Topic: [2019-07-26] The IRS is warning thousands of cryptocurrency holders to pay taxes - page 2. (Read 1220 times)

Don't get me wrong here, I absolutely agree that it's theft that we are being taxed twice or even more on the same money, but you can claim against your losses.

Any capital loss can be used to offset a capital gain within the same year, and therefore pay no taxes on the amount offset If your losses outweight your gains, i.e. you made a net capital loss, then you can claim up to $3,000 of that against taxes on other income that you pay, and you can roll over any additional losses over the $3,000 threshold to future years.

If you are going to pay these horrendous taxes, then at least claim back every cent you can.

This is the biggest irony out there. Our wealth is already taxed once (when we received it as salary). And we make risky investments using whatever amount is left after paying the income taxes. And if we incur losses, then no one is going to help us. We have to bear our losses without any support from anyone. On the other hand, in case we end up with a profit, then we need to pay tax on this amount as well. How many times we need to pay taxes on the same amount? And the biggest joke is that the vast majority of these taxes are going to bomb the sh!t our of some third world country such as Syria, or used to pay salaries and pensions to lazy government employees.

If necessary, I will be willing to pay taxes, but for this I will demand protection for me as a trader.

supposedly, the IRS has no legal mandate to tax people anyway. A constitutional amendment was required, and it was not ratified by the required number of states.

"Can there ever be justice on stolen land?" - KRSOne



if someone wanted to use the "lost or stolen" defense in falsehood, they need not wait any amount of time to move it. Send the outputs to a channel HTLC (privately or on the overall LN), then what happens to it after that becomes incredibly difficult to trace.

It's more than a little dishonest on their part that for the purposes of this question they have a definition of virtual currencies, defining it as a medium of exchange, but for the purposes of actually taxing bitcoin is classed as an asset and not a currency, so they can extract the maximum amount of money from you.

Even if they were to see transactions from an address I provably owned to other active addresses, in the absence of KYC or IP logs from exchanges or other third party services, it would be very difficult to prove that it was me who made the transaction. "My seed was stolen" is a defense I suspect we will see a lot of in the future.

I'm also curious as to what will happen in the scenario you describe, where someone claims they lost or never owned the private keys for some addresses. What about 5 or 10 years down the line, does the person think that enough time has passed and it would now be safe to empty those addresses? Will the IRS be monitoring these addresses forever more?

logically, that's not easy to sustain. if something is too variable in market value to be a universal store of value, it cannot be a either a unit of account or an exchange medium. Unwanted gifts get exchanged, that does not make them accounting units, nor exchange media.

however, Bitcoin is a strange case. It was designed as an explicit medium of exchange (but the network performs that role, not the units ) and implicitly as money. That would be the grounds of a perfectly sensible argument; just because some people use Bitcoin as money, doesn't mean that's what you're doing!

If there is evidence you bought or mined, there is still no evidence that you necessarily sold any, even if you conducted transactions with any outputs you provably owned. As there is no way to prove that you didn't send your cryptographic numeric abstractions  ( ) to an eater address for which no known spending key exists (or to a key-hash you did have the private key for, but later lost it). There's a real possibility that tax evasion cases will take place in courts exactly like that, where someone really did lose a wallet, while the public prosecutor tries to insinuate that the defendant exchanged it for something without paying capital gains.

how much difference will sensible, logical arguments make? I guess it depends how badly IRS & their cohorts need the money

They could certainly be classified as a "medium of exchange". It's a poor definition, but I suspect they've kept it deliberately vague so it can apply to whatever they want it to.

Yeah, agreed. If you answer "yes", but haven't also reported and paid taxes on some crypto activities, I suspect you may end up being audited. Remember of course the IRS class any crypto to crypto trade as a taxable event, so even if you bought bitcoin only to use it to buy and hold some altcoin, and have never sold for fiat, they would still fine you for not declaring that.

could those things really be defined as "a medium of exchange, a unit of account, and/or a store of value" though? that seems like a stretch for rewards rebates and in-game credits.


what do you think they plan to do with this info?

i figure it's some sort of pre-audit system. if you answer "yes" and file a form 8949 disclosing crypto and there are no discrepancies with 1099s they received.....you're probably in the clear.

the thing is, buy and holders would answer "yes" but file no form 8949, and they may get 1099s (which just show total volume) if they bought more than $20k worth. that could make it look like there is unreported taxable activity going on, even if there isn't.

So no one will dare to attract a felony charge against them, if any traded in any exchange and your KYC is verified then there is no way you can lie to them as they will be another issue, i am not facing these issues now but in the future we are also expecting this in the future but want to know the possibility of the punishment before revealing what i own .

I'm the same, but we are definitely in the minority. The majority of users have completed KYC on at least one exchange, if not several, and I fully expect every exchange to hand over details of their users to the relevant governments sooner or later, and we all know just how happy governments are to share data with each other. There are also plenty of other ways for the IRS to track you down and link your identity to various addresses and transactions.

An interesting definition. So by their any "digital representation of value", my air miles would count, as per my previous post. So too, technically, would things like World of Warcraft in game gold.

As above, lying on your tax return is still fraud/false statement, and I would be expecting the IRS to go hard on anyone caught out so as to "set an example" for other users.

it doesn't fall under the tax evasion section, but there's another one you missed: https://www.law.cornell.edu/uscode/text/26/7206


perjury prosecutions may be rare but false/fraudulent return prosecutions---less so.

Like I previously said, I haven't seen the proposed instructions, so I don't know what circumstances tax payers would need to answer 'yes' to the question; it is probably not going to be as simple as answering the question on its face. I am also unaware of any basis in law for the IRS asking about transactions that do not affect income or eligibility for credits/deductions.

What law are you referring to that carries these penalties? The only law I can think of that a taxpayer could possibly get charged with is perjury (US § 1621), but this law does not carry any fines. Perjury is very rarely prosecuted, even for 'slam dunk' cases, but it may be a very reasonable defense that any statement that does not change the amount of taxes due on a tax return is not 'material' and thus does not meet the criteria for perjury. Most people who get in criminal trouble with regard to their taxes usually are charged with attempting to evade or defect taxes (US § 7201), but I don't believe answering this question incorrectly, alone would make someone guilty of this crime.

They defined it in Notice 2014–21, their first guidance on cryptocurrency. It seems to cover both cryptocurrencies and stablecoins:

That's more of a Halloween story.
These exchanges are sure going to be seize by the government if they really will crack down all of the cryptocurrency owners. If you just hold few coins in there I guess its something you can afford to pay. When later they find out you have no activity to the accounts you have in the exchanges, they will probably start creeping into you. Is Mexico, Brazil or Venezuela a good idea also?

I have a number of ways to answer that, one being that I don't use any of the centralized exchanges. I don't have my personal data on any of the existing exchanges. I have used some of the ones that went bankrupt or run with the money, but back in the day there was not much push for KYC so the majority of exchanges in 2014 and 15 did not even ask for a scan of ID. They just wanted your name, address, email and phone number and you were free to trade.

You could also risk it and start getting a citizenship outside of the US. Chances are pretty high that in a couple years your cryptocurrency will be worth so much that you'll be able to abandon everything you have in the US with no regrets and go live somewhere where you won't have to worry about government agents marching in and stealing everything you've worked for, just because they can.

It's all a personal choice. I'm not a US citizen nor am I ever going to apply due to your taxation. I like a lot of things about the US but after reading some stories from people who got robbed by the government and even after being acquitted never got their things back I'd be scared to live there.

It's a good moment to start using DEX and trade in person for cash. I'm all cash right now. My bank account is only for emergencies and I don't have more than €1000 in there at any time.

Let's say you answer "no" to that question. A couple of years down the line, the IRS are successful in their push to get Coinbase, Kraken, Gemini, Binance, etc. to hand over all their customer details. They find out you lied, and did indeed own and use bitcoin in 2019, and you lied on your tax return. Do you think they are going to be sympathetic? No chance. They are going to try to string you up as an example to everyone else.

Is this a confession? Why would anyone in their right mind share something like that with some clerk. Are they going to look into my garden now, because I might be eating my own veggies and not buying them in the store by which I'm not adding to the GDP It's not their business if you have crypto or not and only someone who paid crypto taxes in the past would participate in their sad survey.


What about currencies used in games like eve online. You can trade them with random people for ingame stuff, but you can also trade it for game fees and subscriptions and sell them for money. Just wait, soon they will ask you for any valuables you might have.
Do you own art? Do you own gold? Maybe you have an expensive watch or a diamond ring. You got a necklace from your boyfriend? That's a taxable income! Don't have money to pay? Sell the necklace and pay us, or else! 

Yeah, it's a bullshit question. Even if you just bought and held, which isn't a taxable event and so wouldn't need to be declared, they still want to know even though its none of their business. If you answer "yes", expect them to hound you every year for the rest of your life. If you answer "no", you are effectively lying on your tax return, which is felony punishable with both thousands of dollars in fines and prison.

What's their definition of a "virtual currency"? As far as I know, they don't have one yet? What about my air miles? They have value, I receive them, can buy more for fiat, can send/sell/trade/exchange them with friends or family, can sell them in exchange for flights, upgrades, or add-ons. Do they count as "virtual currency"?

They aren't asking you to specifically report your holdings. However, if you bought any cryptocurrency in 2019, you're supposed to answer "yes" to that question -- even if you never sold anything.

Hopefully they scrap this from the final form, but I'd say the chances are low.

Buying coin with fiat and holding it in cold storage wouldn’t be a taxable event, so I don’t believe there is any basis in law for the IRS to require this to be reported, although I am not an expert in tax law.

If you were to sell your services and receive payment in coin, this would be taxable because you are receiving payment. You would owe taxes on the value of the coin you receive and this amount would be your cost basis. There are other similar situations in which you would also need to report income when you receive coin.

I don’t know what the final instructions will look like once the form is complete and no longer in draft format.