Topic: IRS says we are are criminals now (Read 2896 times)

It probably will not end up in courts, it will likely be more of a political battle.

The IRS will likely go after "big fish" that they think are cheating the system.

Definitely can expect this to be tied up in the courts for years.  (And realistically, the IRS is stretched fairly thin as is....trying to enforce this would be quite difficult.)

The IRS is going to have a very difficult time enforcing capital gains on BTC, especially with relatively small users.

IMO they will likely focus their attention on people who have made a lot of money with BTC and are buying things like cars and houses with BTC, but their "day job" income would not support these purchases.

This was a rudimentary set of laws created by senile old men and women who still use rotary phones without touch tone and have a cassette tape answering machine.

You can't borrow a set of laws from Gold because it's NOT gold nor property and was never created to be as such.  That was just sheer laziness, seriously.  So, I'll be lazy and not report then.  Government is supposed to set an example for the population and if they're lazy, they can't blame their population from being lazy too, it's the lazy lieberal way.

I don't live in the US but if I did, I wouldn't report it, get it done right, THEN, I'll report it.  That's why there's no laws in Canada, I told them if they didn't get it right I wouldn't pay anyways.  Or I'd report the currency from every video game that I play, anywhere from Drebin Points to C&C Funds.  Yeah, makes no sense to report video game money, so I don't report it especially if I don't cash out.

Essentially, governments can put any laws they want but if people refuse to follow them and police refuse to enforce them, they system worked.  I also read somewhere that Poland was taxing miners 28%...  THAT is ridiculous and I would be willing to bet no one reports their earnings too.

If you never filed taxes, they'd likely never know you exist.

However, the last ditch effort would be to open a company overseas and claim you rent your home to a foreign mining corporation, this way you only get taxed on rent and not Bitcoin income. 

-The government rulebook is purposely left open for exploitation.  They pray you don't find out.

Well from what i understand congress (hearings the summer of 2013) treasury SEC were/are somewhat 'miffed' with the land analogy that the IRS used for guidelines....but being an election year likely nothing will get done till after Nov or prob spring of 2015..up to that point ..it was just pay taxes on coin you use on capital gains more or less ..and being USA it is the tax payers responsibility to be honest on such..ie like stocks and bonds..your risk to buy....sell capital gains (or tax credit for capital loss) ..don't sell at all ...don't have to do any tax.

with congress and the above wanting btc to be treated like a modified currency..well the IRS guidelines thru that out the window imho
and imho came out of left field as far as the congress hearings were concerned...if we did not have such a 'dysfunctional congress" these days it likely would have been addressed already ..alas that an't gonna  happen soon in my view.

also seems to me some back room clout by ..dare i say....interests who wanted to 'stifle' bitcoin? I mean 20 days before USA persons taxes are due you are to report ALL btc you own and pay taxes on it before taxes due...i mean really....keep track and document every btc transaction you have ever done and do capital gains on it ..jeez

so again i suspect it will 'evolve' back to you buy equip it is your risk (no more deductions .) er maybe ..just thought them giant PH farms may have enough clout to keep that in..hmmmm...anyway and if you 'spend the coin" like 'selling a stock" you pay capital gains..which again is up to the individual to keep track of or suffer consequences with IRS etc

this whole land/keep track of each bitcoin capital gain you ever made etc etc will all go away imho

but again only giant PH farms by 2015 anyway imho...and again I have a hard time believing the IRS is gonna let such farms 'mine' btc (ie $$$) out of 'air' and not tax them 25% of gross income.....that would be the line I think the IRS will not cross..thus mining will go overseas to say Belize? Denmark? where they would want the $$$ to flow in country and be a bitcoin hub again imho

hmmm.....looking at above PH farms etc...maybe they will keep equip deductions too....not sure how that will work out ..

anyway home mining for btc at least if you look at difficulty vs what you can get for btc vs just buying btc is prob dead

moving on to alt coins (have to make my nut for the IRS don't ya know heh) me always being the tail end of the dog
that will also go 'odd' as soon as I touch an alt miner (its a gift)

anyway what do I know I sure did not see the current IRS guidelines (the weird parts stated above) pop'ing up 20 days before Tax day...

who knows?

Searing

(just my 'hopeful' guesses?)

Although it's obvious quite a few people will be ignoring this and continuing on paying for things in btc and not giving it a second thought, this does pose a problem for quite a few people who plan to do it the legal way. What needs to happen is a wallet that fully integrates the IRS guidelines and automates whatever requirement they have so that you can simple include that part of your taxes with the full report. I expect there will be a sizable market for a wallet like that and whoever can implement it effectively will get the first shot at the market of people who plan to follow the IRS's regulations.

I agree somewhat but the idea they if you bought a bitcoin for 2c in 2009 or some such and used that bitcoin to buy a TV now ..you have to pay 598.98 capital
gains tax is kinda dumb

other stuff...

but yeah likely the IRS will never LET you mine $$$ out of air w/o getting their 25% off gross profits...esp if it all goes to giant corp mega farms in the next year

again i suspect it will go back to 20% capital gains tax if you sell the coin...maybe some more breaks for miners in usa

but likely mining will go to those places like (denmark?) that want to be a bitcoin hub not tax anything just to get the revenue in their country (belize?)

anyway so it goes

Searing

I considered the IRS ruling a huge positive for Bitcoin as it basically legitimized it and provided a precedent for other countries to follow.

Later this year when a truckload of wall street money comes pouring it, remember that it wouldn't have happened if the IRS did not clarify their position on Bitcoin.

Admitedly...if the bank had not messed up etc...i likely would have just sat on coin and waited till 2015 when likely congress will improve on or replace
the current tax guidelines of 2013....and then I would have announced if I wanted to be legal on a better setup 'eureka i had a good year in 2015' and
jumped on the parade then

it is not all bad I'm allowed 50% deduction on equip first year. usually it is 20% for 5 years (btc miners at this point are considered computer equip by my CPA
.other stuff last year as a new biz etc....so on 16k i made thought i'd have to pay 4K
only paid like 550 usd and that was to show a profit (need to show a profit for at least 3 of 5yrs I think?)..this year likely I also won't pay taxes...will start to taper it off
into the last few years here...so the way it works is even at 20% deduction the remaining years and 25% on gross mining if i keep things sensible I'll be very
close to NO taxes...maybe a bit of a loss..but then again considering the alternative i tripped into could be worse

Ideal situation is congress gets involved after fall elections say spring 2015 and gets rid of the IRS land/etc issues and maybe goes back to 20% if you spend the
coin and you equip purchases are NOT deductable ie your risk ...the way I was informally told in summer of 2013 it would shake out...asked CPA about bitcoin...
did you sell any? i said nope ..she said no problem

if that was to come to pass my CPA says it is LIKELY I'd be able to deduct the remaining equip from 2013 to 2015 and yet benifit from hopefully the more
sensible regulations imho say in 2015...if that happens I'll look like a bloody genius...if not well I'll probably muck on thru and jump thru some hoops and pay little
or no taxes anyway

big advantage is btc goes to 10k a coin i buy a house boat and IRS comes by ..how did you get the income...i can laugh ...i'm so squeaky legal clean now I smell
of pinecones and peppermint heh....ie "can't touch this'

the alternative of an alternate choice and ignoring the bank issues warning signs still gives me the 'heebie geebies"

I know others who are also legal ..pawn shop owner ..guys who sell gold/silver as a biz...they are all looked at closely...so they play by the rules

but yeah...if you can stay anon sit on coin till 2015 when hopefully rules are made better by congress on taxes.it is likely then you can 'come out' and go legal
and say "by golly to the IRS I had a great year in person to person trading!" heh

so could be a lot worse don't ya know but them wire xfers to knc and others for miners over 10k are gonna get some of us in trouble imho

Searing

That sucks man. Thanks for sharing the information though. Hopefully people heed the warning.

Oh God.  I don't know why buy that made me laugh so hard.  Save yourselves!

too late for me ...I'm like an otter that got tagged with a radio collar...the rest of you run........ run i say!

Searing

It is time to go deep into yourself, to your heart, and find that forgotten, big, fat, sacred NO.

'

If you are in USA and did wire xfers (and your bank messes up on them) and they are over 10k and you sign the following disclaimer....."i am not
using wire xfers internationally to hide taxes" .....your bank then calls you up says you are 'suspicious' and they are gonna freeze your account
 and they are gonna report you to IRS/SEC
etc for money laundering (they messed up 6x on a money order looked like 60k to the computer somewhere up the line at the bank..that red flag'd such) and
you need to come to the bank with your business tax forms for bitcoin mining and/other proof you are not a 'drug lord' i guess

yep happened to me...but i got to thinking that with 10 attempted wire xfers (me having to sign the form each time) and only 4 of them going thru
(of which 3 were refunded adding to the problem) ...that maybe just maybe in that 2013 was my first year mining I should file a tax return 2013
be a home business and eventually depreciate my equip purchases and pay the nice IRS people 25% on what I mine because I just KNEW this was
not gonna end well..getting the stink eye at the bank..weird looks ....too much paper on me..boy was i right!

and yep I was correct being paranoid paid off big time....took my tax forms to the bank .pointed out on my statement (which they never bothered to
look at) that 6 wire xfers were their fault and canceled the same day...much yelling at people by higher ups on wasted time etc

so yeah w/o the tax home biz stuff on virtual mining I'd be in a world of hurt with the IRS right now...(I think it is mandatory 1yr prison and up to 5 yrs
if deliberate tax evasion ..er gee IRS I don't know where them 40 coin came from ...yep I'd be toast now ..in a loving relations ship with 'bubba' in prision!)

So..with equip depreciation playing the deduction game I likely will get around the 25% tax on anything i mine or close to such and likely the rules will
be changed to something more sensible in 2015 (i hear both parties in gov't are not happy with the IRS calling it land/property etc)

So my point is IF YOU DID A  WIRE XFER OR USED A BTC EXCHANGE the IRS CAN find you...make sure you know how 'vulnerable' you are on such
miner purchases...also coinbase/btc exhcange/ etc are all 'bank legal' now in the USA ....in order for them to work they now have all the info on you
a bank does...so random audit/mistakes/whatever....unless you buy with BTC outside of exchanges ...miners with cash etc you could find yourself
in my boat

(alas...they got me boys.....don't look back legally 'supposed' to get taxed on 25% of stuff I mine (do get equip depreciation of 100% 5yrs thou) ....so
far have not legally have to paid last year any tax and thru 'legit deductions' same is likely this year..but it is a lot of dodging about and ducking around with the
CPA don't ya know

so yeah...keep the above in mind imho and if it does 'smell fishy' and gets weird at your bank....yep pays to be paranoid ...sometimes they really are out to get you!

needless to say i have a new bank

hope this helps save someone else alas I be lost now... 'legal' shudder

Searing

Okay that is a bit far. I mentioned this before, but the fact is that they are desperately looking for ways to control BTC as it takes out the middle man,the bank in this case. And who runs the bank? The Government, and what is the IRS? The Government

They are the criminals and all involved with the IRS should be arrested and tried for treason.

It will not be attempted to be enforced around the globe.

The IRS will only attempt to enforce rules in the US and for US citizens.

IRS will try and stop anything related to Bitcoin. They shouldn't dictate whether or not BTC mining is an income or not, it's crap.

Seconded. They have no way to verify how much bit coin I hold. I don't plan to cash any out but if I did I would use local bit coins to do it.

Pardon my French, but IRS can go down on their knees and well, you get it right?

Don't see how it can be enforced effectively around the globe.

if you like it then it will make a loss of miners

You only need to report transactions over $600, this was part of obamacare. I do believe that this $600 requirement was later repealed.

As long as your report any gains to the IRS at tax time then you are safe from prosecution.

As I wrote previously, $600 or more in a "taxable year" to the same recipient. That can include any number of payments throughout the taxable year.

If you make many small payments to many different recipients, you may fall under reporting requirements as a money transmitter, etc..

In any case, whether you must report or not the payments, you still owe the taxes due.

And there won't be any changes to this. As this is not a new interpretation. This is merely the way the current tax law applies. I even predicted this exact ruling. Go search my archives here.

I am sure it will be in court before the end of 2015, but likely even before the end of 2014.  People by nature hate paying taxes, and governments by nature hate people who don't pay taxes.

Well even though I have an accounting  degree and  worked for the IRS for a while.  My knowledge  of oil tax law is very small. But the idea that an Oil well is a depleting asset is allowed for oil.

  
Here is a fact  bitcoins are depleting as I type boom!! a block just depleted the 21 mill coin well by 25 more coins..  I know a big coin farm in the USA will want treatment just like oil companies get for a depleting asset.  This will happen needs to happen and this will boost BTC mining in the USA.

 But what the F just an opinion  by a 50 plus year old guy In NJ. .

 

PS
I would like to see how long before this takes to go into a courtroom.

Funny I agree with part of what you say.  600 usd payment needs to be reported.  no matter whom you paid it to.

  But a single 600 or greater not  30 x  21 = 630  total.


http://www.irs.gov/pub/irs-drop/n-14-21.pdf   see question 12 below

Q-12: Is a payment made using virtual currency subject to information reporting?
A-12: A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. For example, a person who in the course of a trade or business makes a payment of fixed and determinable income using virtual currency with a value of $600 or more to a U.S. non-exempt recipient in a taxable year is required to report the payment to the IRS and to the payee. Examples of payments of fixed and determinable income include rent, salaries, wages, premiums, annuities, and compensation.

Some may say mining is not a business it is a hobby but I made money at it last year so I will call it a business .

Correct me if I am wrong...many sectors of oil exploration have income that is 100% tax deductible?    I had a few clients that their sole income was from oil exploration, but we had trouble getting financing for them because typically banks or investors only calculate income off of "taxable income"  When their income was not taxed at all, it posed underwriting problems...

The ruling is pretty logical.  I have a tax background. Not sure what they would change it to.  But they may make it like oil well drilling.  This is better for miners.  More tax exemptions.

My return will be fun as I have  a  profit for 2013.  And bfl sent me  500 bucks from 2013 a few days ago.  yeah they are doing some refunds.

But I have btc in every manor.

Buy and hold

Mining.

cloud contracts.  I scored well on DzCoops group buys 5,6,9,10,11,12.

Selling gear on ebay.  

So it will be a fun return.

Actually this is a good thing for BTC   making it as legit as possible  is the best that can happen.

Incorrect. It applies to anyone, and the $600 is the aggregate for the annual reporting period.

Before you give tax advice, make sure you don't want to be sued for giving incorrect advice.

---

Disclaimer: I am not giving tax advice, please consult your own professional adviser.

I believe the IRS came out and said that everyone just needs to make their best effort.   I hate taxes just as much as the next person, but they basically said as long as you are making an honest effort to document your gains and are paying the taxes that you think you owe on them, you will be fine (until there are clearer guidelines).

If you made 20k on BTC and are claiming a short or long term loss, that is a completely different issue.

AGreed ...no one likes it but everybody needs to pay tax's anything else and you are a criminal 

Paying taxes on assets or gains has nothing to do with being a criminal, it is simply the way the US collects money to pay the interest on our national debt as well as fund projects, army etc. It actually further legitimatizes the use of bitcoin within the US. And it being taxed as a property can actually be beneficial as you may be able to pay lower tax rates that if it were considered to be an income, and thus have to pay income tax.

on a side note...by the IRS saying all this is property..my cpa said i was a farmer..heh..in other words..if they are gonna tax me on mining bitcoin at 25% as gross income.....and the only way i can "mine" to get this gross income to pay the IRS is via equipment it is all wrote off ....got 50% off equip as a 'new home run business' etc etc...my CPA had a lot of fun so out of the 16k i made and 4k i should have paid in taxes i paid 550....with the Titan order next year included in this 2013 tax setup...i would have paid 2550 w/o it and paid 550 with it...so anyway was like getting the knc titan for 8k vs 10k....

anyway next fall i can sell bitcoin for regular 20% capital gains tax (over 1yr and 1 day) and any equipment i get this year same deal...prob 25% off reported taxes and depreciation at 20% for 5 years as computer equipment

so its a hobby i figured i'd be legal and eat the 4k out of 16k ..boy was i surprised....so I'll play this game till the rules are tweaked which is imho after this year in 2015 it will be no penalty for mining (ie you assume risk with equip purchase for more coin then you could buy risk) and just coin will be coin 20% on capital gains if you hold it and this silly keep track of every bitcoin will go away

but anyway can spread out the equip depreciation and other perks till then ...so...for the hassle of p/o the IRS for 16k and being legal it is working out so far

only catch is i took off bfl losses if they pay me back then i will show 'found income" of 8k on taxes (ie 2k goes to IRS) UNLESS i buy more equipment then the 2k i'd normally pay to IRS can roll back in to that (see above)

anyway my CPA seemed to have  a good time..I now know how farming works...buy a bunch of equip and pray the next years crop works out

also ..if my coins go down this  year from the 1200 buck high etc etc i minted them at and paid taxes on..then i can take a 'capital loss' whatever that means

never knew republicans had this much fun

anyway imho it will get fixed legislatively this fall 2014 and go back to being a currency...and if BFL comes thru (again staying legal) it will be like getting 25% off equip (what i would have paid on the 8K found income) and/or the Titan taken off last year already saved me 2k i shoulda paid ...so instead of 10k it is 8k

anyway if stuff ROI's only I should be pretty good ..if I make more then depending on the tax guidelines this fall ..I'll do the whole thing over again

but again this is me its a hobby for 16k I'll play whatever legit game my cpa says i should do and pay taxes....until such time these stupid IRS rules are fixed..but the IRS can't call it 'property' with all the tax law that entails in me holding it for 1yr and a day to escape 46% captial gains taxes if less then 1yr and 1 day....equipment home office and the other fun 'toys' my cpa drag'd out is a consequence of the IRS guidelines (so far anyway)

anywho with the elections this fall we may have this same screwed up stuff this year as well (likely) the rule in the USA is keep the IRS happy..that and the fact around nov/dec i can treat my 'mined' coins as more then legit should i go hog wild and only pay the 20% gain (or cry if at a loss) and am as clean as  a baby's butt as far as IRS is concerned

(as to what i would do with anon account ...no bitstamp/gox/many wire xfers over 10k with bank where you signed you are not doing this to avoid taxes ) and other stuff ....er maybe i'd have taken a different tact

but with that much paper work at the exchanges/my bank wire xfers (incl the ones the bank flubbed) etc etc...

anyway my back does not have the itchy feeling of an IRS sniper scope now don't ya know

(now if the equipment i got does not do more then just ROI i'm screwed but i'd be in that boat anyway)

anyway what i've done to cope so far at this modest 'hobby' mode of income....only applies to my piece of mind

Searing

Thanks dude for clearing it all up nice and neat

Legally, control implies ownership and sharing a private key is no more complicated than sharing ownership of something.

That is not true.  The 1099 requirement is only for a business and only for payments in excess of $600 for goods or services to an independent contract.   The same requirement applies if a business makes a payment to an independent contractor in dollars, euros, gold coins, or beanie babies as well.

So simple cheat sheet.

1) Are you a business?
If yes, then continue to #2.  If no, then your done, no 1099 is required.
2) Did you make a payment using virtual currency in excess of $600 in value
If yes, then continue to #2.  If no, then your done, no 1099 is required.
3) Was the payment to an independent contractor?
If yes, then filing a 1099 is required.  If no, then no 1099 is required.

IRS job is to collect taxes on income, regardless if it is right or wrong, they just collect taxes on any profit you make.
Your government is the one that set the tax law, the people who you vote for and give them all these big salaries and free health insurance for life are the one who decide the tax percentage.

Now believe it or not, people are making tons of money from BitCoin, probably I am the only one who doesn't.
So "regardless it is right or not" you have to report your BitCoin profit to IRS.

However, remember this, if not for the IRS asking people to report profit from BitCoin, then BitCoin wouldn't worth a shit, as the government can simply ban BitCoin and then your BitCoins become just numbers on your screen.
Example: online poker, how many of you remember how the FBI shut down pokerstars.com and fulltilt.com and many other online poker websites? I still remember the day when opened the poker website and saw the "FBI warning sign"!!!!

So, again, whether it is right or wrong, the law requires you to report it.
I honestly don't understand many of you, you want the whole world to realize BitCoin as currency, yet you know very well that the government tax your current currency "the dollar", what makes BitCoin different?

Technically no one really "owns" any bitcoin. They only own the private key to claim and use a certain amount of bitcoin. The private key can be shared by a lot of different people or even made public (No sane person would actually do this)

No isentions below certain level of income?
No need to report low transactions?

Think they failed to understand BTC and this will be changed or have little or no real effect for most users

This is only a current decision made by people who are not even familiar with Bitcoin... Changes are coming,hopefully good ones too

Yes, that should be a problem in the future at the current laws gov says that we are criminals? So In the mean while when btc gets used more and more gov will attach additional laws to bitcoin and that could be really a problem.

It's nowhere near as bad as what you're suggesting, if you're concerned just see a CPA.

If your activities are small, TurboTax right out of the box pretty much does everything you need, with the minor exception that it's possible that your state might be a little more complicated.

I'm sure there will be challenges and new rulings in the near future.

http://www.irs.gov/pub/irs-drop/n-14-21.pdf

According to the link above, if we pay for pretty much anything with Bitcoin, we are obligated to report the trade of "property" to the IRS and issue a 1099 MISC to the receiver of the Bitcoin.

Further, all miners are required to report mined Bitcoin as income.

Does anybody see this being efficiently enforced?

Is this going to be yet another law that the administration is going to "selectively enforce" depending on whether or you not you donated to the correct campaign?

Tyranny is nearby.