Coinbase, Bitcoin, IRS?
Last year the IRS issued a summons to Coinbase.
Coinbase has over 8.4 million users and over 27 million wallets, but only 802 people total reported gains or losses to the IRS relating to Bitcoin for the 2015 tax year?
If that isn't a recipe for the IRS stepping in, I don't know what is.
Sure enough, last year the IRS demanded to see ALL of Coinbase's customer account activity from 2013 to 2015. During this time Bitcoin went from $12 to roughly $1200. A time that many investors and traders experienced huge gains.
Right on cue, the IRS wants a piece of that action.
The IRS is basically asking for information on millions upon millions of account owners...
Account owners responded.
As you can imagine the owners of these accounts did not take this news sitting down. The so called "John Doe" accounts have hired the law firm Berns Weiss to ask the judge for permission to the challenge the IRS summons of Coinbase.
Which of course the IRS pushed back saying that the anonymous customers have no standing to mount such a challenge.
The anonymous customers aren't the only ones thinking that they do have such a standing...
Congress stepped in.
Sen. Orrin Hatch (a republican from Utah), as well as others, blasted the IRS for their summons of Coinbase saying:
"It is overly broad, extremely burdensome, and highly intrusive to a large portion of individuals."
And, they have a point!
Asking for all customer information is a direct violation of customer privacy that the exchange seems to be hoping to keep.
However, judging from the news out late yesterday, the IRS doesn't completely disagree with Congress's points...
Now, the IRS is shifting focus.
The IRS just announced that they will scale back their broad sweeping probe and no longer ask for passwords and security information/settings for all of the accounts at Coinbase.
Instead, they will focus their investigation only on the accounts that they have reason to suspect are under reporting their income.
It will be interesting to see how things proceed from here.
At least information on all of their customers won't be given out, but it will be interesting to see if the IRS is even able to obtain the requested info on those that are suspected of under reporting income...
Interesting times ahead.
Make sure you pay your taxes my friends!
Sources:
http://fortune.com/2017/07/06/coinbase-irs-summons/
Image Sources:
http://money.cnn.com/2015/03/26/pf/taxes/average-tax-refund-irs/index.html
https://news.bitcoin.com/irs-fail-audit-virtual-currencies/
https://news.bitcoin.com/807-people-declared-bitcoin-tax-purposes-according-irs/
Follow me: @jrcornel
Great news for all crypto investors who are afraid of wild regulations forced by the government to collect taxes. If the IRS has a valid fact to suspect an Individual thats ok, but to force all customers to show there transactions is not!!!
My thoughts exactly.
This is the truth.
..ha ha ha 2 key words "force" and "all" ...if you want a fascist racist ... i mean this is something maybe the nazi would say right?? lol
I would not say that crypto investors are in fear. I would say that we are ready to take this on and are watching Coinbase closely to see how this goes...
We are going to see the taxation departments in many countries make assaults on the cryptoconomy as it gains momentum in my opinion. No way they'll sit on their hands while we make money out of their reach. The thieving bastards will try their level best to tax the fuck out of us
A crypto-oriented future world where monetary activity is more transparent could solve many of these problems.
Consider this…
Is it not fair to say that the corporate whales who continually find sneaky ways to semi-legally avoid taxation through whatever contrived means basically spoil it for everybody else (and, ironically, themselves too…) ?
What do you guys suppose a fair global tax rate could be in the “cryptopia” we’re all looking forward to?
10%? Maybe even less?!
I'd wager that virtually everybody would be happy with that; especially if half of it doesn't have to be wasted on bombing other countries by then 😂
There is No Law Requiring You to Pay Income Tax
(posted by NathanH83)
IRS Director Admits Taxes Are Voluntary 2013 (Lied2Bad)
They are always after collecting that money... there is no sector that the IRS and our government won't try to sniff out to grab a piece of OUR pie.
If you are simply holding crypto it is considered property of yours and you do not have to claim anything but need to keep record of what you invested.
If and when you decide to convert it back to fiat currency that is when you will need to fill out some type of form to pay tax on it at the end of the year because it has become an "income".
Best advice, talk to an accountant about your crypto holdings lol.
Just like gold or silver bullion, you pay the taxes after cashing in..
So what happens when we use the crypto to actually buy something,
without transferring to a fiat based currency?
That's the beauty of crypto... it is untraceable 😉
Well it can be @crypto2day, but for semi-tech-savvy individuals like me, it isn't. I don't have the know-how or the time to make it so. Most would-be users don't either.
well, that's why certain crypto coins have made privacy/anonymity a core part of their focus. If you care about your freedom, then you might consider holding those coins and not holding bankster coins.
I spoke to an accountant friend of mine (this should not be considered tax advice, get your own accountant and pay them for theirs), and she told me that any time you either exchange for another good (like another crypto or something off Amazon) or for government fiat, you have to claim any capital gains at that time. It will get very complex very quickly if you have a lot of churn. Yes, the IRS really expects you to do this. On what level they decide to enforce this is anyone's guess.
Interesting, considering a Trader does this all day for a living..
Most trading platforms will calculate this stuff for you and send you a 1099 but if you're doing this trading outside of something like that you'll have to come up with another solution.
Scary stuff but good to hear congress has our back for now.
Fuck the IRS. America is not free anymore. We have becoming a police state with a debt ridden and tax enslaved populace.
I thought crypto currency was tax free ?
My understanding too. But sounds like IRS is trying to screw us. Glad that congress disagrees. Not sure how long it lasts though.
Congress doesn't actually agree that cryptos should be tax free, they're objecting solely on the broadness of the IRS's request. They still want to tax your cryptos though, trust me.
In the U.S., crypto is considered property. If you hodl, no concern. Once you start converting back into fiat or trading into other crypto, keep records and bring to your accountant.
You answered my question. I was wondering if you only declare the value when you change back into fiat and not other currencies. It would seem that they need a 1031 type rule where you can exchange properties without paying tax.
I found this: https://www.reddit.com/r/Bitcoin/comments/1uccfz/i_am_a_tax_attorney_here_are_my_answers_to_the/
That was a seriously good article @blubeast. Thank you
I heard someone say once that the IRS only knows what you tell them. I don't agree....and, well, that article really lays it out, doesn't it? Be prosperous.
Depends on where you are I guess.
Hello there - I am a CPA in state of CA - I've posted a few articles about US Tax implications of cryptocurrency - please take a look on my blog if of interest :)
Awesome. Following.
Hello CanuckPride,
Do you offer tax consultation/preperation services? What is the best way to contact you and your rates?
You declare income/loss when a trade happens, nothing is free in the land of FREE!!!
Land of the free, home of the brave... yeah right, feed me another line. I'm so glad I got out of the US years ago when I had the chance. It's interesting to note that citizenship renounciations are also on the rise.
You're absolutely right!
Congress has their backs, if it helps us out, so be it!
It is amusing to watch the crypto community and the government conversation on privacy and taxes.
As more and more people profit from their digital currency portfolios I imagine we'll see migrations to countries or states where the tax laws are more favorable - it seems to be happening already in places like Puerto Rico.
Going from a teenager to an adult, I now truly appreciate the hatred of all things taxes and the IRS that my parents had. How bad does it feel for a government agency to intrude on your life just so they can make sure that a portion of almost every single cent you make must go to the government? Not sure about anyone else but this really irks me...
It is an irksome task to deal with each year.
Nice write up and thanks for the good news. Good to see the IRS taking a step back, although I'm sure they will make an example of one poor individual to instill fear on the masses in the near future
Best exchange not based in the US?
Best to not use an exchange at all.