I will illustrate what happens here. The minimum wage is $11.25 CAD ($23,400) per year.
Using the handy dandy tax calculator I arrive at a tax liability on employment income of $3,349. Cashing out digital currencies are taken in as Capital Gains which give a tax liability of $87. Let me attempt a little table here:
In Canada the last line $468,000 is roughly the average of the top 1%. While Warren Buffet is not Canadian (I assume USA taxes similar to Canadian) consider how much he was paid in 2016. Buffett made $487,881 last year, up 6% from 2015. This included all compensation as defined by the SEC. Among the components are base salary, cash bonuses, stock awards, stock options, retirement payments and perks.
Imagine he took a minimum wage as base salary (he needs pocket change) but the rest as stock option. The price of Berkshire Hathaway is around $294,385 while a stock option is around $196. He probably would get around 2000 stock options. Between 2015 to 2016 Berkshire Hathaway increased in value of $50,000. His capital gains would be $100,000,000. I repeat based on his roughly 1/2 million dollars of salary his real salary was closer to $100 million dollars... and his tax bill would be around $220,000 in Ontario. Even if he cashed out the full amount (to buy a small country), he would save roughly $25 million in taxes.
Interest earned is treated the same way as regular income in Canada which is hilarious because if you receive a tax refund you will receive interest on it ... meaning you will have to pay taxes on that interest.
The interesting thing about Warren Buffet is that he even said that it found it unfair that he paid less of a percentage of his income in taxes than his assistant did. I assume his assistant makes a decent salary but doesn't enjoy an income close to Bufftet's.
Thanks, this was a really good contribution to this post, IMO.
That is why that I suggest printing money to pay for governments service (actually I suggest going to a cryptocurrency but that is another topic). It devalues the holdings of the people who have the most. Doubling the money supply divides the purchasing power of holdings in half.
Warren 1000 >>> 500
Employee 10 >>> 5
It then is in the best interest of the people who have a lot of money to insure that the government limits its spending. Having the government borrow money to pay for expenses means paying the people with the money.
I never thought about it like this before. I need to think about this a little more. This must be why certain in our parties in our government want to limit spending but all my economic professors in college didn't think spending or the deficit was a big deal. Somehow this never clicked in my head before. Thanks!
Consider each year all citizens were sent a number of coins which could be spent into the agency that they would like and they could adjust their spending preference as follows:
It might be possible for people to buy/sell their preferences (haven't given that much thought)
As it would be on a public ledger, the citizens should actually be able to trace how each of their coins are spent. Employees and vendors would exchange the coins they would receive (banks would need to accept them) with the government issuing fiat to the banks. The coins would then be programmed to return to the original wallets on an annual basis.
This would mean that a citizen might allocate their spending preferences once and it then be handled automatically after that or each year would modify it in time to affect the budgets for the succeeding year.
This would take part of the decision making process out of the hands of the few.
I wonder if they will ask for our Steem Power records in 5 years when the Steem Dollar hits $10,000
By its nature, the value of STEEM probably will approach zero instead of $10,000. That is not a bad thing. Consider that email is a protocol which is used by many people on a daily basis and it costs almost zero. STEEM is the protocol for Social Networking. Its value is not just the extrinsic reward of money but it has many intrinsic values... one of which could be that it could be the platform which instigates the closure of revenue collection agencies.
I hope it doesn't go to zero .... I have converted all my SBD To Steem today
It is possible that it could achieve a value if there was a way that authors could put a minimum viewership fee on content. For most people this would be important but perhaps production studios (movie and tv) might want to host their content on IPFS but have a minimum price tag to view the content. Alternatively this could be a funding platform for crowdfunding.
Uh oh .... good thing I only have .005 of Bitcoin
Here is the thing we are overlooking. The darker side of the cloud being that a precedent has been set. There are bunch out there mistakenly relieved that they bought their BTC in 2016, 2017 etc. This is actually a big win for the IRS as they just got their foot in the door. That said everyone in the last two years that meets the criteria should likewise expect their information to be handed over at some point.
This time; however, Coinbase won't put up nearly as hard a fight, if at all as there is now a legal precedent and they no it is a losing battle. Also I think we have failed to estimate the ramifications if the initial Suspicions by the IRS are confirmed. We know they will be based upon the initial BTC user base, the ease of avoiding taxes during that time etc. Ergo the IRS will have a hell of a lot more foundation to their next request based on provable evasive tax information obtained in this initial lot of customers Coinbase will be handing over.
That in turn will allow them more power to start prying into all things Crypto. @pawsdog
If I make 1,000 % on Bitcoin I won't mind paying 1/2 to the Government
It will be more than half..lol.. If they find you failed to pay X number of years ago, they will calculate what you owed with an interest rate that would rival that of a loan shark.
When you pay your taxes late, the IRS charges interest on any unpaid amount. The interest compounds daily from the due date of the return until the date you pay in full. ... The interest rate charged by the IRS is the federal short-term rate plus 3%.
Basically if you failed to pay the $1000 in 2014 you owe some ridiculous number like $1700 now. So you owe what you owed, plus another 70 percent.
https://www.irscalculators.com/irs-penalty-calculator.php
@pawsdog
I am in Canada and cannot even withdraw anything from Coinbase. Do I still need to pay the IRS ?
I bought $50 in June 2017 (6 months ago) .... Do I have to pay taxes in Canada or USA for gains even if i don't cash out ?
You don't have any "GAINS" until you sell. Up until you sell you only have paper profits. Any GAIN you make on any trade is taxable at the time that you sell. So if you bought $1000 of BTC in 2010 and are sitting on hundreds of millions in paper profits you don't owe either government anything until you sell. As your Canadian I don't think you would owe the US anything if you sold, only Cananda. Unless you are a US citizen living in Canada in which Case both governments may want some money.
Wow just looked that up.. what a mess..
Generally, as a U.S. citizen living and working in Canada, you are taxed for money earned in Canada, whether from employment with a company operating in Canada, or investment interest from Canadian stocks, bonds or mutual funds,” says Brent Allen, certified financial planner and financial management adviser with Investors Group in London, Ontario.
So did you earn the money in Canada or the US.. Bitcoin is without borders.. so that's interesting.
I am a Canadian living in Canada. I only invested $50 in Bitcoin but have made some extra Free Bitcoin and Steem Dollars with Earn crypto
What happens when I sell my Steem Dollars (SBD) for Steem and earn 100 % but leave it all in Steemit ?
Still paper profits, so they don't count I would think.. No crypto counts until you convert is to FIAT
I don't ever plan on cashing out my cryptos ... hoping I can someday buy food with it on Amazon.com --- How do I pay taxes when I buy a banana on Amazon with Steem ?
I don't think Amazon will take STEEM.. lol.. but in the event you buy something with BTC that purchase becomes taxable, as well as any gains on the BTC up. As you are looking at it wrong.. You did not buy a banana, you just sold your Crypto for a Banana that is valued at a number in Fiat. So if I bought a CAR with BTC.. I'm still taxable on the car and the gain on the BTC as I just sold my BTC to someone else in exchange for a car.
So if I have gains of $1,000 a year do I pay taxes on those gains if i don't sell ? What happens if Bitcoin goes to zero - Do they give me those taxes back ?
Nope, because you had a profit when you sold.. If it goes to 0 after you sell.. makes no difference.. It's only taxable based on it's price at the time you sell.
I don't need to be rich - I just want to feel rich. I never plan on selling my Bitcoin.
good plan... :)
What happens if i never sell ?
and this is the right way for Bitcoin.
Thanks
@supercard
I don't have 20 000 usd in Bitcoin. I am safe!:)
I think we're going to see a small and temporal dip in price following this annoucement. I think there's two big liabilities effecting BitCoins growth right now: Governmment over-regulation/combating (will be overcome over time because BitCoin can operate without government approval) and over-speculation and valuation creating solvency issues for banks and exchanges. I believe the latter is pacified as long as BitCoin follows a pattern of healthy growth (reflected in passive/active investment in crypto infrastructure) over the next year or two.
We want to see explosive growth but we can't get too ahead of ourselves as investors. We want BitCoin's traded value to be a reflection of its inherent value as a disruptive technology and not just a reflection of naive buyer speculation. There's money to be made in speculation but only as long as this speculation fuels further real investment in decentralized infrastructure as a whole.
Invest like Warren Buffett-- Trade like Lando Calrissian! < 3 Cheers.