IRS Now Has a Tool to Unmask Bitcoin Tax Cheats

kingcolex

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Quote from: Jet Cash on August 22, 2017, 12:43:07 PM

So if I pay cash for Bitcoins, and do the transaction over the free WiFi in McDonalds, how are they going to check on that?
If I buy them from a stranger, then the trail dies with me.

or a lot easier just use an altcoin for transactions and bitcoin for storage.

marky89

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Quote from: HashFace on August 22, 2017, 04:17:23 PM

I'm not sure the IRS really needs to track all bitcoin transactions to find cheaters. Couldn't they just subpoena the records from exchanges to see who is selling for US dollars?

Not too broadly, they can't. With Coinbase, the IRS tried to go on a fishing expedition, and the courts sided with customers, allowing them to file John Doe motions against the IRS actions. In response, the IRS is reportedly drastically scaling back the probe of more than a million customer accounts.

Further, this happened on a licensed, US-based exchange. The IRS presumably has less leverage with offshore exchanges. Apparently, after last month, that's where the DOJ et al come in, to take down unlicensed exchanges and seize their money... Undecided

Quote from: HashFace on August 22, 2017, 04:17:23 PM

I would not be surprised if in the near future the IRS requires exchanges to report buy and sells, at least the ones in the US.

This is definitely going to be rolled out in the next year or two. Coinbase and Gemini will be issuing 1099-Bs to customers before you know it. The IRS doesn't want to miss out on this action any longer.

Soros Shorts

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Quote from: darkangel11 on August 22, 2017, 03:43:14 PM

Quote from: Stingray1970 on August 22, 2017, 12:46:39 PM

Quote from: Jet Cash on August 22, 2017, 12:43:07 PM

So if I pay cash for Bitcoins, and do the transaction over the free WiFi in McDonalds, how are they going to check on that?
If I buy them from a stranger, then the trail dies with me.

Each device as a unique imei number. It would only work if you use different devices and different IP's each time.
If you use the same device too many times and especially if that's used with the same IP, they are going to catch you sooner or later.

Your device doesn't leave imei trace in the blockchain, only in the McDonalds Wifi, so they'd have to issue a subpoena to get that from them. Doable, but what now?
You go to another restaurant and send a transaction. Now they have 2 transactions done from the same device. How do they link a device to a real person?
Let's say you continue doing that over and over from the same phone and all they have is different BTC addresses with the same IMEI and no ID and they've lost a lot of time and money on going through all those devices that used wifi in all those restaurants. That would be a disaster for them.

Furthermore, IMEI is not used in WiFi. IMEI is only applicable for wireless data that goes through wireless carriers. For WiFi it is the MAC address of your WiFi adapter that MacDonald's sees.

HashFace

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I'm not sure the IRS really needs to track all bitcoin transactions to find cheaters. Couldn't they just subpoena the records from exchanges to see who is selling for US dollars? They did the same thing with off shore accounts a while back, and got off shore banks to cooperate, for the most part. I would not be surprised if in the near future the IRS requires exchanges to report buy and sells, at least the ones in the US. I keep good track of my buys, and when I sell, I'll pay taxes ... but hopefully I'll be retired and lower tax bracket by then.

darkangel11

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Don't let others control your BTC -> self custody

Quote from: bamboylee on August 22, 2017, 10:41:39 AM

So can this software still track bitcoin if it goes in a mixer before the user cash out? Isn't mixer suppose to make the coins clean and erase all the tracks? If it does, then its a battle between IRS' software and Mixer's mixing capability.

You don't even need a mixer. All this tracking relies on a hope of making a database of wallets and addresses and then tracking these addresses to an exchange that holds the real name of that user. They'll end up tracking millions of addresses and some of them will surely end up linked to an exchange profile and ID. The problem is some of those people will also have clean tax records or not be US citizens at all, and even if they catch someone they'll have to go through a lot of trouble to prove it in court and make the guy pay a fine.

Stingray1970

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romani245

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Quote from: ?? on ??

The IRS is far too busy dealing with large money businesses lying and avoiding taxes than to try and run this on everyone in the US.

I tend to agree. In the future, if one BTC really is worth millions of dollars someday, then this will be more relevant. But for now, virtually all bitcoiners are still "small fish" in the scheme of tax evaders. The IRS has much bigger fish to fry.

Stingray1970

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darkangel11

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Don't let others control your BTC -> self custody

Quote from: Stingray1970 on August 22, 2017, 12:46:39 PM

Quote from: Jet Cash on August 22, 2017, 12:43:07 PM

So if I pay cash for Bitcoins, and do the transaction over the free WiFi in McDonalds, how are they going to check on that?
If I buy them from a stranger, then the trail dies with me.

Each device as a unique imei number. It would only work if you use different devices and different IP's each time.
If you use the same device too many times and especially if that's used with the same IP, they are going to catch you sooner or later.

Your device doesn't leave imei trace in the blockchain, only in the McDonalds Wifi, so they'd have to issue a subpoena to get that from them. Doable, but what now?
You go to another restaurant and send a transaction. Now they have 2 transactions done from the same device. How do they link a device to a real person?
Let's say you continue doing that over and over from the same phone and all they have is different BTC addresses with the same IMEI and no ID and they've lost a lot of time and money on going through all those devices that used wifi in all those restaurants. That would be a disaster for them.

Stingray1970

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Quote from: Mozdalifa17 on August 22, 2017, 01:05:01 PM

it is very good every time that new advance technology invented , my question what if some has sophisticated secure VPN ? how it works through ?

Well, if they can give a legal reason and a district attorney gives a search warrant, the VPN will have to cooporate. However they will have to already have some proof to begin with otherwise it won't stick in court.
In my country it's heavily privacy protected. So they better have a good reason to begin with.

Mozdalifa17

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it is very good every time that new advance technology invented , my question what if some has sophisticated secure VPN ? how it works through ?

Stingray1970

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Quote from: Jet Cash on August 22, 2017, 12:43:07 PM

So if I pay cash for Bitcoins, and do the transaction over the free WiFi in McDonalds, how are they going to check on that?
If I buy them from a stranger, then the trail dies with me.

Each device as a unique imei number. It would only work if you use different devices and different IP's each time.
If you use the same device too many times and especially if that's used with the same IP, they are going to catch you sooner or later.

Karartma1

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First of all the will need to know the BTC address of someone. Then yes they could do some intelligence on it.
Good luck to all the coinbasers

Jet Cash

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https://JetCash.com

So if I pay cash for Bitcoins, and do the transaction over the free WiFi in McDonalds, how are they going to check on that?
If I buy them from a stranger, then the trail dies with me.

Stingray1970

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They can follow the sale of bitcoins through :
A. an exchange when you sell bitcoin and transfer the money onto your bankaccount.
B. through thorough analysis which bitcoin wallet is usually used by which IP-address.

This last item you can avoid by using a vpn and other associated items.
For A I don't see a good solution.

BrewMaster

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There is trouble abrewing

either IRS was played and someone sold them some application or something that pretends to do what the article describes, in which case kudos to whomever pulled this off successfully Wink

or they have the regular blockchain analysis thing that existed for years and have been done by some companies so far and they are overselling it to scare people into paying their taxes more.

bamboylee

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So can this software still track bitcoin if it goes in a mixer before the user cash out? Isn't mixer suppose to make the coins clean and erase all the tracks? If it does, then its a battle between IRS' software and Mixer's mixing capability.

Dudeperfect

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Right now, we have to pay tax at a rate 18.0% on the transaction fee. It's for those who are using exchange (eg - Unocoin) to buy or sell Bitcoins. Although 18% might sound high rate of tax, it is charged on the amount of transaction fee, thus the actual tax amount is usually nominal ($8 per Bitcoin).

* See this: Buy and Sell bitcoin operations on Unocoin.

However, we don't need to pay any tax while trading through localbitcoins since there is one to one trade portal. It's interesting to see that how it's going to work in the long run when more and more people would come in the crypto world with their wealth.

JasonXG

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This is hilarious. You know why ? Good luck to them breaking the law to "protect it" I dont believe this load of crap one bit. Utter nonesense.

neurotypical

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Quote from: Dudeperfect on August 22, 2017, 08:47:06 AM

I just came across this article and I am not really sure that how it's going to work but as far as I know, we have two different mindsets among the Bitcoin users and some of them have no hesitation to pay taxes on their Bitcoin earnings and some of them are not willing to pay any tax.

* IRS Now Has a Tool to Unmask Bitcoin Tax Cheats.

Quote

The Internal Revenue Service has purchased specialist software to track those using bitcoin, according to a contract obtained by The Daily Beast. Chainalysis, a startup offering its “Reactor” tool to visualize, track, and analyze bitcoin transactions. Chainalysis’ users include law enforcement agencies, banks, and regulatory entities. The software can follow bitcoin as it moves from one wallet to another, and eventually to an exchange where the bitcoin user will likely cash out into dollars or another currency. This is the point law enforcement could issue a subpoena to the exchange and figure out who is really behind the bitcoin.

What is your opinion about this? Let's discuss what is community thinking about this kind of tool.

Well it is to be expected that they will come after you when you sell your coins in an exchange. If you want to sell your coins for fiat, then pay your taxes and sleep better at night. If/when I sell my BTC for fiat, I will just pay my taxes, there's no way around it, I would rather pay and not be stressed about getting caught.

Meanwhile, you can just hold your BTC for years until you are rich and not pay any taxes meanwhile, just like you don't tax holding gold, you don't pay tax holding BTC (until you sell for fiat).

If I sell my BTC, it must be high enough for me to buy a house or something meaningful, otherwise I will just hold it.

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