
Just About Everyone with Bitcoin Is Lying to the IRS - chollida1
https://gizmodo.com/just-about-everyone-with-bitcoin-is-lying-to-the-irs-1825275308
======
spacehome
Their data all comes from people who file taxes Credit Karma.

> The figure, reported by CNBC, comes from Credit Karma, a popular financial
> app through which people can view their credit score and file taxes. Of the
> more than 250,000 people who have filed through Credit Karma this year, a
> whopping 0.0004 percent have claimed to have money in bitcoin or other
> cryptocurrencies.

Could it be possible that people who file taxes with Credit Karma are not a
random sampling of the population, and maybe bitcoin holders (and particularly
those who report it on their taxes) have structural reasons to avoid CK? Lazy
reporting to not even mention it in the article. Is it just me, or is there an
increasing trend to take one statistic and stretch it out to a 5 paragraph
news article?

(And that percentage is just a fancy way to say that 1 Credit Karma tax client
out of 250,000 declared bitcoin.)

~~~
halfdan
Also, why report 250k and 0.0004% and not just "~100 people". Makes it much
easier to digest.

~~~
mathewsanders
I read it as 250k x 0.0004 / 100

(which equals 1)

~~~
TylerE
0.0004% = 0.000004

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gringoDan
I don't think most people are underreporting out of malice. I'm guessing most
with money in cryptocurrencies fall into one of two buckets:

1) People - esp. millennials who have never paid capital gains taxes - who
don't even realize that crypto gains are taxed. (They should, but that's a
different issue.)

2) People who put money into crypto and had some decent gains (<$10,000). Come
tax season, they realized how difficult it would be to report their gains and
just gave up, betting that they wouldn't be audited by the IRS.

Obviously if you realized massive gains and are actively evading taxes, that's
a problem. But I feel for the little players here - a whole lot of people
would report their capital gains if there was an easier mechanism in place.
The current process of trying to figure out the dollar value of each
individual trade on exchanges lacking basic reporting infrastructure is a
_mess_. I'm not surprised that a lot of people just throw up their hands and
give up.

(And yes, I realize that putting an easier mechanism in place to pay taxes on
crypto is inviting the sort of financial regulation that runs counter to the
ethos of blockchain...but let's be honest, in their current form,
cryptocurrencies are not what we were promised. They have by and large been
co-opted by financial institutions and the very intermediaries they were meant
to supplant.)

~~~
jraines
It's nearly impossible. Here's just a few situations that are unclear (no i'm
not asking for advice, nor do I think HN is my personal CPA)

1\. You buy into an ICO and it exit scams

2\. You get staking / masternode payouts (but don't sell them to $ or another
coin)

3\. You trade futures - can you use Form 6781?

4\. What's your cost basis on a futures trade if not (selling/buying bitcoin
with borrowed bitcoin)?

5\. You receive funding/interest payouts on an open leveraged trade

6\. One of your coins forks

7\. You have trades on a DEX with no downloadable history

8\. You have trades on an exchange which no longer exists

9\. You are awarded coins as part of an airdrop to holders of (other coin)

10\. You get hacked (are you sure you aren't faking that to avoid taxes,
citizen?)

~~~
panarky
If you trade 1,000 BTC for 10,000 ETH and never touch fiat, is that a taxable
event?

That trade on January 12 would have been worth $14 million. If you acquired
the BTC years ago, you could have a tax liability of $5 million even though
you never gained a single dollar.

Today that ETH is only worth $5 million. You would have to sell all of it to
pay your taxes.

~~~
celticninja
In some jurisdictions that is a taxable event. However isn't a gain only a
gain when it is realised? If I have 10 BTC worth a $1000 and then they are
worth $100000, do I need to report a gain if I don't sell them? My assumption
is that I only have a taxable gain when I turn it into USD.

------
apo
_The figure, reported by CNBC, comes from Credit Karma, a popular financial
app through which people can view their credit score and file taxes. Of the
more than 250,000 people who have filed through Credit Karma this year, a
whopping 0.0004 percent have claimed to have money in bitcoin or other
cryptocurrencies._

Garbage in, garbage out - like basing the alcoholism rate for the US by
surveying the state of Utah.

 _Check your scores anytime, anywhere, and never pay for it._

[https://www.creditkarma.com/](https://www.creditkarma.com/)

Bitcoin attracts people who can't stand the mess that credit cards have
created. A person obsessive enough about a credit score to use an app that
lets them view it anytime, anywhere won't be interested in Bitcoin to begin
with.

~~~
chc
This appears to be about people who filed taxes through Credit Karma, not
normal users. You need to file your taxes somewhere, and Credit Karma is
probably the best free option available.

~~~
jobigoud
This makes me realize I don't know how the American system works. You file
your taxes to private companies? Then they send it to the IRS? You can't just
fill a form, online or on paper, and send it to the administration yourself?

~~~
dragonwriter
> You can't just fill a form, online or on paper, and send it to the
> administration yourself?

Yes, you can. There are both paper and fillable electronic forms (and, for
simple cases with incomes under $66,000, tax prep software) available free
from the government, and you can file them for free, by mail or
electronically, as appropriate, with the IRS.

~~~
chc
But of course the IRS probably isn't the only entity to which you owe taxes
(states and the federal government are separate entities), so the IRS's forms
only get you part of the way. What services like Credit Karma do is let you
input your W-2 forms or similar (which indicate taxes paid), ask you questions
to determine any adjustments you might need/want to make, generate the correct
forms to send to the IRS and your state tax agency, and transfer the money you
owe from your bank account.

Doing all that by hand is quite a bit more work.

------
thisisit
> The IRS has offered guidance on bitcoin transactions since 2014 and
> _considers the cryptocurrency to be property, not currency. As such, every
> purchase, sale, trade, and mining effort is considered to be a taxable
> event._

Wait. So, cryptocurrencies are not taxed on capital gains? If it is considered
property then do people need to calculate their base price, profit and then
pay taxes?

~~~
tathougies
A capital gain is a gain in capital made during the sale of property. Selling
bitcoin for more than it was bought for and collecting the profit is the very
definition of a capital gain.

------
vonzeppelin
Credit Karma's tax system couldn't even handle multi state tax filings so
there is no way their tax filers could have been a good representation of
anything.

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meritt
Coinbase provided 1099-Ks to the IRS. If filers didn't also provide an 8949
(cost-basis statement) to demonstrate their net gain/loss, they're likely
going to be on the hook for taxes on the entire amount reported in the 1099-K.

------
ozten
What are the demographics of Credit Karma users? That seems like a limited and
biased sample to extrapolate that "just about everyone with Bitcoin is Lying".

I've reported BTC income to the IRS in 2014 and 2017, will do so again in
2018...

~~~
ksherlock
If I had BTC income (which I don't) I'd make damn sure to use an accountant so
someone else has their name on the line. And I certainly wouldn't use Credit
Karma (and not only because I've never heard of them).

~~~
Sargos
You've really never heard of Credit Karma before?

~~~
brewdad
Nope. Should I?

------
whataretensors
Making taxes difficult with crypto is a feature. It allows for selective
enforcement and more IRS weaponization.

------
exelius
I am actually worried about Trump from a solvency standpoint. Hear me out on
this.

Trump has unquestionably shaken faith and trust in government. To the point
I’m willing more than a few voters are thinking “jeez, if these guys are gonna
screw me, I’m gonna take what’s mine”. Hell, our president has admitted to
avoiding taxes in multiple on-the-record accounts!

As a result, everyone I know has admitted to cheating a little bigger on their
taxes this year, and omission of personal investments like Bitcoin is one of
the easiest.

From what I’ve read in the past (I don’t know if this is true), it would only
take a 2% decline in personal income tax filings to cause serious cash flow
problems for the US government. The republicans have spent years weakening the
IRS’ enforcement power, and now Trump has given a lot of people both motive
and a role model to avoid paying taxes.

Maybe if it breaks our current social contract enough, we’ll get to create a
new one appropriate for a 21st century world leader.

~~~
jeffreyrogers
I don't think Trump ever claimed to have done anything fraudulent (whether he
did or not is another matter). I'm not trying to get into a political debate
or argue over Trump's flaws or merits, but there's a big difference between
using legal loopholes that are available to you and deliberately not reporting
things to pay fewer taxes.

~~~
lightbyte
>but there's a big difference between using legal loopholes that are available
to you and deliberately not reporting things to pay fewer taxes.

Legally that's true, but I think the average person upset about this sees zero
difference at all. Myself included, in my opinion using legal loopholes to get
out of tax is morally just as bad, if not worse than deliberately not
reporting things to pay fewer taxes.

~~~
cryptical
"Anyone may arrange his affairs so that his taxes shall be as low as possible;
he is not bound to choose that pattern which best pays the treasury. There is
not even a patriotic duty to increase one's taxes. Over and over again the
Courts have said that there is nothing sinister in so arranging affairs as to
keep taxes as low as possible. Everyone does it, rich and poor alike and all
do right, for nobody owes any public duty to pay more than the law demands."

-Judge Learned Hand, Helvering v. Gregory, 69 F.2d 809, 810 (2d Cir. 1934), aff'd, 293 U.S. 465 (1935)

