

Bitcoin In IRS Crosshairs - Sealy
http://www.forbes.com/sites/robertwood/2013/06/18/bitcoin-in-irs-crosshairs-says-government-report/

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gesman
IRS is entitled to have opinion about receiving taxes from bitcoin
transaction.

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fixxer
A very astute statement that deserves more respect.

The IRS can and should claim what is theirs under the tax laws they operate.

However, I do not see a practical enforcement strategy.

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javert
Same strategy they use for everything else. Think about how they enforce taxes
on cash.

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lettergram
It would be interesting to note that due to the fluctuation in pricing of
BitCoins, you could probably get away with lower taxes by just doing a
conversion of BitCoins to USD at the lowest price that year. Then claiming all
of it in USD for the IRS because your BiCoin assets were assessed at that
price when you calculated them for taxes. There by avoiding part (up to
20-50%) of the tax.

Or just say you don't have BitCoins, since it would be mighty hard to track
that.

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betterunix
"Or just say you don't have BitCoins, since it would be mighty hard to track
that."

Yeah, nobody would ever think to look at the public record of Bitcoin
transactions.

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joejohnson
How would they know which bitcoin address corresponds to me? I can make a
brand new wallet, find someone on Local Bitcoins
([https://localbitcoins.com/](https://localbitcoins.com/)) and buy some
nearly-untraceable bitcoins with cash in a matter of hours.

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betterunix
Look, this is no different from lying about your income in any other
situation. People do it all the time. Yes, you can get away with it...until
you are audited, at which point the auditor is going to start checking on
things, and if you do not have a believable story you'll meet the same fate as
Al Capone.

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lettergram
Could just not say you own BitCoins, unless you have a couple thousand I doubt
you'll even be a blip on their radar. If you have that many, you could just
spread them around wallets too... Really I can't see them picking up on it if
you do it right.

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betterunix
OK, but this is not in any way Bitcoin-specific. You can do this with USD
also. Again, as I noted elsewhere, the mafia has this exact problem: they have
too much money to avoid being a blip (hence money laundering operations). What
is the use of money that you cannot spend?

Like I said, people cheat on their taxes all the time, and they often get away
with it. Bitcoin does not add anything to this. The IRS knows how to audit
cash, which is vastly more anonymous than Bitcoin.

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qq66
If you buy wood in Bitcoin, and then carve it into figurines and sell them for
Bitcoin, your profit is entirely in Bitcoin. Does this mean that you can pay
the IRS in Bitcoin? If so, do they have tax brackets defined in Bitcoin?

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ihsw
That's specious reasoning, there are many BTC->USD exchanges and the IRS could
easily compel you to exchange your currency for USD.

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qq66
Why? If you make profits in a foreign currency such as Swiss franc, you only
pay tax once you convert those to U.S. dollars.

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gamblor956
You are supposed to pay profits earned in foreign currency on a quarterly
basis, via self-reporting, much the same way that self-employment and
investment income is suppoed to be reported. In practice, if you use a US
financial exchange, they can pay the estimated taxes for you (but not all will
do this), and you settle the taxes owed (or refund due) at the close of the
tax year.

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javert
I thought you were supposed to pay profits on foreign currency only when you
"cash out" to dollars. Guess I was wrong. Was I just confusing the tax rules
for foreign currency, and commodities? Is that the rule for commodities?

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nthitz
I'd imagine most people do not use Bitcoin specifically to evade taxes. But
much like Capone, that could ultimately be one of the bigger problems.

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dropdownmenu
It was really only a matter of time before this happened, regulation of trade
(and the taxation thereof) is one of the main tasks of a government.

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bionsuba
I fail to see how trading one 25th of a representation of a solution to a math
problem can be considered bartering.

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drumdance
Alas, laws are written by lawyers. :-)

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jpdoctor
I would love to know why real estate qualifies for a 1031 exchange but
currency exchange does not.

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wmf
Honestly, our laws haven't been based on any legal principles for a long time.
It's a long list of special cases, just because.

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drivebyacct2
Who thinks trading in Bitcoin makes them magically exempt from the tax laws of
their country? Of course, pretty unsure of how they'd have any sort of
accountability or venerability for self-reported Bitcoin income.

"On your 1099 please list all Bitcoin address you've sent or received money
from". Right.

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gamblor956
That's how you report much of your income right now (in the US). Tax
collection in the US is generally based self-reporting, and that extends to
gain from foreign currency exchanges. Information collection from multiple
parties is used only to audit the self-reported data. If the IRS discovers
discrepancies upon comencing an audit, if may (probably will) impose
penalties, back taxes, and interest. Sufficiently large underreporting usually
leads to criminal charges.

Thus, self-reporting of Bitcoin income is fundamentally no different than the
existing tax regime.

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DanBC
The only scary thing is paying tax on something that has sometimes drastic
changes in value.

Taking tax off you, and simultaneously making it impossible to convert bitcoin
to dollar seems a bit tricky too. Unless they're happy to accept bitcoin as
payment of taxes?

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jedanbik
Purchases are taxed. Bitcoins can be purchased. It then follows that purchased
bitcoins are taxed.

A transitive relation, no?

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wmf
I don't think the IRS gets into sales tax; that's more of a state thing.

