
Coinbase Ordered to Turn Over Identities of 14,355 Crypto Traders to the IRS - therealmarv
https://motherboard.vice.com/en_us/article/ywnmkk/coinbase-irs-14000-bitcoin-tax
======
eldavido
The naivitee, ignorance, and arrogance of this thread astounds me.

The HN population (I include myself in this) seems to think everything is new,
there are no precedents for any of this, and that we're building some kind of
new society here. We aren't. Times like this make me wish people like us were
less dismissive of history, liberal arts, and people-not-in-tech generally.

Case 1: a commenter below said something about "a guy moved his assets into
BTC to hide from bankruptcy". Bankruptcy courts deal with this stuff ALL DAY.
It's their job. You can't just make huge transfers/sales when in bankruptcy
and expect people to think that's normal behavior. This has gone on long
before bitcoin, and will continue long after it's gone.

Case 2: taxes. BTC is an asset. If you buy at price X and sell at price Y,
guess what, you owe taxes on Y-X. I don't understand how this is news to
anyone.

Case 3: money laundering and other types of financial crimes. There are entire
companies who build software to detect money laundering. It's a well-
understood problem.

All I'm trying to say is, just because you have a CS degree and work in San
Francisco, don't think you're the smartest person in the world. Moving money
is one of the oldest human endeavors and unlike a lot of topics in software
development, it's an old profession with a huge body of accumulated domain
knowledge. We shouldn't be so quick to dismiss it.

~~~
Kiro
> If you buy at price X and sell at price Y, guess what, you owe taxes on Y-X.

This is easy when you buy Bitcoin, hodl and then sell but what if you convert
it to altcoins, trade altcoins for altcoins and ultimately sell some altcoin
for USD? How do you even keep track of your profits?

~~~
KKKKkkkk1
I'm sure the IRS will be happy to answer your question for you. The more
complex is the scenario you get yourself into, the more you open yourself to
getting shaken down by the IRS.

~~~
Kiro
You make it sound like people do this to confuse IRS or avoid taxes. I simply
like to daytrade altcoins a lot. Also, I'm not in the US but I'm interested in
how this work.

~~~
openasocket
I imagine it's exactly the same as how they tax currency trading.

~~~
charlesdm
This depends on the country.

------
bmcusick
This really reminds of the essay "Technologies of Control and Resistance"[1],
which has really shaped my thinking over the years.

Bitcoin itself is a technology of resistance. Private crypt-currencies more
so. (Cash too) But as long as you have to go through central portals (like
Coinbase) to access the rest of the economy, the government will lean on those
central parties to regulate you indirectly.

Central parties are technologies of control.

[1] [https://blog.elidourado.com/technologies-of-control-and-
resi...](https://blog.elidourado.com/technologies-of-control-and-resistance-
making-sense-of-our-stagnant-dynamism-d135149d0761)

~~~
Cthulhu_
The alternative is to do things off the grid, so to speak - meet people in
person, exchange funds for cryptocurrencies. Actually that might be a small
side business idea.

Of course, one of the goals of cryptocurrencies is to not have to go through
central organizations at all. Not converting your cryptocurrencies back to
fiat, and not storing them on an exchange will be the best way to dodge taxes.
Pretty sure that if you hide your keys well enough, the IRS and co cannot
prove that you have any assets in cryptocurrencies as long as how you acquired
them can't be traced.

~~~
brady747
I always think of this quote from the movie, "Body of Lies":

"Our enemy has realized that they are fighting guys from the future. Now,
ahem, it is as brilliant as it is infuriating. If you live like it's the past,
and you behave like it's the past then guys from the future find it very hard
to see you. If you throw away your cell phone, shut down your e-mail pass all
your instructions face-to-face, hand-to-hand turn your back on technology and
just disappear into the crowd"

~~~
matt4077
Your supposed "enemy", has barely even noticed you. If the big bad government
wants to shut down your little cryptobubble, it can do so anytime it wants
with the stroke of a pen.

But yes: please walk into a forest and "life as if you don't exist". I suppose
that includes not posting conspiracy fanfic online, right?

~~~
grandalf
Why the vitriol. The comment was meant to allegorically offer a conceptual
approach to fighting the dystopian onslaught of oppressive technology.

By oppressive technology I am referring to the kind of tech that obviously
oppressive governments would have built decades ago if it had been possible,
and that the US will gradually arrive at soon enough without explicitly
seeking to do so.

------
Hasz
If you're trying to use bitcoin to avoid tax obligations, the IRS is more than
capable of coming after you.

Launder your coins? You bet they can track that.

Buy off localbitocins? Still trackable, given enough interest.

Never done anything with the coin, just a wallet.dat file? The money's no good
if you can't use it, and they'll want what's owned the minute it moves.

The IRS will get what it is owed, whether you like it or not. The only real
way to avoid them is to be worth so little it's not worth their time.

~~~
JumpCrisscross
Moreover, if you take steps like laundering coins or meeting in person
specifically to avoid paying taxes, you've handed the IRS evidence to
prosecute you for willful evasion. You're trading money today for jail time
tomorrow.

 _Disclaimer: I am not a lawyer. This is not legal advice. Pay your taxes._

~~~
bonestamp2
I don't know how they'd prove you met someone specifically to avoid taxes. I
mean, prior to coinbase there weren't any good/easy ways to get bitcoin... it
all seemed a little bit sketchy on the surface -- you were either buying it
from someone in person or using the red phone in the back of CVS.

Coinbase was a godsend when it came along. No more explaining to my wife why I
was going to the sketchy part of town because that CVS has a red phone...
finally a legit company that I can buy from! But, even with coinbase and
gemini and any other legit exchanges, you may still want to buy bitcoin from
someone in person if you've hit your weekly maximum on the exchange.

I know some local computer repair people who buy lots of bitcoin to pay off
their client's cryptolocker incidents. They easily hit their weekly limits for
business purposes.

~~~
JumpCrisscross
> _I don 't know how they'd prove you met someone specifically to avoid taxes_

I'm not saying using these services _per se_ is necessarily enough to warrant
arrest. But if you're (a) not reporting taxable holdings or income, (b) using
these services after alternatives are available and (c) running your mouth on
forums about cashing in your Bitcoins while on vacation in Europe, you're in
the easy pile.

 _Disclaimer: I am not a lawyer. This is not legal nor tax advice. Pay your
taxes._

~~~
mancerayder
_Disclaimer: I am not a lawyer. This is not legal nor tax advice. Pay your
taxes._

Your advice has been useful to read so far, but are you seriously concerned a
username on here will hold you to account if the advice goes awry? It has a
nervous/pedantic air (no offense intended, just the impression as a reader
when seeing repeated footers).

~~~
JumpCrisscross
> _It has a nervous /pedantic air (no offense intended_

No offense taken :). Most prominently, I do it as a courtesy. A lawyer's
comments on these matters should carry more weight than my own. Second to
that, one might characterize me as nervous and pedantic about such things.

------
umanwizard
Good. If I have to pay capital gains on normal stocks I don’t see why crypto
traders shouldn’t have to also.

~~~
Akujin
What bothers me about this whole thing is that I never bought it like a stock.
I mined it YEARS ago when it was worthless.

Now all of a sudden I have to pay tax on something I already own? Seems like
the government is double dipping. After all I already paid tax on the
hardware, the internet connection, the electricity, and countless other market
products that allowed me to mine said coin.

I have a couple of choices now.

I can either sign up for Coinbase and sell it and kiss 15% of it good bye or I
can go on Newegg and buy stuff directly with Bitcoin.... or go to a bitcoin
meetup and sell with cash in-person..... or go on vacation in Europe and get
Euro and again keep it off the books.

Which do you think I'm gonna end up doing?

PS: My address has never been tied to an IRL transaction.

PPS: God damn it's easy to troll HN. More salt than the dead sea.

~~~
andrewla
If someone raises chickens from eggs; pays for feed and cares for them until
they are full-size, and then sells them, he has to pay taxes on that income,
even though he already paid for the food and the upkeep. There's no double
dipping here.

You can find an accountant who can give you advice on how to account for the
cost of mining the bitcoin to reflect your effective cost basis (or wing it;
the IRS has reasonably good instructions for this sort of thing).

If you go to Newegg and buy stuff, you are obligated under US tax law to pay
the capital gains taxes based on the fair market value of the products
purchased. If you go to a bitcoin meetup and sell with cash, you are still
obligated to pay taxes.

Your legal obligations are clear; whether you can commit the perfect crime or
not and get away with it is another matter.

~~~
Akujin
> If you go to Newegg and buy stuff, you are obligated under US tax law to pay
> the capital gains taxes based on the fair market value of the products
> purchased. If you go to a bitcoin meetup and sell with cash, you are still
> obligated to pay taxes.

I recently bought a GTX 1080 TI with USD

Amazon wanted to charge me 7%. Newegg charged me no state tax.

Which do you think I went with?

Like our president said.

> "I'm smart for not paying taxes." \- The president Source:
> [https://www.cnn.com/2016/09/26/politics/donald-trump-
> federal...](https://www.cnn.com/2016/09/26/politics/donald-trump-federal-
> income-taxes-smart-debate/index.html)

This is also why people shop in Delaware. I wonder how many of those people
reported their purchases to Pennsylvania.

~~~
koolba
Newegg is not obligated to _collect_ sales take from you if they don't have a
nexus in your state. Amazon has a nexus almost everywhere and thus collects
sales tax from you regardless of where you order from. That's only true for
orders place with Amazon itself; independent sellers at Amazon are responsible
for specifying their own taxes that will be collected.

None of this, whether it's collected or not, eliminates your requirement to
pay the sales or excise tax of your home State. In fact, if you go out of your
way to order something or perform a transaction in a way that explicitly
evades sales tax then you could be in legal trouble with your State's tax
agency.

They might not care about a $200 graphics card but they do go after large
offenders. Here's an example:
[http://www.nj.com/mercer/index.ssf/2017/05/broker_from_princ...](http://www.nj.com/mercer/index.ssf/2017/05/broker_from_princeton_charged_with_tax_evasion_ove.html)

> > "I'm smart for not paying taxes." \- The president Source:
> [https://www.cnn.com/2016/09/26/politics/donald-trump-
> federal...](https://www.cnn.com/2016/09/26/politics/donald-trump-federal..).

> This is also why people shop in Delaware. I wonder how many of those people
> reported their purchases to Pennsylvania.

Avoiding paying taxes through legal means is smart. Evading paying taxes is
illegal.

~~~
Akujin
Yea.... I'm sure you report all your purchases at the duty free as soon as you
get to American soil.

~~~
toyg
Duty-free goods have special dedicated legislation in most countries, I assume
in the US too.

~~~
dmoy
Up to like $800 or something, unless I'm confusing it with yet-another-limit
in the tax code.

------
chollida1
This is a net good for bitcoin and all crypto currencies isn't it?

I mean the IRS is treating it the same way that they treat other securities,
isn't that what the majority of the bitcoin community wants? Just some
clarification as to exactly what bitcoins tax situation is and now we are
getting it.

I mean at this point if you traded bitcoin and didn't pay taxes on your
capital gains, that is 100% on you, you can't claim ignorance at this point.

This, more than CME and CBOE futures, though those are important, and more
than a sane way to store them without having to worry about lost keys or being
hacked, is what institutional investors really want before they get into
bitcoin.

In the long run this is a very positive event for bitcoin adoption by the
masses, and more importantly for speculators, large inflows of institutional
money.

~~~
lloyd-christmas
> This is a net good for bitcoin and all crypto currencies isn't it?

No. A quote from the article:

 _" asking for detailed transaction information on so many people, simply for
using digital currency, is a violation of [customers'] privacy, and is not the
best way for us to accomplish our mutual objective.”_

The point of the article isn't about regulation or enforcement; it's about the
methodology of enforcement. If A business magically has more money than they
should given their transactions in a year, issuing a subpoena on their
information is completely legitimate if they are under an active
investigation. Similarly, if a _specific_ person is under investigation, and
they are suspected to be evading taxes, an investigation into _them_ is
grounds to get _their_ info from coinbase. It's not grounds to get _my_ info
from coinbase. People also try and evade taxes in the stock market, that
doesn't mean the IRS is entitled to investigate me just because I also happen
to use schwab and made a trade on nasdaq.

At the end of the day, this ISN'T good for crypto currencies because it
demonstrates that enforcement obeys different rules than other assets.

~~~
orthecreedence
> it demonstrates that enforcement obeys different rules than other assets

Like stock exchanges and banks? Right, because they certainly don't report
your gains/losses to the IRS voluntarily. /s

Seems bitcoin IS being treated exactly like other assets. Parent said this is
a good thing. I agree (and I am a crypto trader). Maybe it's because my
disdain for taxes-are-theft libertarians is much stronger than my reluctance
to pay what I owe for my gains.

Also, it's one thing to not want to pay taxes if you're working a plow in a
field all day. However if you're sitting at a computer pushing a few buttons
and earning money from it, then yeah, no excuses to not pay.

------
falcolas
And this is where the "promise" of anonymous currency/assets falls apart. Some
folks might be able to obtain or sell it anonymously, but so long as these
exchanges exist and given the ease at tracking coins through the publicly
visible blockchain, it only takes one transaction at a broker who can be
raided/subpoenaed for the government to track your assets.

Much like any other form of anonymity on the internet - it often only takes
one tie between your physical and digital identity for the whole thing to fall
apart.

~~~
robert_foss
Bitcoin is not much of an anonymous platform. And anyone using it expecting
anonymity is bound to end up disappointed.

~~~
igorgue
Just tumble your coins, you'd need a super computer to find where they go.
That's what things like Monero automatically do.

~~~
jayd16
For tax purposes, it doesn't really matter that you laundered the money.
They'll get you when you use it.

------
gst
As Coinbase user I always assumed that all of my transactions are
automatically reported to the IRS - I'm actually surprised that this didn't
happen yet.

~~~
mullen
I'm in this category too. I just assumed that Coinbase was handing all this to
the IRS for audits or future prosecution.

------
icu
This was bound to happen. What many people outside of the USA don't realise is
that the Common Reporting Standard (CRS) means that the IRS is very likely
going to share this info with a great many other countries. However at present
I don't believe the USA has signed up to the CRS.

If your tax residency resides outside of the USA, and you made a taxable
capital gain, I strongly advise to report it to your tax authority.

~~~
relyio
I wonder why there hasn't been an attempt at making a country where
regulations are kept minimal and taxes nonexistent or only dependent on what
you use.

It would probably attract a ton of economic activity. Does it exist?

edit: rephrase

~~~
icu
If you are American the answer is no... Americans are taxed by way of
citizenship. The only way out is to give up your citizenship and that's not
easy.

Other countries have different rules that apply to their citizens and also to
residents.

Generally speaking I think it's far better too focus on making the money more
than mitigating the tax.

So while I believe there is no moral obligation to pay more tax than legally
required, you would have benefited from the tax of previous generations so why
should you have a free ride?

~~~
therealmarv
If a US citizen lives somewhere else how is he supposed to pay taxes to the
country he lives in? Only to the US usually? Double tax treaty? I bet many
countries do not like that. Just asking out of curiosity.

~~~
rcxdude
Taxes paid to another country are (generally) deducted from the tax to pay to
the US. There is also a rather high total income exclusion. In practice most
US citizens living and earning money overseas do not pay significant tax to
the US, but they must still file the paperwork (most expats who renounce their
citizenship do so because of the expense/time to do so, as well as the
difficulty of banking as a US citizen overseas due to the restrictions the US
effectively enforces on foreign banks who have US citizens as customers).

------
knodi
Last year IRS reported 800 people reported BTC holding and paid taxes on it. I
know at lease two people that transferred their money in to BTC before filing
for bankruptcy to side their assets.

Hopefully laws can put in place for proper taxation.

~~~
pc86
> _I know at lease two people that transferred their money in to BTC before
> filing for bankruptcy to side their assets._

Hopefully actions like the above continue and those two people go to prison.

~~~
igorgue
Hah probably some VC :D, really think about it.

------
myth_drannon
Coinbase now top 10 in the App Store

[https://twitter.com/FEhrsam/status/936014373562195968](https://twitter.com/FEhrsam/status/936014373562195968)

~~~
ssharp
Sign #4024209230 that we're in a bubble.

------
dsl
Your information will also be shared with the IRS if you used your Coinbase
account to transact with one of the "$20,000+" Coinbase accounts.

~~~
lightbyte
>any user who bought, sold, sent, or received more than $20,000 worth of
Bitcoin in _their_ accounts between 2013 and 2015.

Your own account needs to have had $20k worth of bitcoin, not simply
interacting with someone else who does.

~~~
dsl
It isn't mentioned in the article, but from the order:

"and, where counterparties transact through their own Coinbase
accounts/wallets/vaults, all available information identifying the users of
such accounts and their contact information"

------
londons_explore
Que 14,355 people searching for "punishment for not reporting capital gain"...

~~~
kgwgk
Cue?

~~~
wglb
Well, it could mean "Queue them up" as in "make a line".

------
SonicSoul
this is interesting. I get the FX angle, but what if you never convert your
BTC to USD? in that case your profits are not "realized" and so long as you
pay for stuff in BTC how can they possibly calculate your gains

~~~
patio11
“Realization” has a meaning in accounting and swapping property for property
does, generally, realize the gains.

This might or might not generate an informational return to the IRS. Most
transactions in the economy don’t. They’re still taxed. The tax system
functions on a combination of informational returns and auto matching, human-
intensive audits on a small selection of returns each year, and the honor
system.

“They can’t tax us if we don’t write stuff down!” is believed by many people,
including Bitcoiners, and they are often surprised to find that the IRS has
thought of this clever strategy before. For example: “I see you own a boat.
What year did you buy it in?” “Oh I dunno.” “2015. Let’s try again: how much
did you buy it for?” “I dunno.” “List price, great answer. OK, you understated
your income from 2015 by $65k. Here’s your bill for $150k.” “You can’t do
that!” “I get that a lot.”

------
vkou
The more interesting question is whether or not Coinbase will do the
responsible thing, and provide its American users with the right tax forms to
report their net gains/losses/sales.

I have a feeling that they'll leave the users holding that bag. Move fast,
break things, crowdsource all compliance costs to your users.

I, for one, wouldn't know the first thing about filing to the IRS that I spent
$250 to buy BTC in Feb 2016, and then spent $27.43 of BTC to buy a widget in
May 2017, and then cashed out the other $1,530 into my bank account in
November 2017.

How many of Coinbase's users do?

------
rb808
The internet initially was an anonymous way to access information. Now its the
least anonymous as corporations, ISPs, government and ad agencies watch what
you do.

Crypto currencies used to be anonymous too, wont be long before everyone is
watching your wallet as well.

~~~
mikeash
The internet was anonymous only because it was obscure. The Man barely knew it
existed, and couldn't be bothered to figure out how to track people.

Just like other types of security, anonymity through obscurity is a bad idea
and only works while your obscurity holds out.

Cryptocurrencies are going through the same transition. Initially they seemed
anonymous because nobody with power cared about them. Now that's changing.

If you care about being anonymous, take steps to ensure that it works even if
The Man starts looking.

~~~
sah2ed
I'm sure you know The Man evolved the Internet from ARPANET so they clearly
knew of its existence. Unless you meant to say that The Man didn't think much
of tracking people on the Internet until it become economically viable when it
reached critical mass.

[https://en.wikipedia.org/w/index.php?title=History_of_the_In...](https://en.wikipedia.org/w/index.php?title=History_of_the_Internet)

~~~
mikeash
Here, "The Man" refers to law enforcement, not the government in general.

------
howard941
Not for no reason does Yves Smith of Naked Capitalism [0] refer to
cryptocurrencies as "Prosecution Futures"

[0] [http://www.nakedcapitalism.com](http://www.nakedcapitalism.com)

------
supercanuck
so let's say you buy Bitcoin and instead of selling it back for a $ profit,
you go onto Overstock and buying 10,000 worth of stuff.

Is buying stuff on Overstock using bitcoin a taxable event?

~~~
Lon7
Yes. The same applies to when you trade bitcoin for other cryptocurrencies.
Although it is technically one transaction, if you want to be safe you should
treat it as two separate transactions:

1\. Selling the bitcoin for USD (this is taxable)

2\. Using the USD to buy whatever it is you want.

~~~
supercanuck
That is going to be really challenging for users to use this as a currency in
the USA.

------
sigjuice
Title should say Cryptocurrency instead of Crypto

------
searine
This was inevitable and a good thing.

Crypto has been extremely risky because there is no sure-fire exit strategy.
Now that reliable exchanges like coinbase are popping up, and playing by the
rules, that risk is going down drastically.

A reliable exchange means much less risk, and one of the ways it does that is
accurate reporting. That means accurate reports to you AND the IRS. If you
want a reliable market, that market has to play by the rules.

~~~
zbentley
Absolutely. But you're still going to see prices fall or bad price fluctuation
behavior in the short term, because:

\- A chilling effect/scared-lemming effect from the news will rattle some
people, with or without reason.

\- A reliable market is usually (not always) a less volatile market. A lot of
crypto traders who were capitalizing on the volatility of these markets will
now exit.

------
polskibus
All cryptocurrencies are down today. BTC lost 25%. I wonder if it is because
of this news or sth else?

~~~
peg_leg
Normal profit taking for the asset. Many projections continue to look
upward...outrageously upward. Not sure where it goes, but I put a little bit
of money in just to satisify my FOMO.

~~~
polskibus
Which projections? I don't see many serious analysis for Bitcoin climbing
further up, what I see is the opposite. Do you mind sharing ?

------
zerostar07
Isn't that the whole reason why they ask for identifying information? Hardly
news

------
LrnByTeach
it can't get any simpler than this .

> Case 2: taxes. BTC is an asset. If you buy at price X and sell at price Y,
> guess what, you owe taxes on Y-X. I don't understand how this is news to
> anyone.

------
jasonrhaas
The old Death & Taxes rule still applies, even for Bitcoin.

~~~
smokeyj
And who's face is on the bitcoin? Pay Satoshi what's due to Satoshi?

------
root_axis
Haven't you guys heard? Just trade bitcoins IRL. Fast, convenient and secure,
why would anyone bother with a bank?

------
zzxxddere333
This is GOOD news for bitcoin/cryptos.

Pay your taxes on your gains. If the IRS can turn this into a revenue stream,
it will solidify and legitimize it.

------
omegbule
Big brothers always going to get a cut of your $$

