Topic: IRS sniffing around Coinbase (Read 2366 times)

I myself share your distrust, at least, to a degree

But let's remain impartial and unbiased. If they (the US government) had a hidden agenda behind this matter, we wouldn't see the IRS sniffing around Coinbase but rather the FBI intervening directly in Coinbase operations. These agencies (IRS, FBI, NSA and other alphabet services) are pretty much closed societies themselves, and they don't like sharing info with each other. Therefore, it may be interesting to indulge in conspiracy theories, but the reality is usually more prosaic overall

But is there really a lot in US Dollars they can collect from the use of Bitcoins? I do not think their ultimate aim is just to collect taxes. When the US government makes moves such as this one, there is always a hidden agenda behind it. Sorry for my distrust but we have seen governments around the world that seek to oppress and take advantage their people even in democratic countries.

With that much info on coinbase can't they just run a blockchain tool and depending on results
just audit you on that info cherry pick who to audit. In USA
with IRS you have to prove you are innocent after the fact. Sure if you are ok on
your taxes no problem. But the FUD on this could be daunting on price if it turns into a
hairball to the press of fun FUD.

Honestly I really doubt the IRS would go after anyone who they can't absolutely prove made a huge profit off Bitcoin.
The amount of money/ man hours they would have to invest just wouldn't be worth it to investigate even someone who they believed made a few hundred/ thousand dollars.
They are probably only looking at the accounts they see moving tens or hundreds of thousands of dollars in BTC.

True. In fact Coinbase never said they offer secrecy. The moment you open an account with an exchange and send them ID, you cannot expect that info to remain confidential.

Any info that is collected from anyone, is collected to be USED and SHARED, not to keep confidential. KYC is not to protect the customer. A customer does not benefit from KYC at all.

But naturally a kid who bought bitcoins from his allowance for 500$ a few years ago, never expected that money to grow 100 fold, and having to worry about Uncle Sam stealing it from him or her. 

Personally, I don't think that it all comes down to fear mongering for the purpose of discouraging the use of Bitcoin as well as other cryptocurrencies, though the elements of such a strategy are clearly exhibiting themselves. I'm more inclined to think that these or similar actions are not directed against Bitcoin itself but rather toward disincentivizing people from evading taxes with it. This is quite in line with what all tax collecting agencies do throughout the world...

Their ultimate aim is to collect taxes not to ban or discourage people from using something

The problem is a matter of practicality. It every transaction in your wallet needs to end up on IRS Schedule D then many people in the US would simply not use bitcoins. Furthermore, you can no longer file 1040 EZ even if you were making minimum wage but you happened to have bought/sold a small amount of bitcoins.

yeah but traders aren't trading on coinbase! they do it on other exchanges like bitfinex, bitstamp, btc-e and kraken. coinbase is as it was before a bad choice for trading and it is only good for new users to buy bitcoin the easy way.

and in case the taxes are tightened bitcoin traders move to exchanges that don't enforce the law like btc-e or they pay their taxes just like they pay taxes when trading Forex.

Just got my account deleted from 2 years ago from cex.io they stated they keep info for 5 years..so I'd bet coinbase is the same or worse.

(ohhhh....scored $4.44 usd of dodge I forgot about ...before I pulled the plug!)

Yeah this could be all for show and another fear mongering strategy used by the US government to discourage the use of Bitcoins and other cryptocurrencies. It will not be surprising if the ruling banks are trying to put pressure on the government to put a stop or even ban Bitcoin.

I'm thinking about sending a termination letter to coinbase, asking them to REMOVE and DELETE all my info from their system. Do you think it will be enough to escape the hammer of IRS? I have bought and sold lots of coins on coinbase, so I'm very worried.

It is a bad news for the traders especially the us traders, the government is trying all the best to caught all of the tax income evasion, so it's time to say goodbye to the tax free era, now all of your transactions and your wealth will be monitor by the irs and government

These guys have been sniffing around Coinbase for a much longer time... I think. The people using regulated exchanges to hide illegal money

are plain stupid. You have to adhere to AML/KYC regulations and all transactions are traceable to individuals, so how are you going to hide

these illegal money? If you try to do that, you should get caught... Do not avoid paying taxes, it's a criminal offense. 

A mousetrap never runs after a mouse

They won't necessarily go after you exactly just because you bought $100,000 worth of Bitcoins at Coinbase. They will just sift through the Coinbase records to see who can be caught most easily, pick up a few of those poor fellas, make them into scapegoats and show them on the TV. On the other hand, if you don't live in the US, it seems that you have nothing to worry about so far, I guess. But better be safe than sorry, of course

the difference is that you are surprised when you hear a Swiss bank gave their customer's private information to IRS but about Coinbase you are surprised to hear if they didn't give anything to IRS.

when Coinbase is in US then it is automatically assumed they already give up private information to government agencies.

It's Swiss banks drama all over again   

Many decades ago, people opened anonymous accounts, putting their trust in entities that they paid for. Swiss banksters salaries were paid by tax fugitives for decades. I am not saying tax evasion is good. However I think that a service provider that you pay, must work for you and protect you even if it means doom. Banks should have rejected tax fugitives, if they are not willing to fight for them until the bitter end.

Then, verification came along, anonymous accounts at Swiss banks were converted to verified accounts. All in the name of "fighting crime" LOL. A few years later, when the worlds biggest bullies came knocking their doors, the Swiss bankster traitors shoved their customers in front of a bus without thinking. 2008, the names of those people were given to the IRS (using "instant emergency law", means no legal base at all), many of their customers went to jail!

If I could go back in time I would buy alot of Bitcoin, but ONLY with cash.

A bitcoin bought from an exchange, verified and all, is not safe. You do not own it, it is merely "borrowed".

There is no time machine, and lots of people will be in trouble.  But they cannot complain because Coinbase, as opposed to UBS & Co., never promised secrecy.

Btw the article says Coinbase opened in 2015, so how can they provide data starting 2013?

Does not take much for stuff like this to go pear shaped. I was almost in trouble with sec in 2013 because
of buying a KNC titan scrypt miner for over 10k. Bank set up voice meeting speaker phone SEC. This was also
a week after IRS 2013 rules came out. I went back to CPA with new rules and fixed old miner on taxes and stuff to
show my legitness. SEC guy was fine. Banker guy who started all this because btc was evil in 2013
was embarssed and pissed. Brought up I was still unlawful by not filing taxes. Trying to screw me

Slapped my revised tax forms filed down on desk. Last I heard from SEC guy was why am I here?

If it all goes pear shaped and IRS starts to look stupid they will or IRS folk will over react to
Keep their jobs etc

Remember the IRS policy with coinbase as of now is if you use crypto and/or BTC.
You are likely a tax cheat.  Thus we want all files this being to the IRS so obvious.

This could be quite the witch hunt.

That's why I lon't like mcuh Coinbase, they're too much in the light. That thing will never to Huobi or maybe Kraken.

I don't think so that you are target of IRS. They are after big fishes. If it's true that they are investigating Coinbase they are either sent from someone or have very clear goal what they want to achieve. Money laundering is a serious crime in US but not if it's in cents. :-)

If the IRS wants to come after me for $20 in capital gains, let them.  Dumb IRS will spend more money investigating that they would gain in taxes. You want your $0.03 cents IRS? 

Your $800 coins will turn profitable soon. We have oscillated between $730 and $750 for too long.
Another move upwards seems to be on the cards now. 

They would be way better off going after general contractors and other independent workers who get paid in cash and never file. That being said, I've got no problem paying my long term capital gains if my $800 coins I bought ever turn a profit. :-)

You know what that ind of news looks like Oh look! Let's blame bitcoin as another great solution used by tax evaders general public will love it.
IRS are trying to look cool by targeting bitcoin because they can do very little vs. real way people are evading taxes, by using LEGAL means.
Tax optimization is a fact - no one care, it is legal. Another way creating shell companies and buying sending through them, again fully legal.

So, you plan to commit further crimes to cover up your first crime? That really only gets you so far, though I suppose it's an acceptable risk if you expect to get concurrent sentences. Carry on.

Who says I am going to spend all of it at one time? Besides there is the black market and there are ways to launder your money for a fee. Bitcoin just happen to make it all easier at some point of the process. Add a tumbler to your VPN + Tor usage then it would really be hard for the government to trace your trail.

I agree that they may flag your account because of a large-volume purchase. VPNs won't help, that's right, you'd need to get your account verified to transact with them. But what I really wanted to stress is that they will have a very hard time trying to figure out what you did with the coins.

I don't see a problem here either. The absolute same rules apply to bitcoin as an asset.

They think bitcoin is an asset, like shares, gold or property. So of course you have to report capital gains. If you bought shares with your debit card and then made a profit on selling it, you would have to report that too.

i assume you two have never used coinbase because the step one (the first line of Wind_FURY's comment) is how they can find out about you no matter what VPN you use.

when you sign up with Coinbase you give them all your information and then deposit from your bank (i think credit card also) they again know all your information. so no matter what you do with the coins next your account and bank account are flagged  because of purchasing a large amount of bitcoin.

How exactly are you planning to spend that kind of money? Are you just going to walk into, say, a Porsche dealership with a briefcase full of bills as though nobody's going to ask any questions?

That's right, I don't see how they can effectively enforce it either. Untangling a series of transactions you described would not be worth the effort (unless you are a high-profile target )and definitely cannot be automated.

Don't live in US > Don't care about IRS > Don't use Coinbase > Don't use large amounts to draw attention > or use face to face exchange with cash if you are so worried
where i live nobody cares about bitcoin which is a bad thing for adoption but the only good side is that there is no taxes ever on it.

of course you can always pay your freaking taxes and sleep easy at nights! just like when you do while trading Forex or stocks.

This will be another legal and a "paper trail" headache for the IRS. Imagine this scenario, I buy $100,000 worth of Bitcoins at Coinbase, transfer them to different addresses using an HD wallet. I gamble some in a sportsbetting website, buy altcoins with some at 3 different altcoin exchanges and then transfer them back to different addresses in my HD wallet. I cash out some using Local Bitcoins for a person to person transaction.

How will the IRS figure that out. Also let us pretend I use VPN + Tor since I am also a dark market user.

There might be some people who will get caught with something like this, however I would assume that it is far more likely that the IRS is going to target exchange users and not the average users who moved funds through the site at one time or another.

If there really was something that a lot of people should be worried about I would assume more people would be talking about it; something that isn't really happening yet. If they find something then it might start to generate some publicity.

It is great on the web there is zero reason to fill things out..  The company requires no information of mine to receive value.

Think about how fucked up this is. You buy something with cash or debit/credit card you don't report it, but you need to report every purchase using bitcoin? this is a serious attack against crypto, make no mistake.

Just speaking hypothetically of course. I never said I was doing any of this.

I'm neither a hooker nor a dope dealer nor a tax evader. Those things are illegal almost everywhere.

Only if you're foolish enough to keep all your coins in one wallet. As along as your coins are kept in as many separate wallets as possible, your risk is minimized.

Only wallets that can be traced to exchanges, personally identifiable purchases, payment services, online wallet apps, etc., are at risk of government snooping.

Be sure to separate your wallets into those with compromised anonymity and those that are fully anonymous.

Coinbase has millions of users. I would certainly think the irs will be going after some of the largest buyers/sellers to make an example, and that will happen pretty quickly. I think it will have a stifling effect on your average person who plays with it, which will definitely effect the price.
I'm not sure what Jimbo is talking about, but he should probably should keep his trap shut about his activities.

That is the current tax code. It's just that up till now they were having a difficult time enforcing that tax code due to the perceived pseudonymity of bitcoin. But now their strategy seems to be to go after businesses like coinbase that have lots of transaction data on users. Anyone who ever did business with a large bitcoin business is at risk here, which is the vast majority of users. They only need to know about a couple of transactions from your wallet and then they can use blockchain analysis to get the rest. This is why this case is very important. Unfortunately I don't think coinbase stands a chance of fighting this. This is bearish but I don't think most of the moonshot traders actually give a shit, especially since we won't see the true effect of this for many months/years when the IRS starts properly investigating this stuff, so price wise I'm not sure it will have much of an impact.


Problem is you take your anonymous Bitcoins and buy a pizza off of a merchant that uses coinbase for payment processing. The IRS pull that data from coinbase. Now the IRS know one of your Bitcoin addresses and your name and delivery address of said pizza. They can then see what other transactions happened on that Bitcoin address and other Bitcoin addresses that are spend-linked to it. If you bought enough pizzas they will have every transaction that ever happened in your wallet. So I hope you used an anonymous drop to get your pizzas.

Hooray for anonymous off-exchange trading.

It's like trying to tax a street hooker who takes her "fee" to buy dope from a street dealer. No names, no banks, no taxes.  

I don't think that's true at all, that most people realized that. If you bought bitcoin at, say, $250 then sold it for, say, $240 and took a loss, wtf would think they needed to report that?!

I find the defining by the irs of bitcoin as "property" rather than "currency" more interesting. I've never bought or sold a single thing with bitcoin because I never saw the advantage over fiat. This could get really ugly for bitcoin users if the irs wants to pursue this.

Most people knew that if you bought bitcoin and then later sold them that you must report that to the IRS.

However not a lot of people realize that if you buy bitcoins and spent them on something, you must report your profit/loss from the time you purchased them till the time you spent them, to the IRS. In fact, many people had the belief that if you did not interact with fiat you did not need to report your transactions to the IRS, but that is not the case.

Also transactions from people who are not coinbase users but transacted with a business that uses coinbase as a payment processor may now have those transactions handed over to the IRS.

One would have to be stupid to think that trading on a US exchange is safe from the IRS. I would hope people with some common sense planned ahead if they did so.

I wonder how many traders have reported profits and losses?
http://fortune.com/2016/11/20/irs-bitcoin-tax-evasion-case/
This is where being a shitty trader (like myself) actually could end up being a good thing. Have you made a fuck-ton of money with bitcoin over the last couple years trading? better look behind your shoulder. What's even more interesting is, the irs treats bitcoin as property not as currency. So, everthing you ever "bought" with btc is supposed to be reported.
Just in case a mod decides to delete this post as it's not related to speculation, you are outayourmind if you don't think this is bearish news for the bitcoin price.