Topic: Do you even want all your BTC to be anonymous. - page 2. (Read 337 times)

As far as I am aware, this has never been tested in the US so none of know what would actually happen.

There are plenty of ways other than trading that people receive bitcoins in significant amounts without leaving a KYC-ed paper trail though. Mining. Gifts. Betting or casino winnings. Faucets from the early days. Etc. I simply keep my own good records of buys and sells made as I do with any other asset. Bitcoin also has the added advantage over any other asset in that you can point to a specific transaction on the blockchain, say "This is when I bought these coins", and sign a message from the receiving address as proof.

Yes, is the never-ending story in this forum. It has been discussed in other threads, but not exactly from the point of view that you raise it now. o_e_l_e_o is one of those who advocates privacy to the maximum, I guess he will soon come by.


It depends very much on each case. In that case, as I have argued in other threads, the problem will not only be that they will apply the 0 cost, the problem is that you risk an investigation for money laundering at least. Imagine that you show up in front of the IRS with $600K in cash and tell them that it is from an investment that has worked out well for you and you want to declare it. But you can't provide proof of when you made the investment. You could end up like Al Capone for money laundering and tax evasion.

In addition, a 0 cost would not be so much of a problem if the benefit is 90% or more. In the case you put the price has only been multiplied by 4, but let's suppose someone got 10 Bitcoins at $1k and holded them until they are worth $50K, then sell. The purchase cost was $10K and the sale price $500K. In that case it makes no difference if the IRS applies a 0 cost to you than if they apply the $10K it cost you, the difference in tax is negligible. To me it's more problematic if you show up with $500K that you can't justify. That's assuming you're an average middle class worker with an annual income of $50K who let's say you have a half paid off house (with equity and you are still paying a mortgage), $70 in retirement funds and $3K in savings but also with some personal loan and credit card debt.

Showing up with $0.5M to declare in front of the IRS, whether in cash or Bitcoin is very suspicious.

In that case there are two possibilities. If you did not move the bitcoins in the first place, you can clearly prove that they are yours. But let's say you bought them on a decentralized exchange, or P2P from someone you knew, and for the sake of privacy you passed them through a couple of mixers over the years and there is no way to track them. In the latter case you run into a problem.

Your arguments have nothing to do with bitcoin and the anonymity of transactions though. It is all about the regulations of a specific country regarding bitcoin and taxes. Although many countries have similar laws but it is not everywhere, there are many countries that aren't so invasive about people's affairs.

I guess a better title would be whether you want to abide by your country's laws even if you don't agree with them and what can you do about it. After all the laws are there to serve you not to eff you up the arse.

Tax is necessary for the government. That's why Biden whispers "Pay your share".  It's an obligation as part of society so if we trade our coins to fiat, it's definitely taxable.

There are just people who had seen what might happen in the future though and its because they look back at history when the government took the gold owned by the people like owning gold makes you an outlaw. That's why having BTC anonymously will still be a good idea until governments are done with all its regulations.

Probably no one cares about it. As long as you're enjoying the full features of the platform such converting cryptos to real fiat, especially when it comes trading and p2p.. perhaps being not anonymous isn't not a problem, and also paying tax will be worth it if it's possible to happen in the space. But how they will gonna implement it if other people using another way of withdrawal, i mean not bank.. Because here in our country we have another digital asset as well that based on the real fiat and we can really covert crypto easily and cash out through small stores..

Israeli woman turned $3K to $320K in Bitcoin but Bank now refuses to deposit

The above news is something similar to the one OP have thought. In this an Israeli lady who invested $3k on bitcoin have now turned to be $324k after eight years. She has used her pension money to invest on bitcoin hearing it through family members. The hapoalim bank refused for the deposit as it might be connected with terrorism and money laundering. Then she hired a lawyer and explained the incident. She doesn't have any accounts other than the hapoalim bank. The court have requested the bank not to restrict just because it is from digital assets and do the needful at the earliest.

So, depending on the country there'll be changes in the judgement given. If the bank allows the deposit, then she'll be taxed and lets her use the funds.

If I were to answer your question, it wouldn't be on the basis of tax. I am living in a developing country where tax laws are archaic and are not implemented as they are. Tax policies here couldn't keep up with the times. So tax authorities fail not only to monitor the citizens' actual income but also to collect their due taxes. Having said that, you could have as many Bitcoin as you want without paying a single centavo for tax and would continue to live the rest of your life without worrying that the tax bureau would one day knock on your door.

So while I would want much of my BTC to be anonymous, it would be because of safety reasons.

You make some pretty good points here and certainly ones I’ve considered over the years. Personally I think it’s ridiculous to want fully anonymous bitcoin, so my answer is no, I do not want all my bitcoin to be anonymous. Making bitcoin anonymous would spell its doom. Just look at Monero. It’s a great coin but it’s struggling to move up in value because of how hard it is to use and strict government regulations. I mean some countries won’t even allowed for women to drive or vote, certainly aren’t going to allow on/off exchange ramps to operate in their country. My 2.

Well I have a different theory.  If you are in this game 10% should be very well hidden just in case whatever country you are in falls apart.

The other 90% should be reported so as to avoid the government punishing you .

which ever one you are stuck in  has some set of rules best to follow them with most of your coin.

if you are willing to live a cash only lifestyle. where by its then difficult to buy a house as most real estate agents want traceable bank transfers for their escrows. you will find you are considerably limiting your options of a good lifestyle.

making large cash purchases for a house or car through agents that allow cash, ends up having questions asked about how you funded the purchase. and where the cash came from.

this then ends up with you getting flagged anyways, that you do actually have taxable value and you have some how evaded the IRS. which can lead to more trouble.

so again unless you are willing to live a full cash lifestyle avoid bank transfers and hide under a blanket of hidden value, which then limits things you can then spend that wealth on without causing a flag. sometimes its better to just make a profit and accept the taxes on the profit and just get on with your life. still wealthy, but just a little less wealthy, but not having the hassle stress and fear of looking over your shoulder and limiting what you can do.

example.
buying 10btc at $17k each and selling at $50k each, is $170k-> $500k..
minus say 33% of the $330k profit..  is $110k tax.. leaving you with $390k

$390k still better then $170k so you still made over 2x profit, and you still live a normal life happily able to spend it all legit and clearly without looking over your shoulder or having to limit purchase choices with that money.

or. play around in hidden cash transactions and hope that no one finds $500k under your mattress and seizes it under money laundering or tax evasion. or end up spending $500k on court costs trying to defend your belief in any right you think you had to evade tax.

meanwhile. if its about tax rather than anonymity. theres a difference between 'avoidance' and 'evasion'. and a good accountant can usually set up some trust or shell company to put the money into whereby you personally are not physically holding the funds so IRS is not going to grab tax from you. and the trust/company then pay out value in business contracts so that the company/trust becomes net zero 'profit' by the time their year end approaches... its how the big guys do it.

If you bought a house, how would you expect to pay taxes on it if you did not register the funds with the IRS? That money can't magically be deposited into your account without it triggering a red flag? Seems to me this is more regarding taxes than anonymity, and whether the government has a right to interfere with commerce so they can collect taxes. I don't advocate that people do not pay their taxes, although that's not to say they don't have too much power to do so. Down to the technically of Bitcoin, it isn't true anonymity - your identification is merely represented with a string of characters.

This is the reason why I haven't mixed my BTC. I don't spend it, but I have plans to make fairly large sales (and already did one), so naturally I must be prepared for answering to my bank or tax authorities about the origin of my coins (but so far it didn't happen, luckily). So my logic is, better to not mix the coins, to not make them look suspicious.

If I were spending BTC regularly, I would have prepared some mixed coins, because I don't want some services being able to learn about my other transaction and use or sell that data.

Maybe in the future every aspect of Bitcoin use would be regulated and you could use mixers and other privacy tools and be able to reveal your transactions to government if needed, but right now I don't want to risk it, not when the amounts that are large to me are at stake.

Because if you can't prove what you paid and they do audit you, you're screwed.
Not BTC related but there was a case like that with a classic car sale a few years ago. Was watching a show about it the other day
More or less; someone paid about $7500 for some old car, lost the receipt during the years long restoration process and when they sold it they wrote off the cost of the car, the parts and many other things. They got hit with an audit. And even with YEARS or receipts showing parts purchases for the car in the end since he could not prove what he paid and WHEN for it they only allowed some silly small amount in the 100s. So he owed more in taxes.

That's what brought on this thought.
If you are planning to buy today as an investment are you better off going through one of the big annoying KYC exchanges, since if you sell it in a few years you have proof of what you paid.
Saying a paid $49000 for 1BTC from BlackHatCoiner today is great and all, but if I handed you cash and you sent it to me how do I really prove it.

It's a sad comment but in most places in the world you are innocent until proven guilty.....Except for taxes and traffic court.

-Dave

This is not a topic about the anonymity of bitcoin, but about the concealment of income) Each country has its own rules and its own "human fears", some countries may simply take everything away from you and you will still receive a very real punishment for using cryptocurrency or hiding income. Based on their Bitcoin court hearings in Europe, 90% are prison sentences for money laundering and cybercrime.

So this is anonymity v taxes, and this is a U.S related theory.

In my country Bitcoin and Crypto is treated like any other investment for taxation,
we pay 33% on the profits, so regardless of whether I bought mine anonymously
or not I have to determine a cost and sell, I suspect you would have to do the same.
If you have a date you can determine the cost or buy price and if you are agreeing to
pay taxes then anonymity is a non discussion IMO, maybe I have it wrong though?

I don't understand your parallelism with anonymity. Based on your post, it doesn't matter if you've made it difficult to be traced; it's just you - being the owner of those coins instead of an exchange.

What do you mean you can't prove what you paid? Can't you use a notary to make it official? Also, why will the IRS take it as “$0 cost”?

So there are some serious no KYC people on this board. There are many who think all BTC should be anonymous.
We continually have several threads on it getting posts all the time.
Even a one I started about privacy vs. anonymity https://bitcointalksearch.org/topic/privacy-vs-anonymity-5366195

But..... does anyone worry that some of that might come back to bite them in the ass at some point in time when it comes to taxes / proof of ownership / other things.

Case in point. I bought 1BTC on Coinbase in 2016 at under $600 a BTC I sold it this year. I know I am going to take it up the ass in taxes. It is what it is.

Now lets say I bought 1BTC anonymously and I can find someone to give me the $50000 in cash today. I should report it and if whoever gives me the money should report it, and if we don't report it it does violate the law. But, whatever. Once again, that is up to how an individual wants to do something.

Here comes the kicker.
Lets say at the last big bullrun in 2017 I bought 10BTC @ $16000 when it hit $60000 this I wanted to sell and get a really nice house somewhere. If all BTC I accumulated back in 2017 was anonymous. I am going to really take it up the ass in taxes since I can't prove what I paid for it....since it was anonymous. So the IRS will take it as $0 cost.

So following that, so do you really want it all with no paper trail. Or even a difficult to follow trail, since if it is difficult to follow and you do have to prove it you might spend a lot in time and effort (read money) proving it.

Just a random Saturday thought.

-Dave