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The IRS Is Coming For Your Cryptocurrency Gains

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posted on Nov, 30 2017 @ 10:28 PM
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Just yesterday a federal court ruled in favor of the IRS in a case against coinbase to hand over user information on anybody who had conducted over $20,000 in transactions with cryptocurrency. Basically since the citizens are not reporting their gains, the exchange will have to because it also functions as a broker. Had it been strictly an exchange only, they may have been exempt based on how I am reading it. Frankly, if I had made tens of thousands I would just pay the taxes as your net worth from these trades has still skyrocketed either way. Capital gains tax applies. And I just signed up for a coinbase account yesterday.


Cryptocurrency exchange Coinbase ordered to give IRS data on 14,000 users
A judge’s ruling in favor of the U.S. Internal Revenue Service in its suit against Coinbase, a cryptocurrency exchange, once again proves that death and taxes are about the only certain things in life.
A federal court on Wednesday ordered Coinbase to report all transactions worth $20,000 or more between 2013 and 2015. The IRS took Coinbase to court when the latter refused to turn over the information voluntarily when requested.

Some analysts say that it is this massive appreciation in price that prompted the IRS to look into taxing gains from bitcoin trading.
The IRS alleged that bitcoin traders are not disclosing gains from trading in the cryptocurrency. According to the court documents, the IRS said that only a tiny fraction of hundreds of thousands of Coinbase users, or about 900, reported gains or losses from bitcoin trades, prompting the agency to request user data.

The judgment says that Coinbase must turn over information, such as taxpayer IDs, names, birth dates, addresses and transactions of the customers that fall within the IRS’s search parameters.
Coinbase fought this issue on the grounds that it violates financial privacy of its customers and claimed partial victory, in a blog post, saying that only about 14,000 users, a small percentage of its customer base, will be impacted by the order.

The role of reporting gains on traditional securities, such as stocks or exchange-traded funds falls on brokerage firms or asset managers and not exchanges where these securities are traded.
Unlike a traditional securities exchange, such as New York Stock Exchange or Nasdaq, however, Coinbase also doubles as a brokerage firm, storing digital currency and allowing users trade on margin through its subsidiary GDAX.

If a taxpayer realized a gain or loss after selling or exchanging bitcoins held as an asset, then it is treated as capital gain or loss on property if held for longer than 12 months. Short-term gains are taxed as ordinary income.
“Once we got the ruling from the IRS about treating bitcoin as property, there is no ambiguity about reporting it. Knowingly withholding gains is fraudulent and can cause penalties,” Graham said.


Yup, so there it is. I mean hey, the law is the law right?

But as an FYI for those beginning to get interested in this bubble, if everybody you know is starting to talk about it, then its too late to realize a good return. Because if you knew what you were doing, you would have already make bukoo bucks. But since your only thinking about it now, you don't know what your doing and will probably end up losing your life savings.

I suggest one of the other two behind bitcoin if you wanna just try it out and see where it goes. Etherium and Litecoin I believe is the other one.

Start at coinbase if you feel you are ready.




posted on Nov, 30 2017 @ 10:35 PM
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a reply to: worldstarcountry

Is IRS at fault here? The tax base for military spending has to come from somewhere. Is cheating on taxes really immoral?



posted on Nov, 30 2017 @ 10:35 PM
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a reply to: worldstarcountry

www.abovetopsecret.com...

But, just for passersby:

A federal court on Wednesday ordered Coinbase to report all transactions worth $20,000 or more between 2013 and 2015. The IRS took Coinbase to court when the latter refused to turn over the information voluntarily when requested.


In regards to the bubble, the tech bubble reached up to the trillions in market cap, the housing bubble was around 7 trillion. The entire cypto market which Bitcoin holds about half of is about 300B.



posted on Nov, 30 2017 @ 10:36 PM
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I'm only kind of curious as to... what counts as a gain? Does simply holding Bitcoin as it goes up in value count as having made money? Or only when you sell it and actually 'make money'?

I mean... if you got it years ago... or... well... even a few months ago when it went from 5000 to 10,000 dollars for a Bitcoin... is that income? Or only when you trade it in for cash?



posted on Nov, 30 2017 @ 10:43 PM
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Unless I'm wrong:
The key words here are "after selling". You can make millions in bitcoin gains, and those gains aren't taxable until you actually SELL the bitcoins for fiat money like the USD.
So, what people can do is simply keep their cryptocurrencies in a private wallet and get a debit card linked to those cryptocurrencies to pay for everything with their cryptos instead of fiat money... non-taxable, spendable money.
Does anyone know if that's correct? Who is responsible for the tax if you're not the one actually converting the cryptos to fiat?



posted on Nov, 30 2017 @ 10:47 PM
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a reply to: trollz

Yes, the way I understand it, unless your converting/selling your crypto back into fiat, it is not yet a gain. However, I also think Bitcoin is considered property and may be subject to a tax but I don't know what metric they would be able to use to justify a tax as that.

As you describe is how crypto is intended to be used. As a currency, separate from fiat. PoS with instant transactions. However, given its growth and such it has turned into a store of value and not many would feel too comfortable spending it on things given it's volatility and propensity to rise in price, to great heights in some folks opinion.
edit on 30-11-2017 by JinMI because: your you're your you're your you're

edit on 30-11-2017 by JinMI because: (no reason given)



posted on Nov, 30 2017 @ 10:47 PM
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If you have a hardware wallet, wont they not know what you have? Assuming you buy the coins from a person or ATM?



posted on Nov, 30 2017 @ 10:47 PM
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a reply to: dfnj2015
Hey, hey, I didn't express in one way or another. I just said its happening, and we all know it was going to happen. This is more of a PSA is all that if you had been trading CC's without thinking of the tax burden, well now the tax burden will be coming for you.



posted on Nov, 30 2017 @ 10:48 PM
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originally posted by: rshackleford
I'm only kind of curious as to... what counts as a gain? Does simply holding Bitcoin as it goes up in value count as having made money? Or only when you sell it and actually 'make money'?

I mean... if you got it years ago... or... well... even a few months ago when it went from 5000 to 10,000 dollars for a Bitcoin... is that income? Or only when you trade it in for cash?


Let's say for example that 1 bitcoin is exactly $2,000. You spend $2,000 of fiat money and buy exactly one bitcoin. The price of bitcoin goes up 50%, to become $3,000 per bitcoin, meaning you just made $1,000 extra. If you sell the entire $3,000, you've just earned $1,000 over your initial investment of $2,000, so you have to pay capital gains tax on that $1,000.
From everything I've seen, it's not taxable until you actually sell it and convert it back into fiat money.
***Unless I'm wrong***



posted on Nov, 30 2017 @ 10:51 PM
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originally posted by: iTruthSeeker
If you have a hardware wallet, wont they not know what you have? Assuming you buy the coins from a person or ATM?


"I gambled everything away, sorry... No gains here."



posted on Nov, 30 2017 @ 10:52 PM
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a reply to: trollz
Hold on now, read that last paragraph in the summary. It is only treated as a capital gain if held longer than 12 months (one year) . Short term, or < 12 months and it is treated as regular income. Deciding to sell at eleven months and 29 days though would probably depend on your total annual income and the tax bracket it puts you in on whetehr or not it is cheaper to pay a capital gains tax or income tax.



posted on Nov, 30 2017 @ 10:56 PM
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originally posted by: trollz

originally posted by: iTruthSeeker
If you have a hardware wallet, wont they not know what you have? Assuming you buy the coins from a person or ATM?


"I gambled everything away, sorry... No gains here."


That is true, because either way, just purchasing it is a gamble.
edit on 30-11-2017 by iTruthSeeker because: (no reason given)



posted on Nov, 30 2017 @ 10:57 PM
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It's income so it is taxable at the rate established. If you do not pay, they can freeze all of your assets. I know a couple of people who had all their assets froze, it was a big inconvenience, also they would have been way better off without the penalties.



posted on Nov, 30 2017 @ 11:45 PM
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So many questions. Over 20k USD at todays rates or at the time of each transaction seperately if added up to over said amount?

Also, as another user posted, there are cards out there which you connect to a bitcoin wallet, and it is kept in btc form until a point of sale transaction is made with the card, at which point payment is made in usd on the current exchange rate at that moment. Personally, i get a great joy imagining all the headaches this must be causing for the IRS. Lord knows most of them hardly understand any of it.

Also, think regular investors have questions about taxes on crypto buys/sells/trades/purchases...imagine being an exchange or a business that accepts bitcoin. Imagine being one of said card companies mentioned above. Sooo many questions for them and complications for the tax man.

Another point, imagine if Overstock.co m had been keeping just 10% of purchases made with bitcoin as bitcoin without converting, or any other company for that matter - they must be rolling in it.

Also, crypto people trade physical assets for btc amongst eachother directly - another question! The IRS can blame the damned Federal Reserve and our broken ass inflationary system fot cryptocurrency ever becoming a thing in the first place and the resulting headaches for them as far as I am concerned. Why dont they just ask for more printed fake fiat bills??



posted on Dec, 1 2017 @ 12:25 AM
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What a scam, you have to gamble buying crypto currency if you lose money bad luck but if you make money you get taxed on it....



posted on Dec, 1 2017 @ 12:56 AM
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originally posted by: hopenotfeariswhatweneed
What a scam, you have to gamble buying crypto currency if you lose money bad luck but if you make money you get taxed on it....

Buying precious metal is much the same, except you're much less likely to make a huge profit very quickly... there's a difference between high risk investment and a scam. You really think the government is going to let anyone make a dollar without getting their cut... everything is taxed one way or another.
edit on 1/12/2017 by ChaoticOrder because: (no reason given)



posted on Dec, 1 2017 @ 01:00 AM
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a reply to: ChaoticOrder

No the government always gets their cut, they are like the mafia.

Gambling should not really be on their radar, but we peasants don't have say....



posted on Dec, 1 2017 @ 01:13 AM
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originally posted by: trollz

originally posted by: rshackleford
I'm only kind of curious as to... what counts as a gain? Does simply holding Bitcoin as it goes up in value count as having made money? Or only when you sell it and actually 'make money'?

I mean... if you got it years ago... or... well... even a few months ago when it went from 5000 to 10,000 dollars for a Bitcoin... is that income? Or only when you trade it in for cash?


Let's say for example that 1 bitcoin is exactly $2,000. You spend $2,000 of fiat money and buy exactly one bitcoin. The price of bitcoin goes up 50%, to become $3,000 per bitcoin, meaning you just made $1,000 extra. If you sell the entire $3,000, you've just earned $1,000 over your initial investment of $2,000, so you have to pay capital gains tax on that $1,000.
From everything I've seen, it's not taxable until you actually sell it and convert it back into fiat money.
***Unless I'm wrong***


If you buy something directly with bitcoin you are still liable for capital gains on any increase in value from when you bought the bitcoin till you spent it.

It's the same principle as if you buy something with gold. The tax is due even if you never convert the asset into dollars, you liability will still be calculated in dollars.



posted on Dec, 1 2017 @ 12:15 PM
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a reply to: ScepticScot

Actually gold and silver are being taken of the tax table in many states, and the trend continues to grow. In the states where they are doing this, they are correcting the definition of gold as the only constitutionally recognized money.

So now you can avoid taxes on any gain in value in gold in like 5 states, and you have always been able to avoid taxes on non-us denominated gold if your buying $500 or more, at which point it is considered investment.

The good thing about gold though, is there is no database of users for the IRS to come after. You buy it, you sell it cash in hand, move on with your life. No records, and that is why they had Nixon nix it. But Fiat does not last forever, and bullion is making a comeback.

I would only put more than $10k into crypto's if it does not affect your future retirement plans. If your putting your life savings or whatever you have available into it, your bound to get disappointed.



posted on Dec, 1 2017 @ 01:38 PM
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While I have issues with where tax money is used (to say the least..), I actually see this as a promising step.

It shows a form of government acceptance. Rather than attacking it and dismantling it, they want to make money off of it the only way they know how.

I feel the only true way to "shut it all down" is for governments to actively attack, and I think the underlying blockchain tech has its best chance of embedding into society through crypto-currencies. Its a major PITA, but nations are significantly less likely to disallow something they are making money from too



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