
IRS sends warning letters to more than 10k cryptocurrency holders - rememberlenny
https://www.wsj.com/articles/irs-sending-warning-letters-to-more-than-10-000-cryptocurrency-holders-11564159523?mod=rsswn
======
modeless
> One version of the letter recently uploaded to the IRS website asks
> recipients who believe they have followed the law to sign a statement

Does anyone have a link to the letters? It drives me mad that journalists
refuse to link to primary sources.

~~~
bilbo0s
> _One version of the letter recently uploaded to the IRS website asks
> recipients who believe they have followed the law to sign a statement..._

Just a word of advice to anyone who may be receiving letters like this in the
future. Do not, under any circumstances, sign a statement that you have
followed the law without consulting with qualified counsel first. You should
know that every time you sign off on something to the federal government, if
it turns out not to be true, they got you on a count of Lying to the Federal
Government. (Yes, each signature is a separate count. At least that's the way
our lawyers explained it to us when advising us on FDA approval for our
product.) So you can easily rack up years behind bars in this situation right?
There's the original forms in you return. How many times did you sign papers
there? Then there's this statement that they want you to sign. That's another
potential count.

What's worse, you may have made an honest mistake, and you really do believe
that you are in compliance. So you go ahead and sign such a statement. Only
you weren't in compliance. Now what? I hate to say this, but just don't. Don't
sign it. Get everything looked over by the experts first. Maybe they can even
negotiate with the IRS on your behalf if you have made a mistake.

But you don't want to be in the position of having signed something like that
with honest mistakes potentially out there in your documentation.

~~~
anonymous5133
Exactly. It falls in line with similar to "don't talk to the police". Just
keep quiet. This applies to everything when dealing with any government
agency. The government is not your friend.

~~~
halter73
People say stuff to police that's later used against them in court all the
time, so I agree keeping quiet is generally good advice. You should still use
your common sense though.

I have a friend who took this advice way too literally when we were 18.

I was in the car when he got pulled over for speeding once, and he refused to
say a single word to the officer. He handed over his license, registration and
proof of insurance, but wouldn't answer any questions.

The cop asked how him how fast he thought he was going, and my friend didn't
even tell the cop that he wouldn't answer his questions. It was just the
straight silent treatment. The cop was clearly getting agitated. I was begging
my friend just to answer the questions, even if just say he didn't remember or
something, but he refused.

Fortunately, his grandma is in the backseat and really saved the day by
apologizing for her idiot grandson. My friend wound up only getting a warning
thanks to his grandma, but no doubt we would have gotten a big ticket at the
minimum if he kept the silent treatment up.

Another time, we both got busted for launching bottle rockets in a public park
a couple weeks after the 4th of July. There were several witnesses including
the people that called the cops, but once again my friend did the exact same
silent treatment to the cops. I sang like a bird about my own actions while
being careful not to say that my friend had also launched rockets.

Fortunately the questions were directed at both of us, and we weren't asked
specifically who all was involved before my friend felt guilty that I was
taking all the blame and started talking to the cops himself.

Good thing because in Ohio launching bottle rockets is an M-1 misdemeanor
carrying up to a six month prison sentence. The cops could have been jerks,
but instead they recommended that the prosecutor drop charges after we did
some community service. Had my friend stuck with the silent treatment, I fully
believe we would have been punished more severely.

Again I urge common sense. Every situation is different. Had it been someone
else or somewhere else or a slightly different situation, being quiet could
have been the right decision. This could be an example of white privilege, but
so far in my life, I've never regretted just being honest with the cops.

~~~
bonestamp2
> in Ohio launching bottle rockets is an M-1 misdemeanor carrying up to a six
> month prison sentence

I wonder if we're thinking of the same kind of bottle rocket... like a plastic
soda bottle propelled into the air by water and/or compressed air? Why is the
penalty so severe?

~~~
halter73
I've played with those too, but the bottle rockets I got in trouble for were
small fireworks.
[https://en.m.wikipedia.org/wiki/Skyrocket](https://en.m.wikipedia.org/wiki/Skyrocket)

------
fortran77
This is no different from any other profit or gain. The Government isn't
specifically targeting these people; it just wants them to make sure they
realize it's like any other investment.

~~~
crypto_throwa
Here's one situation where it is very different.

Say I get paid 100 BTC for doing a job worth $100/BTC at the time or $10000.
Now, say BTC drops to $1/BTC. I owe income tax on the $10000. Let's say I owe
$2000 (20%) in taxes. However, I only have $100 now. My effective tax rate is
2000%.

This does allow for a small deduction of capital gains each year. However you
can only deduct $3000 a year in capital gains. In a larger scenario, this
would take decades to fully receive your total deduction.

~~~
jpmattia
> _Here 's one situation where it is very different._

Good god, no it is not different.

When the internet bubble collapsed in 2000, it literally bankrupted some
people who had been compensated with stock options because of taxes.
Exercising the options not only had resulted in greater income, but it caused
AMT to kick in.

Moreover, some of the exercised options yielded stock that was still in lock-
up due to IPO agreements. (People were anxious to start the long-term capital
gains clock.) Shares plummeted even before they could be sold to pay off the
taxes due.

The moral of the story is: Make sure to set aside money (liquid, USD) for
taxes if you get hit with a sudden windfall. (edit addition, JumpCrisscross
comment below has it right.)

Here's a couple of links to that history:

[https://www.chicagotribune.com/sns-tech-taxes-
story.html](https://www.chicagotribune.com/sns-tech-taxes-story.html)

[https://www.mercurynews.com/2008/11/10/rescue-bill-offers-
re...](https://www.mercurynews.com/2008/11/10/rescue-bill-offers-relief-to-
some-valley-taxpayers-hit-with-the-amt/)

~~~
JumpCrisscross
> _When the internet bubble collapsed in 2000, it literally bankrupted people
> who had been compensated with stock options_

Best practice is to sell stock sufficient to pay for taxes when exercising
options. (Same for workers subject to U.S. taxation being paid in a foreign
currency.)

~~~
nostrademons
Alternatively, you can sell a covered collar that protects your downside
enough to know that you'll have the cash on hand come tax time. This limits
your upside somewhat, but usually less than selling the stock outright. Mark
Cuban famously used this strategy to protect his Broadcast.com payout under
lock-out.

[https://www.acceleratedfi.com/real-world-options-example-
how...](https://www.acceleratedfi.com/real-world-options-example-how-mark-
cuban-used-options-to-survive-the-dotcom-crash/)

(Check the details of your contracts with an attorney and financial advisor;
I've heard that some lock-outs now explicitly forbid trading in derivatives of
the stock to prevent doing what Cuban did. With financial engineering being as
advanced as it is, though, it's always possible to create a "synthetic"
derivative that is nearly guaranteed to have the same value as a particular
options strategy without mentioning the particular asset involved.)

~~~
H8crilA
Trading options against employer's stock may be forbidden by insider trading
policy. It was in my previous job (along with shorting, and only trading
during trading windows). Can't say I disagree with such policies.

Other than that yeah, get a collar or just straight up buy some puts. Or like
others recommended - sell some % instantly and put in high grade bonds, or a
savings account. Forgetting taxes is a big mistake.

------
blhack
To highlight how nuts this could be:

I travel to India every year, and I always carry with me a few hundred USD
worth of rupees (the local currency).

It would be insane for me to try and track the value of the rupees (in USD)
for every time I bought something, and calculate the deltas between that and
what I originally gave to the money changer. It is completely impractical to
do that, and while I'm not an accountant, I have an intuition that for any
reasonable amount of money that any traveller would be carrying with them, the
fluctuations are irrelevant.

And yet this is what people using cryptocurrencies are expected to do.

Obviously if there is a large capital loss or gain, then this should be
reported on your taxes, and I suspect the same is true for foreign currency
exchange.

I guess to ask a question: are individuals expected to track the fluctuations
in USD value of their cash while travelling? If so: is there a threshold? Why
is crypto different (other than some belief that it might be more convenient).

~~~
jefftk
The IRS has decided to treat cryptocurrency as an asset (like gold) instead of
a currency.

~~~
kosievdmerwe
Well a lot of people are treating cryptocurrencies as speculative assets. ICOs
wouldn't have been such a big thing if people didn't do that.

So why shouldn't the IRS do the same?

~~~
patrioticaction
The ICO market crashed and trading volume on crypto exchanges keeps dipping
lower and lower and lower. Its main use-case has shifted back to currency
after a failed bid as a security.

~~~
mirekrusin
Can you refer me to the source of "crypto exchanges [volume] keeps dipping",
please? I'm looking at BTC volume and it's not dipping at all. There was a
sharp drop in Jan '17 when Chinese exchanges were forced to close. Other than
that volume correlates to the price.

------
iaw
My experiences with the IRS have been nothing but positive over the years.
They were always polite and clear in their positioning. They either made
corrections in my favor or sought more information to identify what if any
additional taxes I owed due to a mistake in my filing.

What I suspect is happening here is that the IRS is figuring out how to
prioritize it's investigations. Sign or don't, it only determines when you are
investigated. Once they've identified a holder of bitcoin it's likely that an
investigation will be forthcoming.

------
dawhizkid
So long as this is the case how can it possibly make sense to use bitcoin to
actually transact e.g. fulfill the vision of bitcoin as "digital money" if
every time you buy a cup of coffee with bitcoin the expectation is that you'd
have to calculate capital gains and report every year?

~~~
zcrackerz
It's not buying a cup of coffee that's the issue. The issue is in converting
between currencies, which is no different than investing in foreign
currencies. If you exchange USD for EUR, wait a while, then exchange back to
USD and you've made a profit, it's taxable.

~~~
PKop
_Every_ taxable event is something you have to keep track of.

And _spending_ appreciated crypto, even on coffee, or anything else, is a
taxable event.

So the point stands that using crypto as "spending money" vs purposefully
saving it as store of value is going to be a real pain, for all of the
technical reasons but also the tax complexity.

To see why this is the case, imagine someone saved BTC as store of value, then
years later exchanged it for a house.

They didn't sell if for $. But they used its appreciated value to buy
something. There is a capital gain involved, and so taxes as well.

------
ddtaylor
I don't think most people getting phone calls or letters from the IRS think
any of them are real at this point.

~~~
yeezyseezy
Worth noting that the IRS will not call without having sent a letter first

~~~
anonymous5133
New scams have been sending fake letters claiming to be from the irs.

~~~
enobrev
I haven't seen the letters. Isn't that considered a federal crime since it's
fraud via the US Postal Service?

~~~
blhack
Isn't it fraud already a federal crime?

~~~
garmaine
Federal? No. You defraud someone and it is state, local, or even civil..
unless circumstance (e.g. via mail) makes it a federal offense.

~~~
blhack
What about if you defraud somebody by pretending to be the IRS?

~~~
ISL
Probably a federal crime.

------
donclark
So why do we have to file? Why cant the IRS just tell us every year if we owe
or not and how much?

~~~
xamuel
A serious answer that isn't just "lobbyists":

Even if the IRS had perfect info about all your income and investments, there
are decisions you can make which effectively make taxes non-deterministic.
Suppose on two different dates, you bought shares of a company. Then on a
later date, you sold one share. You get to choose which purchase date to count
the sale as being against. This is important because you pay on the profit
made based on that assumption. It also effects whether you pay short-term or
long-term capital gains taxes for the sale.

Say for example you bought 1 share for $100 two years ago, and another share
for $500 one month ago. One week ago, you sold one share for $1000. If you
count it as selling the $100 share, then you must pay taxes on $900 in profit,
BUT you enjoy the lower long-term capital gain tax rate. If you count it as
selling the $500 share, you must pay taxes on only $500 in profits, BUT you
suffer the short-term capital gain tax rate. Which of the two should you do
(if you're a hypothetical perfectly rational actor who always makes absolutely
optimal decisions)? Depends on what you plan to do with the other share, what
you think is going to happen to the stock price, and so many other factors you
could write a 10,000-page book about them...

~~~
sowbug
Lot identification actually isn't a tax-time decision; it's a transaction-time
decision. If you don't identify the specific lot you're selling (or more
specifically if your broker isn't given or doesn't follow instructions which
lot to sell), then in general sales are treated as FIFO, which might not be
surprising because that characterization leads to maximum gain in a rising
market. See Internal Revenue Service Publication 550 for more. This means that
the tax treatment of a stock sale is in fact fixed at the time of transaction;
moreover, it's entirely automatable by standing instructions to the brokerage,
which most brokerages routinely offer as a feature ("tax optimizer" or "tax-
lot optimizer" or similar language).

(This of course is all US tax code, not applicable to US states or other
countries.)

~~~
xamuel
Not a tax lawyer, but _reporting_ of lot identification is a tax-time
decision, at least for the things being discussed in this thread.

If it's transaction-time then that's totally unenforceable since this
discussion applies to things as diverse as trading physical goods for other
physical goods in an ad hoc unrecorded environment. It would make no sense for
it to automatically be FIFO anyway, for example a person with amnesia might
temporarily forget their ownership of longer-term holdings.

And for just one example where FIFO would be suboptimal despite a rising
market, merely suppose that you know you're about to die and your children are
about to inherit everything with a higher cost basis, but you need a bit of
cash right now. (I highly doubt tax optimizer software has achieved the strong
AI that would be necessary to know if you're about to die.)

~~~
linuxftw
You've clearly never bought and sold stock in two different lots in the US
before. Brokerages report cost-basis to the IRS, this basis will be calculated
based on your selection when you initiate the trade.

You can't start talking about other capital gains in the same sentence as
regulated securities as the reporting requirements are going to be different.

------
AznHisoka
For what it's worth, Gemini doesn't report everything to the IRS. This is the
response I got from them when I asked last year:

 _" Gemini is required to report gross proceeds paid to US customers from
bitcoin or ether sales on the Gemini exchange on IRS Forms 1099-K when
applicable reporting thresholds are met. Typically, Form 1099-K reporting will
be required by Gemini where the number of bitcoin or ether sales transactions
on the exchange exceeds 200 transactions per year AND the total sales proceeds
from all sales transactions exceeds $20,000 per year."_

~~~
x3n0ph3n3
Coinbase didn't "report" these account holders, they were given a subpoena to
turn it over.

------
hcurtiss
I'm sure there's a lot to know about this topic, but it's odd to me that
they'd treat a "currency" as an appreciating asset. If I'm given a dollar (or
peso) as change, and if between the time I receive the dollar and the time I
spend it the currency purchasing power increases, I do not pay taxes on that
gain. I can just buy more stuff with that dollar (including other currencies).
In this instance, where it's increasingly true that bitcoin can be used as
currency to purchase goods and services, it's odd to me that those are
realizing events that require you calculate gain. I get it that shares of
stock work that way, but I can't buy a hamburger with shares of stock.

~~~
lizknope
How practical is bitcoin as a currency for day to day use. I thought the
transaction time was 10 to 30 minutes. I get frustrated at the checkout
counter when my credit card takes longer than 10 seconds.

10 to 30 minutes seems a lot closer to how long it takes for a stock sale to
go through on E-Trade so I can see why the IRS would classify it more like a
stock than currency.

~~~
Jach
Ignoring the periods in the past with very high transaction fees and network
congestion, for the most part it's been as practical as a card and often
faster since I can just use my phone to scan a QR code and click a verify
button. We can also ignore the lightning network in the calculation of
practicality. Normally if I send you a payment you'll see the notification of
a pending transaction with the amount on your side pretty much immediately.
There is a risk that I could after walking off with the goods create a new
transaction with a higher fee (especially if the replace-by-fee flag was part
of the original send, and one might want to be more cautious if that was the
case) to send them to myself instead, though even if I try it's not guaranteed
to succeed. If you wait around for on average ten minutes (could in actuality
be a few seconds, could be more than ten minutes) for the transaction to get
one confirmation in a block you can be a lot more certain no shenanigans will
occur. Most merchants will use a third party system that will take on this
risk for you. I don't know if third party systems like Stripe do the same for
credit cards, but credit cards have the same risk profile. (I can call up my
card company and claim a fraudulent charge after getting the goods. They'll
then in turn not honor the charge. It takes something like 180 days before a
CC charge becomes much harder for the payer to dispute, vs. bitcoin's 10
minutes for very hard and 60 minutes for basically impossible. Seems like an
ok tradeoff to me.)

~~~
navigatesol
> _for the most part it 's been as practical as a card and often faster_

Have you ever used a card? If you think that opening your phone, scanning a QR
and then hitting "verify" is faster than a tap or swipe of your credit card,
I'm not sure what to tell you. _Best_ case scenario, they're about the same.

> _I can call up my card company and claim a fraudulent charge after getting
> the goods_

And they'll investigate and determine you committed fraud, and you'll be fined
or go to prison. What's the equivalent with Bitcoin?

~~~
Jach
I of course use a card frequently, though have yet to have the "pleasure" of
dealing with a tap-to-pay card. I don't really want to. I'd say average case
(not best case) is they're about the same, but yes, getting out my phone and
unlocking it, opening the bitcoin app, scanning the QR code and hitting
confirm, then putting my phone away, is indeed often faster than getting out
my wallet, picking out my card from the other crap in there, inserting it into
the chip reader (or swiping it), and hitting confirm (after maybe having to
enter a pin or zip code or tell it "this is a credit card" or dismiss a "do
you want to donate to grocery store's cause-of-the-month?" dialog) and then
sometimes having to sign a printout or a touch screen, then putting my card
back into the wallet and putting my wallet away. CCs are a usability nightmare
that I'm amazed we put up with.

> And they'll investigate

Have you never reported fraudulent charges before? There's basically no
investigation unless it was an ACH thing.

~~~
sjy
Using a tap-to-pay card would probably change your perspective. They were
specifically designed to eliminate that usability nightmare. I find them
easier to use than Apple Pay (because Touch ID only works about 90% of the
time for me), and certainly easier than scanning a QR code (look at the queue
of people struggling to enter any concert with electronic ticketing). The only
downside is that you still have to carry a card.

------
Scoundreller
So how does BitCoin Cash distribution get handled in USA?

Is it like a dividend? A stock split? A spin-off?

What about all of these airdropped tokens? Are they dividends, with tax
payable even if you didn’t “collect” them in some way? Or splits?

Can you deduct the Day1 value of the new token from the capital gain on the
first token? Or do you assume the cost of the new token was $0 and any sale is
a total capital gain?

~~~
pilingual
I'm not sure the burden is on the individual unless they recognize receipt of
the cryptocurrency. If someone mails you $100 and you discard it I don't think
you owe taxes on it. Same for air drops and forks like Bitcoin gold.

Bitcoin cash, if you acknowledged receipt of it, is exactly like earning $266
and must be reported, at least that's what tax experts noted at the time:
[https://www.forbes.com/sites/greatspeculations/2017/08/04/ho...](https://www.forbes.com/sites/greatspeculations/2017/08/04/how-
to-report-bitcoin-cash-and-avoid-irs-trouble/)

~~~
Scoundreller
The $100 for nothing, I agree.

But if something that you owned mailed you $100 because you owned them, that
sounds taxable in some way.

------
trixie_
There are a bunch of websites that will help compile your crypto trades into
the forms you need for your taxes. This year I used cointracker.io and it
worked pretty good for me. It created a file that was easily imported into
TurboTax. Also if you lost money on crypto you can claim some of that as a
deduction.

------
Causality1
Crypto trading is so casual it's very easy to not realize you have legal
responsibilities. That's what got Chris Boden of The Geek Group arrested.

------
cwkoss
As far as I understand it, IRS wants cryptocurrency traders to report USD
profit on every trade. This gets extremely ugly if you are trading one
cryptocurrency for another, as these trades are unclear as to whether they are
an entry or an exit.

Now, I simply recommend that everyone only trades USD-to-crypto and back,
never crypto-to-crypto if you want to comply with tax law - it gets very
complicated fast.

~~~
sdinsn
> This gets extremely ugly if you are trading one cryptocurrency for another,
> as these trades are unclear as to whether they are an entry or an exit.

Trading one crytocurrency for another is a taxable event. Just like how
trading one real currency for another is a taxable event. It's not unclear and
trading platforms provide tax tools that solves this problem

I traded crypto and paid my taxes

~~~
171243
I believe prior to 2018 this was not the case with crypto.

~~~
verdverm
Weren't they treated more like property then?

~~~
uwuhn
I think Like-Kind is the term. Someone please correct me if I'm wrong, but
IIRC any crypto-for-crypto was a Like-Kind exchange prior to Jan 1, 2018.

~~~
garmaine
There is no evidence this is the case except wishful thinking.

------
rolltiide
Having talked to many people I do believe there is low tax compliance, but
having read how the IRS rationalized the Coinbase subpoena to the judge I
realize they have no idea to tell if they have compliance or not.

They merely did a search string for 2015 for "bitcoin" in tax filings and
found 800 people filed that way. So I checked my 2015 tax filings and saw I
had manually entered "LTC" for closing a litecoin trade to US dollars. Hm
okay, so one of the most compliant US citizens isn't counted as one of the 800
people, got it.

So then Coinbase's compliance with the subpoena now has them automatically
sending Schedule D information to the IRS and to users based on a net value of
any holdings in their account. But Coinbase doesn't know what any of the
holdings or transactions represent, just like your bank doesn't know what your
deposits and transfers represent. A third party is now assuming that its users
are on the hook for capital gains, causing a filed accounting discrepancy for
everyone.

Fascinatingly incompetent.

~~~
VLM
"Coinbase doesn't know what any of the holdings or transactions represent"

I had a KYC interview with Coinbase wondering where my coins came from. (I
mined them in the 2009 to 2010 era when they were worthless, mined before the
famous 10000 bitcoin pizza delivery, LOL). So they have a statement from me,
which is probably now on file with the IRS.

Now here's a puzzler... I got my 6174-A and so I verified my coinbase register
and old tax form reported cap gains from sales match to the penny. Which they
do. So now what do I do, just sweat I guess.

~~~
H8crilA
As always - get a professional to look into your situation. Hopefully you've
made enough profit to pay the few hundred $ and forget about it. And if you
made it big time - congrats man!

------
todipa
Chuck Rettig, the new IRS commissioner comes from a tax litigation background.
He's got a lot of experience and is preparing for one of the next big tax
battles which is how to bring crypto under compliance with the current tax
regime.

I still think they lack the technical knowledge to understand crypto and as a
result, you'll start to see an increase in information being requested.

In any case, I willing to bet that you'll have a couple of court cases that
will really bring crypto into compliance in a way that makes sense for 80% of
the people.

~~~
pcwalton
> I still think they lack the technical knowledge to understand crypto and as
> a result, you'll start to see an increase in information being requested.

On the contrary, I think that the IRS knows cryptocurrency very well. The
reason why the IRS requests information is that they want to prove to a court
that they went out of their way to give taxpayers the benefit of the doubt.
They want to be able to tell a judge "we gave this person ample opportunity to
explain the situation and correct any misunderstandings before taking
enforcement action". The IRS will go through the motions of requesting
information even if— _especially_ if—they know full well that fraud has
occurred, just to strengthen their case.

------
matt-attack
> The Coinbase customers whose information was turned over bought, sold, sent
> or received digital currency worth $20,000 or more between 2013 and 2015.

Is that in today's value or at the time?

~~~
rphlx
I believe they valued at time-of-transaction. e.g. if you had no other
transactions except for a $100 buy in 2013 that you immediately withdrew to
personal cold storage, and then that appreciated to $20k+ today, you shouldn't
have been included, assuming they supplied only the minimum amount of info
legally required.

------
firemancoder
I got a notice that registered mail failed to deliver from the IRS. Since I
have no other dealings/reason for them to send me mail, I'm assuming I'm one
of the ones. Will find out Monday.

~~~
firemancoder
And for the record, all my bitcoin dealings have been this year (late starter)
so I have nothing to worry about with unclaimed income. (Thank you flying
spaghetti monster)

------
bb88
This is a question I don't know. And I was wondering if HN could shed some
light on this.

The IRS treats bitcoin as an investment property. What happens when one trades
investment property for a car, or a boat, say?

~~~
AlexandrB
I’m not an accountant, but based on what I know about stocks you would get
taxed on you financial gains (if any) based on the market value of the bitcoin
at the time you trade it for the car.

~~~
bb88
So that would probably hold true with bitcoin since the IRS sees bitcoin as an
"investment property" more akin to stocks and bonds.

~~~
beefalo
It is the same as using anything other than USD to trade for something. Wether
that is Stocks, Euros, GBP, goats, if you bought it at one price and traded it
for something else based on a different price, you owe taxes for your capital
gains from holding that asset.

------
ilovecaching
So under the current laws does a person only pay taxes when converting to and
from fiat to crypto, or does it apply to crypto transactions of any kind?

~~~
teej
I believe this is where a lot of the confusion comes from. If you use Coinbase
to directly trade crypto (e.g. BTC for ETH) this is a taxable event on your
BTC even though you never touch fiat in the process.

~~~
171243
Didn't this recently change? Prior to 2018 was it not considered a "like for
like" transaction?

~~~
sfkdjf9j3j
Only against the advice of most accountants. Exchanges between different
grades of the same precious metal aren't considered like kind transactions, so
it seems pretty unlikely this "trick" would work for crypto.

------
jonjonBoy
Wish there's a way to change the regulation to leave crypto alone.

Me watching too much fight club and partying with too much tea..

------
a2tech
Glad I sold at the peak and made sure that my accountant filed the appropriate
gains paperwork.

------
liquidify
Crypto currencies have properties of a lot of different types of assets. The
crypto tax scenario should reflect that it is different than any existing
single class of asset and should be treated as uniquely as it is.

------
HocusLocus
I am not a tax expert, so I'll spare you my advice.

------
dev_dull
The math behind crypto doesn’t magically make you immune to government
oversight. All they have to do is ask, and you better not lie.

~~~
mtw
It depends where you do your transactions. If you do it on CoinBase, yes, you
are going to be tracked. There are many other options though where you don't
have to provide ID.

~~~
jedberg
Right now it's pretty hard to live on cryptocurrency alone. Which means at
some point you will need dollars (or Euros or whatever), and that transaction
is almost always traceable to a person.

~~~
mtw
I don't know a lot of people who only have cryptocurrency income. Most people
have a regular job, but then decide to put a % of their savings into crypto.
You can use your job income to pay for transactions. If there are any
cryptocurrency income, it's then up to you how to manage that. Put that into
traditional finance (then declare it), hold (not selling, so there are no
capital gains, so no tax), or use crypto to buy products that are outside
traditional finance

~~~
jedberg
This is true with cash too. You can take part of your income into cash and
make anonymous transactions with cash, and maybe even profit from them in an
untraceable way.

But you better hope it is truly untraceable, and that no one else involved in
that transaction makes it traceable, otherwise the IRS will come for you.

Same with crypto, except it is a lot easier for someone else to make you
traceable since all the transactions can be traced to their origin on the
blockchain. If someone you transacted with files US taxes, it's not that hard
for the IRS to trace that back and ask who the BTC came from. It would only
take one person turning on you for you to get caught.

It's really not worth it.

------
mtgx
It's not sustainable to tax regular Joe for each and every cryptocurrency
transaction due to the nature of cryptocurrencies, especially in the US where
people have to do all of their taxes on their own.

I believe Canada has something like 20% tax on the profits you get out of
cryptocurrencies for the year, which I think is a much simpler system that
makes much more sense.

~~~
keltex
The U.S. works the same way. You are taxed on the net short or long term
capital gains not on every transaction. So if you made $1000 on one trade and
lost $500 on another you would only be taxes on the net $500 profit.

~~~
habosa
That's actually not true right now. Every time you trade it's a taxable event.
So if you went USD --> BTC --> ETH --> BTC --> USD you would need to show 4
transactions to the IRS.

The total tax burden will look a lot like (Final USD - Total USD) * (Short
Term Cap Gains Rate) but you can't just report it that way.

In 2017 I mucked around with Crypto and accumulated about 50 transactions over
~5 currencies. Reporting was a monster pain in the ass.

~~~
jandrese
Given the libertarian bent of some people who are most attracted to
Cryptocurrencies I'm guessing many don't report anything to the IRS
voluntarily.

Even regular capital gains are kind of a pain to report, especially when
you've inherited the stocks from a deceased relative who kept no records about
them.

------
xenospn
Fake money, real problems.

------
a_bitcoin
Sure, it makes sense to tax earnings from cryptocurrency trading.

But aren't there bigger fish to fry, richer people more flagrantly evading
taxes? Let's sort that out first, k

~~~
banachtarski
There are two separate matters here. Defining the law and enforcing the law.
Misreporting capital gains on crypto violates existing law and is illegal
today. Tax evasion by legitimate means (401ks, IRAs, writing off losses) is
perfectly legal, and if you or I have complaints, this should be taken up with
policy makers and at voting booths.

~~~
JumpCrisscross
> _Tax evasion by legitimate means_

Tax _avoidance_ is legal. Tax _evasion_ is illegally not paying taxes. (The
distinction is purely legal.)

If you don't like someone's tax avoidance, you change the law. If you don't
like someone's tax evasion, you prosecute them.

~~~
banachtarski
Thanks for the correction, totally mixed up the terms.

------
pard68
So the real question is, what exchange can I use as an American that doesn't
report to the IRS?

~~~
dmerrick
You could sell your crypto to someone for cash

~~~
hombre_fatal
[https://localbitcoins.com/](https://localbitcoins.com/)

------
AdrianB1
This will be a very unpopular opinion, but it is true: USA is much better than
200 years ago; if 200 years ago you were a slave, 100% of your output belonged
to your master. Now your government owns only 40-50% of your output and you
feel totally free. The only bad thing is that almost 100% of the population is
now a half-slave. You don't chose what to pay, how much and what for, you just
have to pay up, or else. Yes, you get some services, whatever the governments
wants to, same as slaves got shelter and food, as much as the master wanted
to. I see some similarities, tell me they don't exist.

~~~
wpietri
This is just foolishness. Are some rich people still exploiting others and
rigging the system? Sure. But chattel slavery was an extraordinary evil. It's
at best vacuous to put it in the same moral bucket as a democracy where people
vote to, say, make sure old people don't starve in the streets.

~~~
rphlx
> people vote

The "high taxation is not slavery, because you voted" argument lost all merit
once net recipients of the welfare state became able to out-vote its net
contributors - which has already happened in the US.

> make sure old people don't starve

If only that were what the extent of what social security actually does. But
it's not properly asset tested. So broke millenials are paying a ton of
payroll taxes, which are - after substantial adminsitrative overhead -
transferred to their elders who almost always have significantly more assets
than they do, and often don't even need a transfer at all, let alone as their
only way of avoiding starvation.

~~~
wpietri
One, your numbers for "already happened in the US" are at best erroneous. The
question of who gets what from labor is complicated, but the one thing for
sure is that there are no easy answers, because labor itself is deeply social.

