Last year the IRS issued a summons to Coinbase.
Coinbase has over 8.4 million users and over 27 million wallets, but only 802 people total reported gains or losses to the IRS relating to Bitcoin for the 2015 tax year?
If that isn't a recipe for the IRS stepping in, I don't know what is.
Sure enough, last year the IRS demanded to see ALL of Coinbase's customer account activity from 2013 to 2015. During this time Bitcoin went from $12 to roughly $1200. A time that many investors and traders experienced huge gains.
Right on cue, the IRS wants a piece of that action.
The IRS is basically asking for information on millions upon millions of account owners...
Account owners responded.
As you can imagine the owners of these accounts did not take this news sitting down. The so called "John Doe" accounts have hired the law firm Berns Weiss to ask the judge for permission to the challenge the IRS summons of Coinbase.
Which of course the IRS pushed back saying that the anonymous customers have no standing to mount such a challenge.
The anonymous customers aren't the only ones thinking that they do have such a standing...
Congress stepped in.
Sen. Orrin Hatch (a republican from Utah), as well as others, blasted the IRS for their summons of Coinbase saying:
"It is overly broad, extremely burdensome, and highly intrusive to a large portion of individuals."
And, they have a point!
Asking for all customer information is a direct violation of customer privacy that the exchange seems to be hoping to keep.
However, judging from the news out late yesterday, the IRS doesn't completely disagree with Congress's points...
Now, the IRS is shifting focus.
The IRS just announced that they will scale back their broad sweeping probe and no longer ask for passwords and security information/settings for all of the accounts at Coinbase.
Instead, they will focus their investigation only on the accounts that they have reason to suspect are under reporting their income.
It will be interesting to see how things proceed from here.
At least information on all of their customers won't be given out, but it will be interesting to see if the IRS is even able to obtain the requested info on those that are suspected of under reporting income...
Interesting times ahead.
Make sure you pay your taxes my friends!
Sources:
http://fortune.com/2017/07/06/coinbase-irs-summons/
Image Sources:
http://money.cnn.com/2015/03/26/pf/taxes/average-tax-refund-irs/index.html
https://news.bitcoin.com/irs-fail-audit-virtual-currencies/
https://news.bitcoin.com/807-people-declared-bitcoin-tax-purposes-according-irs/
Follow me: @jrcornel
Great news for all crypto investors who are afraid of wild regulations forced by the government to collect taxes. If the IRS has a valid fact to suspect an Individual thats ok, but to force all customers to show there transactions is not!!!
My thoughts exactly.
This is the truth.
..ha ha ha 2 key words "force" and "all" ...if you want a fascist racist ... i mean this is something maybe the nazi would say right?? lol
I would not say that crypto investors are in fear. I would say that we are ready to take this on and are watching Coinbase closely to see how this goes...
We are going to see the taxation departments in many countries make assaults on the cryptoconomy as it gains momentum in my opinion. No way they'll sit on their hands while we make money out of their reach. The thieving bastards will try their level best to tax the fuck out of us
A crypto-oriented future world where monetary activity is more transparent could solve many of these problems.
Consider this…
Is it not fair to say that the corporate whales who continually find sneaky ways to semi-legally avoid taxation through whatever contrived means basically spoil it for everybody else (and, ironically, themselves too…) ?
What do you guys suppose a fair global tax rate could be in the “cryptopia” we’re all looking forward to?
10%? Maybe even less?!
I'd wager that virtually everybody would be happy with that; especially if half of it doesn't have to be wasted on bombing other countries by then 😂
There is No Law Requiring You to Pay Income Tax
(posted by NathanH83)
IRS Director Admits Taxes Are Voluntary 2013 (Lied2Bad)
They are always after collecting that money... there is no sector that the IRS and our government won't try to sniff out to grab a piece of OUR pie.
If you are simply holding crypto it is considered property of yours and you do not have to claim anything but need to keep record of what you invested.
If and when you decide to convert it back to fiat currency that is when you will need to fill out some type of form to pay tax on it at the end of the year because it has become an "income".
Best advice, talk to an accountant about your crypto holdings lol.
Just like gold or silver bullion, you pay the taxes after cashing in..
So what happens when we use the crypto to actually buy something,
without transferring to a fiat based currency?
That's the beauty of crypto... it is untraceable 😉
Well it can be @crypto2day, but for semi-tech-savvy individuals like me, it isn't. I don't have the know-how or the time to make it so. Most would-be users don't either.
well, that's why certain crypto coins have made privacy/anonymity a core part of their focus. If you care about your freedom, then you might consider holding those coins and not holding bankster coins.
I spoke to an accountant friend of mine (this should not be considered tax advice, get your own accountant and pay them for theirs), and she told me that any time you either exchange for another good (like another crypto or something off Amazon) or for government fiat, you have to claim any capital gains at that time. It will get very complex very quickly if you have a lot of churn. Yes, the IRS really expects you to do this. On what level they decide to enforce this is anyone's guess.
Interesting, considering a Trader does this all day for a living..
Most trading platforms will calculate this stuff for you and send you a 1099 but if you're doing this trading outside of something like that you'll have to come up with another solution.
Scary stuff but good to hear congress has our back for now.
Fuck the IRS. America is not free anymore. We have becoming a police state with a debt ridden and tax enslaved populace.
I thought crypto currency was tax free ?
My understanding too. But sounds like IRS is trying to screw us. Glad that congress disagrees. Not sure how long it lasts though.
Congress doesn't actually agree that cryptos should be tax free, they're objecting solely on the broadness of the IRS's request. They still want to tax your cryptos though, trust me.
In the U.S., crypto is considered property. If you hodl, no concern. Once you start converting back into fiat or trading into other crypto, keep records and bring to your accountant.
You answered my question. I was wondering if you only declare the value when you change back into fiat and not other currencies. It would seem that they need a 1031 type rule where you can exchange properties without paying tax.
I found this:
That was a seriously good article @blubeast. Thank you
Depends on where you are I guess.
Hello there - I am a CPA in state of CA - I've posted a few articles about US Tax implications of cryptocurrency - please take a look on my blog if of interest :)
Awesome. Following.
Hello CanuckPride,
Do you offer tax consultation/preperation services? What is the best way to contact you and your rates?
You declare income/loss when a trade happens, nothing is free in the land of FREE!!!
Land of the free, home of the brave... yeah right, feed me another line. I'm so glad I got out of the US years ago when I had the chance. It's interesting to note that citizenship renounciations are also on the rise.
You're absolutely right!
Congress has their backs, if it helps us out, so be it!
It is amusing to watch the crypto community and the government conversation on privacy and taxes.
As more and more people profit from their digital currency portfolios I imagine we'll see migrations to countries or states where the tax laws are more favorable - it seems to be happening already in places like Puerto Rico.
Going from a teenager to an adult, I now truly appreciate the hatred of all things taxes and the IRS that my parents had. How bad does it feel for a government agency to intrude on your life just so they can make sure that a portion of almost every single cent you make must go to the government? Not sure about anyone else but this really irks me...
It is an irksome task to deal with each year.
Nice write up and thanks for the good news. Good to see the IRS taking a step back, although I'm sure they will make an example of one poor individual to instill fear on the masses in the near future
Best exchange not based in the US?
Best to not use an exchange at all.
muy interesante compartido en mi perfil
Don't mess with the IRS... they are ruthless.
That being said, currency shouldn't be taxed. That is like saying "HEY! we printed more money and the value of our currency went down when compared to the currency you use! Well thats not fair, we spent a long time developing this way to tax people via inflation so they don't really realize it, so pay us the difference please.... Oh and if you don't we will take your property away which was never really your property to begin with and then throw you in jail"
"we will take your property away which was never really your property to begin with"
Nice piece of work @libertyhound , I see you been doing your homework..
Yup
Watching the IRS try to police cryptocurrencies is like watching my Nan try to install antivirus software on her computer. They are way over their heads, and have no idea what they're doing.
Good and informativ post. Thank you for sharing.
Upvote and follow.
Cheers bluchr
Good info @jrcornel however IRS is not relevant to non Americans and thus not subject to their demands. Therefore if coinbase gives IRS all account info then they will be liable to international lawsuits.
Interesting, thanks for the info. We'll see what happens...
I think the best thing to do is build up coins on your own wallet then go to a country with more reasonable tax laws. That's the good thing about earning online in a currency that's not tied to any country. We can vote with our feet and cash out where we please.
Except the US is trying to make it a rule that you must declare any virtual currencies that you hold in excess of $10k at the border...
If you are a US citizen, you are required by law to pay taxes to the USA even if you don't live in the country. For example, I pay the UVA tax in El Salvador and the US income tax.
I think that my thoughts here may not go over well, but please consider:
With all that being said -- no I do not think the IRS should be able to subpoena everyones records from Coinbase. However, it's important to look at similar examples... ETrade reports all of our gains and losses to the IRS. All other brokerages do the same. Why is it so scary to think it may be a good thing if Coinbase/Other crypto exchanges did the same?
how to spot a fed...
Found some interesting information at: https://bitcoin.tax/faq
How are the IRS treating Bitcoins?
The IRS has recently given guidance on the specific treatment of Bitcoins and other crypto-currencies, which has helped clarified the situation.
Bitcoin is a personal property, not a currency, and so is taxed as a capital asset Gains made from converting Bitcoins into a fiat currency are subject to capital gains tax Purchases of goods or services with Bitcoins must also account for gains Bitcoins and other alt-coins obtained from mining is recognised income immediately at their fair value Mining equipment can still be deducted as a legitimate business expenseClassification
The IRS are treating Bitcoin as property. Any gains made from the sale of personal property are subject to capital gains tax.
Basically, you pay taxes when you convert back to dollars in the USA
I feel like the government doesn't understand cryptocurrencies at all!
I think its is fair to say follow the law. It is clearly defined as a property. If you have gain report it and pay taxes
Sooner or later evey country will impose tax on crypto in one way or other
I wrote a blog about this issue recently, for anyone that might actually need assistance with and IRS issue or filing: https://busy.org/bitcoin/@avva/so-you-don-t-know-if-you-owe-taxes-on-bitcoin-that-is-need-top-expert-cryptocurrency-tax-attorney-text-me
Government and the IRS( indoctrinated resource and Supply) company that should be totally abolished for imposing taxes on people without representation but not on the Big and Rich.
I'm not about this free for every one society where people sit on their butts lazy and dependent on the corrupt elect, but start growing as a community in education, learning a trade or profession and stop being dependent on government.
Government is suppose to look out for the welfare of the people, not put them on welfare.
I already paid income tax on that money before I put it in coinbase.
Crap, I gotta hide!
Something tells me Orrin Hatch has a sizable investment in crypto!
This is the very reason I never use services that ask for personal information to open an account. And I definitely don't ever link my banking account to any such service. This was bound to happen to coinbase. Surely they knew it was coming.
how do you transfer money between fiat and crypto.
I'm only aware of coinbase
I have a friend who lives close to a btc atm. He picks up what I want, and I mail him the fiat. Just found out that there is a btc atm an hour and a half from where I'm at so I'm going to pick up some myself next week. The atm gives you a code and you enter it into localbitcoins.com. Then just transfer it to your preferred wallet.
wow awesome!
are u from texas?
Boy howdy!
Man im glad there is no IRS in the UK. I have read some awful stories about them.
they are awful, corrupt, and political
USA it sucks its like being held captive
Interesting times ahead for sure. I mean it's really easy to hide your funds in any privacy coin. How would they find you?
great information, thank you
Yeah this dynamic is only going to get bigger and bigger a crypto goes "mainstream" Uncle Sam is going to demand his share. I used coinbase for my initial bitcoin transactions, but have not pulled anything into USD in a bit.
Plan to explore the other options out there when its time.
great informative post, upvoted
I think it's wrong to be taxed on crypto gains, and even so, more wrong to tax those gains before they have been converted to fiat.
the irs is so wrong, especially in this case
Informative Post man :)
really great work thanks a lot for sharing and keep on posting ;)
This was coming a long time ago, it was almost impossible to think that it would never reach this, it is too much money at stake to let it go, thank you very much dear friend @jrcornel for this information
Have a great day
Just do your taxes. I use quickbooks and have everything done automatically. Crypto income is capital gains, and bitconnect is dividends (15%). File quarterly. Nobody bothers you if you just keep things on the up and up.
How does Steemit fit into that for you? It is very possible that steemit income will have to be reported as income when it is earned and then if you sell that steem at a higher price than when you earned it you will have a capital gain (or loss) as well.
They want a piece of every action, they seem to be more greedy than the public. Coinbase is not only in the US.
Is there way for IRS to track users from the information shared with them? The blockchain is public can they use it to track accounts at coinbase?
I'm new to the crypto world and constantly learning. The IRS always want a piece of the pie, was wondering how they will try with bitcoin. Good read, thank you for sharing.
@joytotheworld - if you really want to know how they'll take their pound of flesh, I've posted 3 articles on here about it! Take a look and lmk what you think ;)
Yes, this will be the first year I have to report any gains. You dont have to report if you just buy and hold! HODL!
Its really sad how they want to control the one thing that was created created to do that very thing and not be controlled. Seems like no matter what people do and how hard they work they still have to pay a big chunk of their income to them.
Good for those in the U.S. but being in Canada, this government is all about raising taxes.
What about Coinbase customers who do not live in the USSA and are not American?? Best to open and hold your accounts in a jurisdiction that still values individual privacy.
Coinbase got me started, and most of what I bought there is still there. IRS needs to be reigned in! They actually went after charities under Obama--not pharma or energy--charities that have been around for a long time, that had good reps.
FYI get your cryptos off exchanges!
Countless stories of them going under etc.
Additionally, if you hold BTC, best to have it in a personal wallet so that if any fork happens you (should) still hold coins in any/all active forks
I recently got exodus wallet, very easy to use, but there are many options out there
DASH - Isn't it possible to manage a DASH account COMPLETELY PRIVATELY, COMPLETELY ANONYMOUSLY ?
I'm looking into it but if it is so, I'm going to switch to DASH !!!!!
It needs to be easier to following gains, losses and earnings. I only report when I sell my BTC for USD. My understanding is that if a person were to exchange these assets for things like lamps, then the USD was not involved nor taxed.