Topic: How does the IRS look at anonymous bitcoin? (Read 739 times)

Indeed, it's gambling. Especially in places like I live, where there isn't a tax framework to begin with. The tax collector can assume you're okay, just as he can assume you're laundering money.

Depends on what you consider small. Buying an iPhone, a smart TV, and a PS5 isn't going to raise eyes. If you're buying a hundred bitcoins, then a yacht, and then two houses, then yeah, sus. 

You'll have bitcoin. 

I think you are fantasizing. The amount of cash can be reduced or a very small country like the Vatican can be controlled. But it can't be done in most countries or unions like USA, Russia, Europe. As soon as governments start imposing restrictions, shadow markets will appear.

It's going to be the same in any developed mainstream country. How do you think authorities will react when you show up with 1 million worth of BTC?
I've seen some people claim if you just claim 0 cost purchase and pay your taxes they will leave you alone but with I think they are lying and just hoping that's how it works.
In practice you are gambling that they start an investigation and once it starts the consequences are unpredictable. You may get a slap in the wrist or you may end up in big trouble. The question is, is it worth doing this gamble?

And as far as exchanging it for cash, this is useless. 1) You cannot do anything with cash other than buy small purchases, 2) They will eventually ban cash, so you will have nothing

As far as I can tell, you are trapped in BTC. Since it's too much too cash out, and it's too little to start some sort of tax haven structure (and there's still risk anyway)

If the price of stablecoins collapses, then you will legally not need to declare it
I think that an adequate person first thinks about his own safety and his family, and then looks for a solution to his tax issues. Every country has different situations and it is impossible to give universal advice.

But strictly speaking, in each of these exchanges a taxable event is potentially created.


Yes, well, I always repeat the same thing here. It's not the same if you file with the tax authorities with $1k in stablecoins of dubious origin than if you file with $1M. The $1k may have been paid to you for selling anything over the internet. $1M can potentially create more problems for you.

As long as there are still countries where the authorities don't care from where millions in stablecoins suddenly appeared, yes, this will work. Provided that the stablecoins don't collapse

If the user has at least a little brains, then he will not change his bitcoins for cash. First, he will change them for Monero, or similar coins, then he will change these coins for stablecoins. The exchange amounts of stablecoins for cash will be those that are not subject to mandatory taxation or, in the worst case, a small fine. But linking the user to the first original bitcoins would be very difficult.

Many of the the "ancient whales" renounced US citizenship years ago and moved elsewhere. The thing is, back then it was less common to keep track of stuff, so I guess they would bother less about it and understand that Bitcoin "wasn't a thing", but right now they have Chainalysis and all that stuff, so depositing any mixed coins in an exchange is already a risk as you could end up with frozen funds.

I would look into what is the best move before doing anything tho. If the coins aren't tied to any KYC actions then you have all the time in the world since no government will know unless you say so. Once you claim you have bitcoins there is no way to undo that, they already know, so you must have a plan.

If you were in the EU it would be easier to move elsewhere, but IRS is another story.

Fiscal authorities are often quite relaxed about Bitcoin since every transaction is well documented. At some point, the "anonymous" user will want to use the coins, and create a situation where the fiscal authorities can know that they exist. At this point, it would be up to the taxpayer to prove that there were no taxable transactions before that point...

The IRS (Internal Revenue Service) views anonymous bitcoin transactions as taxable events. In fact, the IRS has issued guidance stating that virtual currency, including bitcoin, is treated as property for tax purposes. This means that any gains or losses from the sale or exchange of bitcoin are subject to capital gains taxes. Additionally, individuals and businesses that receive bitcoin as payment for goods or services must report it as income on their tax returns.

However, it should be noted that while the IRS can track bitcoin transactions that are conducted on public ledgers, it may be more difficult for them to trace transactions that are made on private or anonymous networks. This is one of the reasons why it is important for individuals to accurately report any bitcoin transactions on their tax returns, even if they were conducted anonymously. It is also important to note that in some countries, anonymous transactions are illegal and can be subject to penalties.

Yeah I mean if crypto makes me a millionaire I'd be sure to talk to tax lawyers if I wanted to stay in the US. There is no point right now as I'm probably at a huge loss. However, from the sounds of it, it sounds like the gov is literally out to try to get you even if you do that. Like face the risk of hiring a lawyer and getting charged and possibly convicted of something anyways so is it really even worth it? Moving to another country would suck but at least you'd be free from unfair tax laws from a literally evil government that tries to punish you for doing the "right" thing and being law abiding. Since having private bitcoin isn't illegal, nor is not saving receipts of purchase.   

And I was under the impression a lot of bitcoin out there is still in the unknown. As in there are holders of it who have not revealed they own it. Is that really all a thing of the past? I heard that some years back that a lot of bitcoin addresses are held by unknown entities and have been holding from 2013? or something like that. Ancient whales or something. So like some of it is probably people who could have mined it on a laptop or something, or maybe bought and literally forgot about it until recently ish or something idk. I was under the assumption it's still a thing. Idk if most of them revealed themselves when it went up to 60 70k? Idk. Like I feel like there are tons of people who didn't cash out because it didn't make them rich, just like bought a small amount or just a few bitcoins when it was cheap or something long ago, and are just waiting till it reaches a mil. Idk. What metric can we use to measure that?

These millionaires have lawyers and tax advisors on their payroll, who provide them with solutions to what you are talking about. Instead of asking in a forum, they ask their lawyers about the doubts you mention.

Besides, you are taking a lot of things for granted, which need not be the case:


Not in all cases are millionaires going to be unable to prove that. And in any case, most of them legalized their situation long ago, not now. Look at the Winklevoss twins for example.

I've also been wondering, how do they look at these millionaires who cash out from before KYC was a thing? Back when you didn't need KYC, surely there are some anonymous whales right now who will eventually cash out. The gov going to arrest them because they cant prove how they bought them? Clearly, you'd see the bitcoin, just sitting for a long time somewhere. I guess maybe they forgive that since there were no KYC requirements for the longest time. I mean hell, there are still anonymous ways to buy it, or ways to anonymize it. They going to go after everyone after a certain date or what?

It's probably somewhat easy to hide the paper trail. I just hate the fact that wanting privacy is treated like a criminal offense even though it's not at all illegal. If bitcoin goes to the tens of millions I'll prob be forced to play it safe and revoke my citizenship and move to a more crypto friendly nation, of which, idk atm. Maybe declare my millions, pay whatever tax on it, then reapply for US citizenship if I want to come back. Such a fucking hassle to merely cash out. Well, I guess the US gov will miss out on the taxes I'd pay on cashing out. Dumb fucks, their loss.

If memory serves me correctly, they have their own blockchain analyzer and tracer.  However, something like Wasabi Wallet might make the IRS's job a bit harder and keep them a little more honest perhaps.

That is fine in theory but in practice the states through the IRS and equivalents have a virtually unlimited collection voracity.

If you mean that someone who has not declared their earnings, when they go to spend that money will pay VAT and other similar taxes, I might agree with you, what happens is that the IRS wants to tax people for the income tax the capital gains tax and then apart from that they want them to pay VAT when they spend their after tax money.

I don't think they need to care. If there are undeclared earnings, they can be taxed at least when someone tries to somehow use the bitcoins...

Well, in any case it will be the income in crypto that you cannot clearly justify.

Besides, as I have commented several times in these cases, the amount matters, and a lot. It is not the same that the Ministry of Finance or the IRS or equivalent in your country, thinks you have €8.7M of dubious origin that the amount is only €870. In the first case he faces up to 12 years in jail if found guilty. In the second case the penalty if found guilty will not be more than a small fine (I understand that this is the case in many countries, although I do not dare to say that it is the same in all of them).

I've seen people on other forums say that NFTs would be a good way to launder money, but in light of news like this, it doesn't look like they are.

Edit: I'd like to know what o_e_l_e_o  or LoyceV think about this, as we have discussed similar topics in other threads.

I have searched for more information but cannot find more details. Without them, I speculate that the sales of NFTs that he has declared are not registered like the sale of a house or a car in which in a contract the names of the buyer and seller are put and both are perfectly identified.

And this is what I had seen in other forums say: that to launder money a good way would be to create an NFT and say that you have sold it when in fact the funds have been transferred to yourself from an unidentifiable source, either with Monero, or with Bitcoin that has gone through a mixer or similar systems.

https://beincrypto.com/latvian-nft-artist-8-7-million-earnings-seized-allegations-money-laundering/
Latvian NFT Artist €8.7 Million Earnings Seized Over Allegations of Money Laundering
"The Latvian government has frozen NFT artist Ilya Borisov’s earnings of around €8.7 million over allegations of money laundering. He faces up to 12 years in jail if found guilty."

I understand that this case is with NFT tokens, but any of your income in cryptocurrency may be considered illegal by the tax authorities.

As I told you in a previous message, the answer will depend a lot on where you live and how inquisitorial the IRS or the Treasury Department of your country is.

The only thing to remember is that Al Capone got locked up for tax evasion. It wasn't Bitcoin, but all they could prove was that he had a lot more money than he could justify.


If we are talking about high amounts, there will be. Remember that the greater the amount, the greater the problem. Having $2K in cash of undeclared origin is not a problem, but having $2M in either cash or Bitcoin of dubious origin can land you in jail. I would take action long before the amount gets higher, rather than having plausible deniability as the only plan.

Yeah they hate privacy for sure... but there is no law against making your coins private. Say swapping to xmr and back. So I dont get what they can do from a criminal law standpoint, they need evidence you did something wrong right? If they have nothing because it's just bitcoin that showed up some time ago from an xmr swap, it's just a new fresh bitcoin, and if it sat for years and suddenly goes to an exchange. Like they can suspect maybe you did something wrong but what can they do about it unless they crack xmr itself?

The only thing i can think of is maybe them wondering if you paid taxes on the swap when you swapped from xmr to bitcoin but guess what, you only have to report anything if you made a profit. no cap gains taxes on losses. So just convert during a bear market.

Are there any known cases of anyone getting in legal issues from crypto because they kept their coins private?