

Do you have to file an FBAR for a bitcoin account? - babuskov
http://www.irsmedic.com/2013/03/28/bitcoin-and-fbar/

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JumpCrisscross
It is unlikely the IRS would need a new law to require Americans to report
significant Bitcoin positions on their returns.

If you have a stack of cash in a drawer, you are supposed to tell the IRS
about it. It does not matter if it's in dollars, yen, Swiss francs, or pounds
sterling. The fact that a lot of people don't doesn't make it legal, just
unlikely to be enforced unless you give the IRS a reason to hate you. If, on
the other hand, you have a garage with millions of dollars of un-reported cash
in it you become an IRS priority. This is no different, _under present law_ ,
from someone holding millions of dollars in bitcoins across several wallets.

The IRS could also treat bitcoins as an asset, which would classify bitcoin
transactions as barter and make holdings subject to capital gains (and losses)
in dollar terms. All said, it would not need new legislation to deal with
this.

~~~
andrewpi
> If you have a stack of cash in a drawer, you are supposed to tell the IRS
> about it.

Under what regulation?

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n3rdy
> Under what regulation?

Unfortunately when it comes to the IRS, current laws and regulations are
irrelevant. They prosecute retroactively and change the rules as they see fit
to scare the public into compliance.

The fact that people are so quick to ask about IRS compliance with bitcoins is
evidence of this. People feel an obligation to an entity they owe nothing to,
because they are scared to death if they don't report a couple bitcoins, that
FBI, secret service, or even ATF is going to break down their door and storm
in with assault rifles.

~~~
gamblor956
Stop spreading FUD. That's not how the IRS operates. It _very frequently_
loses court cases, including Tax Court cases, in which the taxpayer challenges
IRS actions.

More to the point--the IRS does not have police powers, it can only levy civil
sanctions after full due process. That means no ATF involvement, ever. The IRS
can, in limited circumstances, refer cases to the DOJ for further
investigation as a criminal matter.

~~~
oleganza
In other words, there are frequently cases in which IRS tries to take what
does not belong to them? If so, it only proves the point that people are
scared by IRS and it is IRS that spreads soul-killing FUD.

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tomku
The headline is entirely speculation. The article itself is heavy on the
ideology and light on facts.

Edit: The edited headline is STILL inaccurate. It's not a "law proposal". It's
one tax lawyer's speculation.

~~~
babuskov
While I agree with you, I'm having a hard time explaining the article in a
single short sentence. I actually found this link inside a long thread on a
closed LinkedIn group discussing potential law, so it's not just one lawyer
talking about it.

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seanmcdirmid
And how is this not any different from our reporting requirements now? Any
bank account we (US citizens) have over $10k must be reported.

~~~
jstanley
Because it's just something you have, which _might_ be worth $10k _if_ you
sold it.

If you own a car worth over $10k, do you need to report that?

~~~
iaw
Until explicitly stated otherwise bitcoins are considered, by definition, a
cash-equivalent for US citizens. I take it you don't file taxes in the US (or
at least don't have very many assets)?

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ancarda
I fail to see how any regulation regarding BitCoin would work in practice. I
think it would be hard to prove you have a BitCoin wallet as it's a quite
anonymous system. Besides, I could have my wallet.dat file on a remote server
and manage transactions through that.

I get the feeling the IRS right now think BitCoin is a joke and if/when it
becomes a big deal, they'll panic and try to pass shifty laws. None of which
will make any real sense.

If anything, they'll try to pass laws regarding moving money to/from USD <->
BTC.

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unimpressive
Excellent article, but it needs a title change.[0]

[0]: At the time of writing the title is "US citizens to report BitCoin
accounts over $10.000 to the IRS"

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Jackim
I think a comma might be more appropriate here. North Americans usually use
the $1,000 over the $1.000 format.

~~~
babuskov
Thanks, fixed it.

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redthrowaway
Interesting idea for a startup if they go through with this: a service that
provides plausible deniability for bitcoin wallets.

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tlrobinson
This begs the question, what is an "account" in Bitcoin? Can I not just make
multiple Bitcoin addresses with $10,000 each?

~~~
iaw
The exchanges will all eventually have reporting requirements for US citizens
making transfers above a certain threshold in a certain period of time.

Once the IRS actually gets to work and addresses this they'll probably end up
altering terminology so that a bit coin "account" is comparable to all bit
coins within an individuals direct ownership and control.

In the end investment proceeds from bitcoin will be taxed and traced. I
wouldn't try to outsmart or game the US government in terms of account
balances, I could see a "smart" early adopter going to jail because of their
efforts to avoid taxes.

~~~
SilasX
And if the money's never on an exchange, but just in the network? And how do
they prove I own any bitcoin?

~~~
jiggy2011
I wondered about this too, if it gets to the point where you can buy
significant goods and services with bitcoin then it's basically a tax evaders
dream.

~~~
dublinben
Only to the point where the IRS audits you for spending significantly more
money than you earn. Drug dealers and organized criminals get caught for this
very problem concerning undeclared cash.

~~~
jiggy2011
That's true, if you have a ferrari and declare minimum wage income you'll have
problems though there are many less conspicuous ways to spend/save/invest the
money.

You would certainly get a significant rise in tax evasion. I'm not actually
convinced that's a bad thing overall (though I'm not inherently anti tax). If
it brings tax schemes previously only available to the wealthy into the hands
of commoners.

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rishimoko
As Bitcoin has no country or jurisdiction of origin, I fail to see how Bitcoin
can be classified as foreign.

I also fail to see how the IRS has any regulatory power over a currency not
defined by US tax law.

~~~
tptacek
One easy way to disabuse yourself of this notion is to take a job working
remote for a Canadian company.

~~~
rishimoko
The difference being they can't see you getting paid in bitcoins. They can see
you getting paid through banks.

They have no regulatory power regarding Bitcoin because they have no way to
enforce it.

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temphn
Suppose you have the Bitcoin on a local wallet, and your computer crashed,
losing all the private keys (perhaps presenting the requisite Apple Store
receipts when you took it down to the store to get repaired). A bit like
losing your cash in a fire; computers do crash quite a bit. Not a lawyer, but
I think something like that might be difficult to disprove in court. On the
other hand, subsequent spending from those addresses would then be monitored.
So perhaps best to report that computer lost/stolen.

~~~
nwh
How would anybody know a particular address belongs to you?

Unless there's a direct connection with transactions, or you generate a vanity
address with your name in it, there's probably not much way that you could.

