Over the past year I have moved and exchanged and transfered my funds all over the place through multiple wallets (cold and hardware), multiple exchanges, I have been gifted coin, I have made coin through Coinbase Earn, I have switched it from coin to cash and cash to coin, from my bank account back into other exchanges, I have traded for stablecoins, I have bought BNB that was used for trading expenses, then I have also done trades, and I mean thousands and thousands of small fast trades. I did my very best to track my funds by recording it all on paper but:
How much do I owe in taxes? It is almost impossible to say because two different currencies are colliding and Bitcoin is totally unstable, You can not tax something that keeps moving like that.
Topic: What is the current tax status of crypto-currency in the USA? - page 2. (Read 673 times)
The main thing is that the tax inspectorate does not have any evidence that you actually own a cryptocurrency or have income from a cryptocurrency market. Otherwise, no conversations will help and you will have to answer for unrecorded income.
Maybe they don't have that proof if you don't trade it in exchange. Just look at the Binance US exchange that is used exclusively for US citizens because Binance cannot combine global and US users, because the US has strict regulations on exchanges.
Well not only at binance but bittrex, KuCoin and other exchanges must have the same rules for US citizens. Where they have to do the KYC to report their taxes, not only that, many platforms do not accept US citizens because US regulations are quite strict with the crypto platform.
Is crypto-currency actually taxable in the USA?
It is confusing for me to figure the tax issue out. If a person buys Bitcoin and then sends it all around the place, uses it for trading on multiple exchanges, makes thousands of trades, then buys coins like BNB for trading more, then sends portions of coins to wallets and back and forth.
How can that be traced? Even with block chain ledger, it seems impossible to trace that much activity.
How many people are washing their coins to make them untraceable?
How can the IRS determine and verify who owns coins?
Are they going to tax people who lose money from crypto-currency?
Does anybody else think it is confusing?
It is confusing for me to figure the tax issue out. If a person buys Bitcoin and then sends it all around the place, uses it for trading on multiple exchanges, makes thousands of trades, then buys coins like BNB for trading more, then sends portions of coins to wallets and back and forth.
How can that be traced? Even with block chain ledger, it seems impossible to trace that much activity.
How many people are washing their coins to make them untraceable?
How can the IRS determine and verify who owns coins?
Are they going to tax people who lose money from crypto-currency?
Does anybody else think it is confusing?
I find it confusing they state that they are going to serve it to over 10,000 US cryptocurrency investors but how are they going to track each and every trade, they can only track those trades on a centralized exchange, but not possible if a user will trade his coins in a decentralized exchange, and of course we also have a peer to peer transactions, that leaves them a lot of loads.
It just seems like privately holding Bitcoin should be completely non-taxable.
Holding BTC is non-taxable. Selling it and realizing capital gains is a different story. It's the same as with any property; gold, stocks, real estate, whatever.
Since the IRS is starting to consider that Bitcoin is "property" it is not the same thing as real estate property, or even intellectual properties - because there is no paperwork legally establishing that ownership.
Yep, it's like a bearer instrument. That makes tax enforcement difficult but it doesn't change how the IRS sees it. If you buy anything for $1 and sell it for $2, they want a piece of the action.
The main thing is that the tax inspectorate does not have any evidence that you actually own a cryptocurrency or have income from a cryptocurrency market. Otherwise, no conversations will help and you will have to answer for unrecorded income.
Maybe they don't have that proof if you don't trade it in exchange. Just look at the Binance US exchange that is used exclusively for US citizens because Binance cannot combine global and US users, because the US has strict regulations on exchanges.
Well not only at binance but bittrex, KuCoin and other exchanges must have the same rules for US citizens. Where they have to do the KYC to report their taxes, not only that, many platforms do not accept US citizens because US regulations are quite strict with the crypto platform.
The main thing is that the tax inspectorate does not have any evidence that you actually own a cryptocurrency or have income from a cryptocurrency market. Otherwise, no conversations will help and you will have to answer for unrecorded income.
This is how I feel about it too, and by the way, I am not trying to evade taxes in any way. It just seems like privately holding Bitcoin should be completely non-taxable.
Since the IRS is starting to consider that Bitcoin is "property" it is not the same thing as real estate property, or even intellectual properties - because there is no paperwork legally establishing that ownership. Although Bitcoin is not "anonymous" it is still in the realm of being an anonymous asset class, and I hope that it should stay that way.
What if you buy some Bitcoin, send it into a mixer. Now that Bitcoin is not traceable. How can anybody tax you on that coin?
If the Tax Man asks about the Bitcoin just say it was lost. It's gone so you should not have to pay taxes on something that was lost.
Let's say somebody used their bank debit card to buy a pound of physical gold bar. Is the Tax Man going to knock on their door and say they need to pay taxes on that? A person can say it was just lost and is not in their possession anymore.
If the Tax Man asks about the Bitcoin just say it was lost. It's gone so you should not have to pay taxes on something that was lost.
Let's say somebody used their bank debit card to buy a pound of physical gold bar. Is the Tax Man going to knock on their door and say they need to pay taxes on that? A person can say it was just lost and is not in their possession anymore.
Is crypto-currency actually taxable in the USA?
It is confusing for me to figure the tax issue out. If a person buys Bitcoin and then sends it all around the place, uses it for trading on multiple exchanges, makes thousands of trades, then buys coins like BNB for trading more, then sends portions of coins to wallets and back and forth.
How can that be traced? Even with block chain ledger, it seems impossible to trace that much activity.
How many people are washing their coins to make them untraceable?
How can the IRS determine and verify who owns coins?
Are they going to tax people who lose money from crypto-currency?
Does anybody else think it is confusing?
They can tax based on the amount deposited on the bank or credit card of the people. The US government always has surveys on the work and income of the people to easily manage. If they see anomalies in transfers, they will investigate and record different taxes for each job.It is confusing for me to figure the tax issue out. If a person buys Bitcoin and then sends it all around the place, uses it for trading on multiple exchanges, makes thousands of trades, then buys coins like BNB for trading more, then sends portions of coins to wallets and back and forth.
How can that be traced? Even with block chain ledger, it seems impossible to trace that much activity.
How many people are washing their coins to make them untraceable?
How can the IRS determine and verify who owns coins?
Are they going to tax people who lose money from crypto-currency?
Does anybody else think it is confusing?
in Asian countries still do the same.
Well you should know that it is not completely untraceable once a particular bank account has been associate with it , when I think about myself , my bank account my KYC all actually merges into one .
Therefore due to your PAN card and other identity cards Being used in your wallets you can be easily traced and unfortunately they are considered virtual investments and ate highly taxable .
I think if you could use some method where you don't involve any of your documents , you could really get off of this thing.
But not really sure , because every government sector is also comprising IT one...come on people are preety intelligent there too that's why they have that job.
I believe that satoshi knows about this fully which is why he created a system in crypto codes that will ever make a transaction to be traceable no matter the technology that they use. We caused all these exposure of our self to the government, when bitcoin had already created a decentralized system, but we virtually created and turned it around and many people started coming up with a centralized system. Therefore due to your PAN card and other identity cards Being used in your wallets you can be easily traced and unfortunately they are considered virtual investments and ate highly taxable .
I think if you could use some method where you don't involve any of your documents , you could really get off of this thing.
But not really sure , because every government sector is also comprising IT one...come on people are preety intelligent there too that's why they have that job.
It is only when such transaction passes through the centralized system that it becomes traceable by the government, provided it is fully a decentralized system, I doubt if the government would ever trace such transaction, and this is why we should try ad solely use bitcoin alone, if we have a transaction that would involve keeping the eye of government off it.
Well you should know that it is not completely untraceable once a particular bank account has been associate with it , when I think about myself , my bank account my KYC all actually merges into one .
Therefore due to your PAN card and other identity cards Being used in your wallets you can be easily traced and unfortunately they are considered virtual investments and ate highly taxable .
I think if you could use some method where you don't involve any of your documents , you could really get off of this thing.
But not really sure , because every government sector is also comprising IT one...come on people are preety intelligent there too that's why they have that job.
Therefore due to your PAN card and other identity cards Being used in your wallets you can be easily traced and unfortunately they are considered virtual investments and ate highly taxable .
I think if you could use some method where you don't involve any of your documents , you could really get off of this thing.
But not really sure , because every government sector is also comprising IT one...come on people are preety intelligent there too that's why they have that job.
All the large exchanges (Binance, Coinbase, Kraken, and so on) respond to US government requests for user information. Coinbase happens to have the biggest target on their back because of their position as the largest US-based exchange. That's why they were targeted by the IRS in a federal lawsuit seeking customer information. They fought it but ended up being ordered to hand over information on 14,355 customers. I think that's what he's referring to.
Thanks for clarifying that. I ponder that the 14 thousand customers could be high rollers with big accounts or very big purchases in the six figures or more. (not my account!)
Coinbase offers you the chance to actually trade and then send money to your own bank account. They are horrible and they are definitely the worst in customer service however if you are American and want to buy bitcoin they are by far the leaders of that, you can send money from your bank to them and then buy bitcoins, do your trades and then end up sending back money to your bank account. There are local exchanges like that all around the world and Coinbase is the leader in USA, there is no other difference than that.
In regards to sending funds out of Coinbase and bank into bank accounts, how are other exchanges different? Are other exchanges less reliable in some ways?
Certainly we can bash Coinbase (I sometimes do) but they are probably backed up by the most money in case of emergencies. And also Coinbase has never been hacked before, am I right?
I think the difference is depending on what other exchanges you talk about. I mean if you use exchanges like poloniex or binance they are mainly alt to btc or vice versa with maybe usdt sprinkled in there but there is no cashing out to your own bank account as far as I know.
Coinbase offers you the chance to actually trade and then send money to your own bank account. They are horrible and they are definitely the worst in customer service however if you are American and want to buy bitcoin they are by far the leaders of that, you can send money from your bank to them and then buy bitcoins, do your trades and then end up sending back money to your bank account. There are local exchanges like that all around the world and Coinbase is the leader in USA, there is no other difference than that.
Coinbase offers you the chance to actually trade and then send money to your own bank account. They are horrible and they are definitely the worst in customer service however if you are American and want to buy bitcoin they are by far the leaders of that, you can send money from your bank to them and then buy bitcoins, do your trades and then end up sending back money to your bank account. There are local exchanges like that all around the world and Coinbase is the leader in USA, there is no other difference than that.
How is it different cashing out from other exchanges compared to Coinbase?
It's not. Not really, unless you're trading P2P. But trading P2P like on Localbitcoins = paying huge premiums and giving out KYC documents left and right.
All the large exchanges (Binance, Coinbase, Kraken, and so on) respond to US government requests for user information. Coinbase happens to have the biggest target on their back because of their position as the largest US-based exchange. That's why they were targeted by the IRS in a federal lawsuit seeking customer information. They fought it but ended up being ordered to hand over information on 14,355 customers. I think that's what he's referring to.
With coinbase which is a shady company dealing your information to others and giving it to government as well and basically allows you to be watched by everyone for every move you do is still better than most decentralized ones when it comes to actually cashing out your money to dollars. Its both easy and also fast for it and there is still no better way. Decentralized ones still require a ton of work on cashing out process plus volume still sucks compared to others.
How is it different cashing out from other exchanges compared to Coinbase?
You may think that decentralized ones are far superior and better to avoid taxes and give your information to wrong hands (lets be honest there has been multiple instances of your info stolen from government happened in just past decade).
However, people do not feel the same way and willing to risk their security for the comfort and ease of use. With coinbase which is a shady company dealing your information to others and giving it to government as well and basically allows you to be watched by everyone for every move you do is still better than most decentralized ones when it comes to actually cashing out your money to dollars. Its both easy and also fast for it and there is still no better way. Decentralized ones still require a ton of work on cashing out process plus volume still sucks compared to others.
However, people do not feel the same way and willing to risk their security for the comfort and ease of use. With coinbase which is a shady company dealing your information to others and giving it to government as well and basically allows you to be watched by everyone for every move you do is still better than most decentralized ones when it comes to actually cashing out your money to dollars. Its both easy and also fast for it and there is still no better way. Decentralized ones still require a ton of work on cashing out process plus volume still sucks compared to others.
I think we need to start having this enthusiasm for DEX exchanges, which is the only exchange that can completely guarantee us of privacy.
A properly set up decentralized exchange with no KYC procedures (like Bisq, for example) is far superior to a centralized exchange (such as Coinbase) in protecting your privacy, but it's not a complete guarantee depending on the methods of payment you use. Face-to-face trades or cash deposits can be devoid of any personal details, and therefore truly private. Other payment methods such as bank transfers, Western Union/MoneyGram/etc., still require you to register an account linked to your real identity, and that information has to be transferred to the other party you are trading with. You are trusting the exchange not to record your details, and you are also trusting the other person not to leak your details to the government.Whilst these scenarios may be unlikely, they are not impossible, and so your anonymity is not guaranteed.
The only way government can track the usage of cryptocurrency down is to use the IP address or track it by the website people visit from an IP location that has to do with cryptocurrency
That's not true. If you have performed KYC procedures on any reputable exchange, chances are that exchange is currently, or will in the future, hand(ing) over details of your deposits, trades, and withdrawals to your national government. This doesn't just mean that all your activity on that exchange is being logged, but also your deposit and withdrawal addresses are being linked to your real identity too, which allows some blockchain analytics to be performed and link other addresses and coins to you.because tracking the transaction itself is absolutely impossible, because everything that goes through the crypto technology is highly encrypted which makes it a decentralized system
This doesn't make sense. It doesn't matter that bitcoin is decentralized, or your wallet is encrypted. The ledger is public. As soon as they have linked an address to your identity, then can absolutely track what happens to your coins.I do not understand why people keep embracing centralized exchange when the purpose of cryptocurrency is to remain anonymous with our transaction, while it is done peer to peer without the interference of third party. I think we need to start having this enthusiasm for DEX exchanges, which is the only exchange that can completely guarantee us of privacy.
Haven’t you heard that the decentralized system of cryptocurrency does not permit it to be traced and this is why some government is still having issues with it till date and in particular United State. There is no way some of these funds that has passed through cryptocurrency, especially bitcoin can really be traced, and this is what makes it become not taxable.
The US is actually doing really well (bad for users though) in tracking crypto activity and taxing them. They're even employing the services of firms like Chainanalysis to make sure they get their due. The only way you can really escape them is by not touching KYC exchanges, which is starting to become more difficult by the day.
The only way government can tax cryptocurrency users is to impose tax on them which will be more on industries that have openly declared to be using blockchain in their operation, so they might just weigh the worth of the company and slam any charge they feel dim feet for such company on a monthly basis or on a yearly bases.
They don't decide what the tax bill is. Crypto is taxed in the US like property, so the tax rate is corresponds to pre-existing laws.
The IRS published a memo in 2014 indicating how crypto is taxed: https://www.irs.gov/pub/irs-drop/n-14-21.pdf
Once you give up your KYC on an exchange, you need to be careful about what goes in and out of that account. The key is wallet/transaction clustering. Once you move coins to a service with your KYC on file, the deposited coins can be analyzed to identify (with a certain degree of accuracy) your wallets and other third party services where you hold coins. Those third parties could be subpoenaed later to further reveal your transactions.
Here's a simple example. If you send 1 BTC to Coinbase from an output holding 10 BTC, there is now strong blockchain evidence that you own the other 9 BTC. The IRS doesn't know that off the bat but if they ever look into you and your Coinbase account, it'll be obvious.
Once you give up your KYC on an exchange, you need to be careful about what goes in and out of that account. The key is wallet/transaction clustering. Once you move coins to a service with your KYC on file, the deposited coins can be analyzed to identify (with a certain degree of accuracy) your wallets and other third party services where you hold coins. Those third parties could be subpoenaed later to further reveal your transactions.
Here's a simple example. If you send 1 BTC to Coinbase from an output holding 10 BTC, there is now strong blockchain evidence that you own the other 9 BTC. The IRS doesn't know that off the bat but if they ever look into you and your Coinbase account, it'll be obvious.
If you live in America, surely you will feel how their government sees everything with business. Yes, maybe we know that this country is a liberal country where people are free to do anything in legal terms. Maybe America will never look at bitcoin like what Japan did, they will continue to monitor the entry and exit of bitcoin through exchanges like Bittrex in America. All people originating in America will be supervised and required to pay taxes every time they receive and send bitcoins.
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