
IRS Notification - bdcravens
https://support.coinbase.com/customer/portal/articles/2924446
======
tristanj
This is an update to
[https://news.ycombinator.com/item?id=15815811](https://news.ycombinator.com/item?id=15815811)
( _Coinbase Ordered to Turn Over Identities of 14,355 Crypto Traders to the
IRS_ ) from 3 months ago.

------
seibelj
I highly recommend that you do not commit tax fraud. Pay your taxes - not only
the right thing to do, but because of the lack of anonymity provided by every
blockchain save a few, it is trivial to track your trades.

You don’t want to go from mild-mannered software engineer to tax criminal, do
you? Think about it hard. Government lawyers and regulators are indeed
incentivized by metrics - the max number of pleas and convictions. They don’t
care about your stories.

The smart move is to pay what you owe, and if you don’t like it, structure
your affairs for the future to minimize taxes. But it’s very risky to lie
about your past.

Additionally, tech industry workers have not exactly been worshipped by the
press as of late. Expect a lot of backlash if you, an already highly paid
knowledge worker, cheated to pay what taxes you dutifully owed. The press
would not be kind to you, and they would not be in the wrong.

~~~
amorphid
To me, having to cut a big check to the IRS is the ultimate first world
problem. I'd love to owe the IRS a million bucks because I made way more than
that :)

~~~
UncleMeat
Yup. I'm happier if I am paying more taxes, as it means I am making more
money.

~~~
BigChiefSmokem
As an immigrant to this country it feels good to pay my taxes every year. It's
the least I can do for everything this country has done for me and my family.

------
DINKDINK
From the summons[1]:

"The Narrowed Summons “do[es] not include users: (a) who only bought and held
bitcoin during the 2013-15 period; or (b) for which Coinbase filed Forms
1099-K during the 2013-15 period.” (Id. ¶ 2.) According to Coinbase, the
Narrowed Summons requests information regarding 8.9 million transactions and
14,355 account holders."

Looks like the IRS is encouraging hodling /s

Seriously though I'm glad that the tax court reduced the reporting requirement
to just people who likely have a tax obligation (bought and sold) than people
who merely bought and hadn't sold.

[1][https://assistly-
production.s3.amazonaws.com/75687/kb_articl...](https://assistly-
production.s3.amazonaws.com/75687/kb_article_attachments/128798/CoinbaseOrder_original.pdf?AWSAccessKeyId=AKIAJNSFWOZ6ZS23BMKQ&Expires=1519430515&Signature=VNPqt1DH2RSgmZykg4q71MmaoVQ%3D&response-
content-disposition=filename%3D"CoinbaseOrder.pdf"&response-content-
type=application%2Fpdf)

~~~
bhouston
Holding avoids triggering capital gains right?

~~~
berbec
Yes. You only owe taxes on the dollar (capital) increase in value (gains),
calculated when sold.

------
uberswe
They profited or earned money and it wasn't declared when doing their taxes.
People who should be worried are those that didn't follow the rules. What
makes it interesting is that cryptocurrencies are very new and it might not
have been obvious if taxes should have been declared at the time (you probably
should have). If they declared or can show that they tried to declare then
it's no big deal...

~~~
dawnerd
I wonder what the threshold is for the IRS. If I sold some coin and only made
a couple dollars, is it even worth the effort? What about 100 dollars?

~~~
electricslpnsld
I've had friends audited for not declaring _cents_ of interest they earned
when their landlords placed security deposits in savings accounts...

~~~
pishpash
I call BS. Anything under 50¢ is rounded down to $0 by IRS's own accounting.

~~~
jkaplowitz
They give taxpayers two rounding options of which a given filing must
consistently pick one or the other.

The first is to put whole dollar amounts on all the lines on all the forms,
and to round those as you say. Even that one doesn't round all intermediate
numbers used in calculations, only the lines on the form.

The other is to be precise to the penny.

Both are allowed by the official instructions, even if software like TurboTax
Online always picks the first.

~~~
pishpash
Pretty sure tax software rounds every entry (that means input data and
"worksheet" numbers), not just the numbers on the final forms. Also there are
no "intermediate" numbers in tax calculations as each step is always an
elementary arithmetic computation (+,-,*,/).

However, if you do things by hand there is some ambiguity whenever you have a
choice to bundle or unbundle accounts, because if you enter them separately,
you've rounded before the sum, but if you enter one total, you are supposed to
round after the sum. You can save a buck here and there if you want.

~~~
jkaplowitz
You don't have a choice about how to do it in many cases, though I think I
know the example you mean which is valid.

One example of how preliminary numbers (a better phrase than intermediate)
aren't rounded would be if someone has three Forms W-2 in a year, such as from
three jobs. All three Box 1 amounts are added up unrounded regardless of
whether you put a whole dollar wage total on Form 1040. If the three Box 1
amounts end in 35 cents, 40 cents, and 45 cents (just to pick a suitable
example), you're going to show an extra buck of wage income than if you could
round those cents away.

IRS guidance from the 1040 instructions:

"You can round off cents to whole dollars on your return and schedules. If you
do round to whole dollars, you must round all amounts. To round, drop amounts
under 50 cents and increase amounts from 50 to 99 cents to the next dollar.
For example, $1.39 becomes $1 and $2.50 becomes $3.

If you have to add two or more amounts to figure the amount to enter on a
line, include cents when adding the amounts and round off only the total."

------
chanfest22
Ooof — for folks looking for a solution to their crypto tax problems, check
out a service like [https://www.cointracker.io](https://www.cointracker.io)
(full disclosure: I'm working on this product)

~~~
rlorenzo
This is exactly what I was looking for.

Just wondering, I see the Tax Summary. It seems to be all that I would need to
fill out my taxes, right? What does generating the 8949 form give me?

~~~
chanfest22
You can use the transaction history CSV generated to report your taxes
yourself (just requires manual effort on your part). The Form 8949 is the
actual IRS Form for Capital Gains and Losses, and CoinTracker actually
completes the form based on your preferred accounting method based on your
transaction history. Feel free to ping feedback@cointracker.io for more info.

------
mindslight
I guess this is going to be a thread where tax victims soothe their recently-
bruised egos by voicing support for the persecution of others.

Please, don't be the crab bucket.

(But yes, it also isn't very bright to reveal one's identifying information to
eg Coinbase and not expect this to happen. /nofriends)

~~~
wtfstatists
True but lets take it as punishment for not voting with feet before. Get out
while you can, its only going to get worse.

~~~
Cyberdog
Where can one go to avoid taxation? I suppose it's theoretically possible in
terra nullius places, but I don't think I could talk the wife into moving to
one of them.

~~~
wtfstatists
The aim would be make govts scared of losing tax dollars and get more bang for
buck. So switching even state would work.

~~~
gowld
Federal taxes apply nationwide.

------
all_usernames
Coinbase may or may not send you a 1099 form.

"Coinbase provides Form 1099-K to certain business customers and GDAX
customers that have received at least $20,000 cash for sales of virtual
currency related to at least 200 transactions in a calendar year." Coinbase
Tax FAQ

------
dopamean
I feel like I don't know enough to care about this. I suspect many people will
be upset about it but I just don't see it. Is what the IRS asking for any
different from the kind of access they already have to traditional banking and
trading accounts?

~~~
wmf
In traditional accounts the brokerage would send a 1099 form to the customer
and the IRS. But Coinbase doesn't do that for some reason, so the IRS is suing
them to get the information. And for some reason the IRS initially asked for
more information than they need, so there was some legal wrangling to narrow
the information. It's like both Coinbase and the IRS are trying to make things
more complicated and scary.

~~~
gowld
They are both trying to make things more _simple_ , for themselves.

~~~
wmf
In the end, Coinbase still had to produce the data and they spent a ton of
lawyer hours. I don't think they simplified anything. Maybe they were trying
to set some kind of precedent that they don't have to assist in taxes in any
way.

------
shiado
An interesting thought experiment is if it is possible to create some sort of
Bitcoin derivative from private keys and use it as a means to exchange Bitcoin
and avoid any sort of rules used for taxation of cryptocurrencies.

Ownership of bitcoin is the ownership of a private key which is simply a 256
bit number that is used in ECDSA for signatures. What if I transform this
number into some other form using steganography and embed it in an image, or
maybe I just shift it left 100 bits and claim it isn't a valid Bitcoin key and
hence I own no Bitcoin. Is ownership of the resulting medium considered to be
ownership of Bitcoin? Can I trade it without it being considered
cryptocurrency? Can I own it without it being considered to be owning Bitcoin
and later convert it back and "acquiring" new bitcoin avoiding capital gains?

~~~
umanwizard
In the US, when existing law doesn't determine what will happen in a
particular case, a judge uses his or her judgment, and creates new law. Since
most judges aren't idiots, they aren't going to be tricked by this sort of
scheme.

Edit: I don't even think this would require new law. You presumably don't get
to claim you don't possess the contents of a safe because you wrote the
combination down in code or backwards or something.

~~~
kelnos
Judges do not create new law. They interpret existing law and decide if a
potentially new use case can be considered to be covered under existing law.
If so, they make a ruling to that effect, and depending on jurisdiction and
other factors, that ruling may become precedent that other courts can/will
follow. If not, they dismiss the case, and it's up to the legislature to make
a new law governing this use case, if they so choose.

Having said that, I agree that judges aren't idiots, and they can often spot
when someone is trying to be creative in order to circumvent existing law. The
IRS also has pretty broad latitude in determining what falls under existing
tax law and exactly how, and the courts take a dim view of people who are
trying to evade taxes.

~~~
jkaplowitz
Judges do also make new law even where existing statutes and precedents don't
give an answer to follow. As one of many examples, California's courts
invented our current idea about strict product liability for manufacturers.
Statutes came second.

This is part of our longstanding common law tradition, going back far beyond
the prominence of statutes.

