Topic: What is the current tax status of crypto-currency in the USA? (Read 690 times)

I'm not sure if they will actually threaten exchanges to be shut down because they do operate globally, but I'm sure they can come up with something like taking away their licenses or having some of their bank accounts be closed.

If you bully exchanges long enough, they'll lose so much in revenue and profit that they don't have much of a choice to cooperate. I would just recommend people to pay their taxes because you'll be busted eventually anyway.

You are not private. It's stupid to think that you can get away with not declaring the gains you make on an exchange, especially when you're using Coinbase. It sucks to do so initially, but it saves you a lot of money in the long run.

I think that the United states are accepting it more as digital assets and which people are using to trade, and since it is taxable, they are more concerned about the tax itself which is what will be their own benefit and I think that is good anyway, at least, that will serve  as bribe for them to allow us too to be able to use our cryptocurrency peacefully lol.

I think that they felt they cannot have control of it before, but now that they know it can be regulated and they can still get what they have been getting from fiat through its usage, they want to regulate it and which I think is the reason why they have tried to invite binance to establish a separate platform for their own citizens where they can have full control over the income of their people through binance exchange.

You can track it quite simply really. What you have to do as a government is not to track each individual person, you just track the exchanges and tell them if they don't give government the information they require they will be shut down.

So, places like coinbase notifies the government all the moves you do, it could be deposit/withdraw/trade doesn't matter, they will let the government know and send them a file with every single person who has done any moves that day every day. This is why governments can tax Americans who do crypto trades so easily, they are not tracking YOU specifically, they just blackmail the companies so they can get more information, that way if they ban the crypto trades people would do it illegally but this way they make it legal but taxable.

I think they are only taxing the cryptocurrency exchange, because for me there's no way to know if you are a crypto user or not, you will just get caught when you broadcast it to the world haha, but yeah I think the crypto exchange is included and those who are running a business.

Some countries, which occupy a very high position in world politics, create a certain structure, thanks to which they will fight against economic crimes.  When this whole process starts, the cryptocurrency will definitely be under special control to avoid fraud and abuse of cryptocurrency in the field of economic crime.  If this problem is resolved, then I think that there are no problems for the legalization of cryptocurrency in the United States of America legally and then taxes will be levied accordingly, if not for every cryptocurrency user, then from trading exchanges and that's for sure.

I have repeatedly heard such news that in some States, the Senate officially makes decisions to legitimize cryptocurrencies as digital securities and recognize cryptocurrencies as real assets.  It seems to me that if senators at the local level make such decisions, then soon such decisions will be made in Congress.

Of course, they would surely be outnumbered, and how can they even tax what is yet to be regulated, except maybe they just want to have a fixed tax for companies running blockchain technology system. The physical tax collectors in my country even lacks the capacity to control the ones they can physically manage, talk less of managing a digital tax. In my country, not every company pays tax, they only go after the companies that they know about.

Maybe as a result of hype or so. Most of the companies that even operate solely online in my country including my own company has never been once bothered for tax, so it think cryptocurrency would really make the job very hard for them now if people start using it and that is why they may introduce fix tax.

Did Satoshi ever mention anything about the taxing of Bitcoin?

That actually remains to be seen. It wouldn't surprise me if agencies have a way to take off the private jacket and expose the underlying transaction. We just assume they are private because they haven't really been stress tested enough.

They will not openly admit that they can already crack these transactions. It's better to make it appear that privacy coins are actually private-- the illegal use will automatically be driven in that corner and therefore easier to bust.

I add more value to a good old mixing process than using something that people think/believe is offering privacy, but might not do so in reality at all. Most of these privacy coins are overly hyped too. No thank you.

Just pay your taxes and be done with it. Transactions that are confirmed are public information for ever.

no, it's a federal agency. they have a criminal enforcement division, agents with guns that come arrest you......the whole nine yards. ain't you ever heard of al capone? https://en.wikipedia.org/wiki/Al_Capone#Tax_evasion


technically, we need a new tax code to accomplish that. that would need to be passed through congress. good luck with that......the whole electoral/legislative system is corrupt.

The IRS is like a real estate agent.  They find where deals are going down and then jump out in front of it and say they want a piece of the pie too.

The IRS is a private company.  All those bozos can do is send letters.  The IRS can never show up to your house.  They can just send letters.

I'd like to see Bitcoiners take a new and bolder stance on this tax topic.  I think the IRS is going to be completely outnumbered when it comes to taxing Bitcoin. There very well could be a revolution brewing with a global currency and the light bulbs will eventually all turn on for the masses.  I think The People will decide that Bitcoin is non-taxable, not the IRS.

It turns out to be US citizens quite troublesome they have to report their finances, including financial transactions in crypto. but there are still many exchanges outside that don't use KYC right? that means tax for US users is only partial, and I'm not sure the tax on crypto will be effective be implemented

That's typically how the IRS approaches things. If you screw up, it's on you.


Sure there are unknown variables. And there's lots of stuff you can probably get away with tax free like P2P trading, offshore exchanges, and spending on goods/services. But be smart about it. Don't just sell a bunch of coins on Coinbase and not pay the taxes. That's exactly who they're looking at right now with this letter campaign.

Look, I agree with you. The IRS have no idea what they are doing, the people they employ don't know how to properly tax crypto trades, and the guidance they have issued falls far short of being comprehensive or even useful. But that's not how the IRS see it. If you are on their radar, they may well be coming after you. They've started sending out threatening letters just last week to a list of people they presumably acquired from Coinbase.

Irrelevant, I'm afraid. The president also thinks global warming isn't real and the British were using planes during the Revolutionary War.

Because currency and property are two different things as far as taxes are concerned. They obviously will class it as property so they can extract the maximum amount of tax revenues from it.

It is far easier to evade tax with cold, hard cash than it is with bitcoin.

This the IRS unveiling their new treatment of Bitcoin law:


I say that we decide in this Bitcoin community whether or not to pay taxes on this stuff. I am starting to think NO.

Also, with 2,642,923 registered members at this forum, we outnumber the IRS employees of 80,000...

Why do you think that bitcoin is not anonymous, but till now, it is still difficult to trace the transaction of bitcoin, if it was not anonymous as you think, it would have been quite so easy to trace all these hackers that has been stealing money from people. I understand that you can view some few details but not to be traced which is the main anonymity of the system we really want.

I know that we have privacy coins, and these ones claims that they have fully covered all these part where you can make transactions that will not been seen at all.  With bitcoin, it will still be very easy to evade tax and I think it is the more reason why bitcoin is the major threat to government and banks, you see that they care less about other crypto but focuses more on bitcoin because of its true decentralization.

How much tax do people pay after purchasing BNB that they use in trading?

How much tax do people pay from a transaction fee from sending crypto out of Coinbase?

How much tax do people pay when they convert the small remainders of coins at Binance into BNB?

How much tax do people pay for lost coin?

How much tax do people pay from washed coin?

How much tax do people pay from gifted coins?

How much tax do people pay from Coinbase Earn income?

When people buy coin at Coinbase they do not charge taxes it is just a transaction fee so how much are people expected to pay?

Why do none of the exchanges mention anything about taxes at the moments when all the transactions are being executed?

Is it the users fault for not understanding all the tax laws?

There are still too many unknown variables to take the IRS seriously about this. I think it is premature to start paying taxes on crypto. I think we are all looking at at least 3 years before ordinary people and ordinary traders are going to be expected to pay taxes for this stuff. Most people in the world still have no clue what is happening in the crypto world and that includes most governments are still completely puzzled about how this can adapt as a working asset class.

There are still people that are moguls of money in our society who think Bitcoin is invalid and they still think it was created out of thin air. You can't expect USA citizens to pay taxes on it since the president of the USA claims Bitcoin is essentially fake and bogus and not a valid form of money. The biggest investor Warren Buffett publicly bashes Bitcoin (although I suspect Buffett is already fully loaded up on Bitcoin and if not he plans to be). Bill Gates has slammed it too.

Once those 3 guys get on board then you can start thinking about taxing people but until then the wealthiest and most powerful people say it is just a ponzi scheme. Why follow the tax laws when the government does not yet consider it truly and genuinely taxable? The IRS is claiming that Bitcoin is "property" but they still think it is fake money. The IRS has prematurely launched these new tax rules and they know it.

You won't be expected to pay money on losses, but you will be expected to document and declare them. Doing so is actually beneficial for you; you can use your capital losses to offset your capital gains, meaning you pay less tax overall. If your capital losses are greater than your capital gains within a tax year, you can even use this to offset taxes you pay on gains from other sources (such as stocks), or even on your income tax. There is a cap on this at $3,000 per year, but you can roll any excess over to the next financial year as many times as you like.

For example, lets say in one year you made $2,000 from bitcoin, but at the same time, you lost $3,000 from altcoins. You would have a net loss of $1,000. You would owe no tax on your cryptocurrency activities, and you would be able to offset $1,000 in tax from elsewhere. If you had also gained $5,000 from stocks in that year, you would only have to pay tax on $4,000.

Do they expect people to pay taxes on trades they lost money on?  Or is it just the wins?

Moving fiat to/from bank accounts and coins through mutiple wallets/exchanges isn't taxable. Receiving gifts isn't taxable, but the realized capital gains (when you sell) are. I'm not sure about the Coinbase Earn income.....probably negligible amounts right? It's probably self-employment income, which is reportable, but if you make less than $400 in SE income in the year it's not subject to the additional self-employment (FICA) taxes.

BTC/fiat and BTC/stablecoin trades are easy: they get reported on Form 8949 exactly as they are shown in your trade history. Trading altcoins against BTC requires an addition step: calculating the fiat value at the time gains/losses are realized. The IRS just wants consistency. You could probably use the daily Coinbase BTCUSD close on the day of any given trade. Tradingview calculates some altcoin markets to USD value, so maybe you could use those.

The BNB being used for trading fees is a bitch to figure out. You're on your own there.

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.

In general, I completely agree with you, because due to the massive requirements of KYC taxes can not be avoided. The fact is that in any country, every citizen personally submits a declaration of his income to the tax authorities.  But this does not mean that every declaration is checked.  If you selectively check and find errors, then the person will have problems.  If someone has suspicions that there are left-wing incomes, then the tax office will immediately get down to business.  I think this system works that way.

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.

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.


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.

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.

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.

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.
in Asian countries still do the same.

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.

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.

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!)



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.

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.

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.

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.

This is one part of centralized exchange that is very dangerous and may be used against us in the future, imagine that an exchange is planning to start afresh in a country like USA, and USA being stubborn to approve, they could just use the data they have accumulated so far from U.S citizens to lure government into approving them by showing them how the system can be transparent to them.

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.

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.


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.

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.

Remember when you are doing any activity in the centralized exchange site and as a US civilian and you must do verification with your identity. IRS used the data that collected from the exchange site that followed all of the IRS guidance or become compliance with US regulation.
This article explains more about the status of taxation in the US https://bitcoinist.com/bitcoin-tax-irs-new-crypto-tax-guidelines/

I think they are not taxing the trades of bitcoin but more like sells of bitcoin like its a product which is horrible and caused many people a lot of pain. I have seen a guy who had as much as 400k at one point in bitcoin and taxed accordingly in dollar value and then the 2018 bear happened so he paid tons of taxes on money he didn't have and he wasn't even sure how he would be capable of paying it, he was literally considering bankruptcy just to get rid of it.

So, the system is still horrible unfortunately and whoever has done this taxing system for bitcoin has no idea of what bitcoin is, for example it should have been the profit you make from selling not just having since you can have a million dollars worth but it could worth 300k in a month whereas if you actually buy and then sell for higher that is real profit you should be taxed for.

The important factor is intent.  If you are investigated by the IRS and it is clear you made honest mistakes and tried your best to pay taxes you won't be punished.  If you go and try to hide your source of income and partake in money laundering then they will hit you hard.

Bitcoin is not private. At All.

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.

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.

Look at it from a different perspective. If you manage to hide most of your transactions and you are a successful traders, would you be able to explain to the tax authorities, where your income are coming from, if they do a life style audit on you?

People think they can hide things from the IRS, but at one stage your income from trading has to be spend and then your start leaving a paper trail and that normally leads to your downfall.

Why risk going to jail for tax evasion, if you can simply pay the damn taxes and enjoy the proceeds of your labor?

No country in the world has taxes on capital loss.That would be insane.Paying taxes,when you are losing money.WTF?
I'm pretty sure that cryptocurrencies in the USA are a subject to capital gains tax and income taxes.
The US tax legislation is so damn complex.

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, but even at this, there is little to which they can still do, 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, except those coins that are centralized coins which can still be tracked, and I see that this may be the reason why the government of united state may back Facebook cryptocurrency up if they are to final agree to regulate and adopt cryptocurrency in the future. The highest they can do for those who would insist to continue with decentralized coin, is just to impose fixed taxes on them.

The idea is to let people report it themselves instead of actually tracking it. Coinbase or any other USA based place will notify the government and IRS for your transactions but if you remove your money from there and do whatever you want and return back the most knowledge IRS will have is you put in some money to coinbase, then something happened they don't know and you have either less or more money back into your coinbase for cashing out, which means they will ask you what happened in between for this change to happen.

Aside from that they are not tracking it, they are getting reports from both people themselves who do not want to seen as tax evaders and from coinbase like places to notify them of your movement, which means they do not go out and try to find you, they are asking you to go find them instead, makes things easier. You may want to not pay taxes at all and find loopholes but then if you get reported by some person then you will face harsher punishments.

I can’t even imagine how to track a person who has a cryptocurrency. If, of course, the person himself came and said all his data or trades large sums, then this may attract attention in transactions from his wallet. But people who trade not large amounts of cryptocurrency are not worth tracking.

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 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.

As mentioned above, every trade is a taxable event, even if that trade is between two cryptocurrencies and never touches fiat.

It's very difficult, especially if you are making multiple trades on multiple exchanges, but the expectation from the IRS is that you track it all and report it all

A combination of people completing KYC or otherwise linking addresses to their real life identity, blockchain analytics, and exchanges reporting to the IRS.

You can use your losses in crypto to offset taxes you pay elsewhere.

Coinbase handing over the details of everyone with assets above $20,000 is only temporary. This cut off was what the IRS won in court, and it included 13,000 users, but they were pushing for the details of half a million users, and will continue to push. Assume if you have completed KYC on any major exchange (US based or not), the government will sooner or later know all your trades on that exchange.

Cumbersome is an understatement! The Bitcoin ecosystem was designed so that it can not be traced for tax purposes, and at the very least not with any clarity. The movement and exchanging of funds, pairs, and proof of ownership is entirely too cryptic. On the same token I really want to report taxes and honor all tax codes.

For my purposes my account is way below $20,000 in value. Does that $20,000 limit only include purchases of fresh coins? Or is that for purchases and then any sales or converting back and forth to fiat? The tax operations of cyrpto-currency is just so vague and confusing. To have the IRS come in and ask for taxes from crypto seems wrong.

Supposedly with the new tax laws in effect for 2018, in the US you have to report any sale of a cryptocurrency or any trade from one crypto to another.

This is very cumbersome if you do a lot of trading but not so bad if you just do a few transactions every year.

As far as what the IRS can track, I doubt that they can track much of anything at this point unless you are using US exchanges such as Coinbase.

Coinbase apparently reports to the IRS any customers that have yearly transactions totaling $20,000 or more.

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?