Originally published at: https://boingboing.net/2019/07/26/irs-sends-warning-letters-to-1.html
…
3 Likes
Good. Magical internet money indeed.
12 Likes
And this is why the 1% use offshore tax havens.
8 Likes
Looks like those Libertarians will have to find something other than math Beanie Babies to collect if they want to escape the Ro-o-oad to Serfdom.
15 Likes
And this is why they are lobbying to gut the IRS.
2 Likes
Serious question - how does that work? Especially when it a volatile currency? Is it just when you cash out? If I earn $100, that is already taxed, so I buy some bit coin and it is worth $200 no. Do I get taxed because it went up in value? Or only if I cash out? What if instead of bitcoin I bough 100 Euros or Pounds or Yen?
I guess being poor means I don’t have to worry about such things.
5 Likes
I too am poor, so I don’t really have personal experience with it, but from what I understand, any conversions to cash would be taxed on the profit from the original investment.
3 Likes
That’s the key to answering your question. Buying and selling a cryptocurrency is the same as doing a forex trade as far as the IRS is concerned: you have to report your gain or loss when you convert back to USD. Same goes for someone paying you in a cryptocurrency (or EUR or GPB or what-have-you) vs. USD: the IRS expects you to report that income at the value in USD on the date in question as well as reporting gains or losses when you cash out in USD. It’s a big accounting hassle, especially since there are no tax treaties with the decentralised “issuers” of cryptocurrencies.
The cryptocurrency Libertarians were under the impression that BTC and such were too magical to be discovered by the IRS, but exchanges like Coinbase act as holes in that delusion – if the exchange is anywhere near trustworthy and reputable it’s going to be subject to regulation or oversight. The only way to avoid getting caught is not to use an exchange at all (or at least keep the balance under $20k) and do all your transactions with others in cryptocurrency on a peer-to-peer basis, which carries its own risks and hassles.
15 Likes
Good. Bitcoin is, by definition, a tax-avoidance scheme mixed with pure speculation, so I love seeing my taxes used to help tax cheats pay up. Now, we just have to annex/quarantine Switzerland, the Caymans and Delaware …
3 Likes
Yeah, like any other asset you’re going to owe capital gains if it is worth any more money when you sell it than when you bought it.
4 Likes
I believe the nomenclature is Dunning-Krugerrands, dude.
13 Likes
Untrue. There are special tax rules for foreign currencies (e.g., section 1256). But they don’t apply. The IRS treats cryptocurrency as a form of property, usually as a capital asset.
9 Likes
Thanks. I stand corrected. From the article:
For federal tax purposes, cryptocurrencies such as bitcoin are treated as investment property akin to stock shares or real estate.
This is one of the reasons that the government is moving so fast to nail down Facebook’s Libra cryptocurrency scheme: it will be more difficult to treat what FB clearly intends to be an active means of financial exchange as anything other that a “foreign” currency.
7 Likes
“Math Beanie Babies”
“Dunning-Krugerands”
I’m dying over here.
4 Likes
You aren’t taxed on unrealized gains. (There might be some rare exceptions.) You’d get taxed when you convert in back to your home currency, just like people who trade other foreign currencies.
2 Likes
Just remember, HODLers…Al Capone went down for tax evasion.
I almost said word to the wise, but then realized my mistake there.
4 Likes
Or simply use an out of country organization for your Bitcoin transactions. China is gobbling up lots and lots of currency exchange and banking transactions, as it is, for exactly this reason, as a great example. No, the IRS is not going to be slapping a successful subpoena on a Chinese company in China ^^’. It’s far safer in many ways to have a Chinese bank account, rather than the Swiss version, these days.
Worship at the Bitcoin altar is eminently silly, yes, but so is reflexive scorn. Largely removing/hindering governmental control of currency is both problematic and promising.
Definitely. If someone wants to entrust tens of thousands of dollars to a company in China or Russia or whatever, it’s an option. Not a wise option, but an option.
3 Likes
Believe exactly what you like.
The fact remains, however, that the IRS won’t be subpoenaing any company based in a country where there isn’t a corresponding treaty to support such. Would you prefer Antigua? China was a mere example; their process for starting an account is obnoxious, mind you…
Here’s an Antiguan Bitcoin vendor, in fact.
Before you try to pooh-pooh Antigua, by the by, you should do a little research into where “offshore bank accounts” are kept, and why =).
Edit -> I should have pointed out the fact that the very same reasons that make a given country a good offshore tax haven are exactly the same reasons they make a good place to exchange Bitcoin, or for that matter any other currency.
I’m not contesting what you said, just pointing out that there are added risks for the Libertarian “geniuses” who think they can escape the reach of the bad ol’ state by using cryptocurrencies. They may see taxation of their money by the U.S. as theft, but keeping their money in other jurisdictions opens it up to the more direct form of theft, depending on the whims of their governments.
For various reasons, I’m familiar with offshore banking, although I don’t use it myself. There was a time when a lack of international regulation allowed safe options in stable liberal democracies like Switzerland or (in a roundabout way) the Channel Islands, but now that’s not an option.
3 Likes
