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Bitcoin Exchange Ordered To Give IRS Years of Data On Millions of Users (gizmodo.com)
Last month, instead of asking for data relating to specific individuals suspected of a crime, the Internal Revenue Service (IRS) demanded America's largest Bitcoin service, Coinbase, to provide the identities of all of the firm's U.S. customers who made transactions over a three year period because there is a chance they are avoiding paying taxes on their bitcoin reserves. On Wednesday, a federal judge authorized a summons requiring Coinbase to provide the IRS with those records. Gizmodo reports: Covering the identities and transaction histories of millions of customers, the request is believed to be the largest single attempt to identify tax evaders using virtual currency to date. As a so-called "John Doe" summons, the document targets a particular group or class of taxpayers -- rather than individuals -- the agency has a "reasonable basis" to believe may have broken the law. According to The New York Times, the IRS argued that two cases of tax evasion involving Coinbase combined with Bitcoin's "relatively high level of anonymity" serve as that basis. "There is no allegation in this suit that Coinbase has engaged in any wrongdoing in connection with its virtual currency exchange business," said the Justice Department on Wednesday. "Rather, the IRS uses John Doe summonses to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown." In a statement, Coinbase vowed to fight the summons, which the company's head counsel has previously characterized as a "every, very broad" fishing expedition.
Because Bitcoin is not a currency according to previous legal rulings and the IRS seems to be treating it however would advantage them in any given instance. I would assume that holding on to bitcoin then qualifies for capital gains if sold later at a profit.
The premise of your question is flawed. BitCoin transactions are NOT anonymous, they are actually tracked *forever* in the block chains which are public records. What's supposed to protect you is that your wallet (a set of Crypto Keys actually) is used to identify parties in a transaction. Where it may not be easy to match the wallet to the person (or entity) making the transaction, but once you do, you can find EVERY transaction made by that wallet from public information.
Those trading BitCoin (which is something impossible to physically trade) must do so electronically, which means you have to use some kind of exchange at some point in order to obtain something of value for your BitCoin (i.e. trade it for something else). It's these conversion transactions where the anonymous nature of those Coins really isn't so safe and one's identity can be revealed. Once you are identified as the owner of a wallet, then everything you've done falls out of the public record in the block chains.
You seem to have most of it right:
https://www.irs.gov/uac/newsro...
In some environments, virtual currency operates like “real” currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction.
The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:
Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
The IRS will always figure out how to get their money. Look at all the cannabis dispensaries in the states where it's "legal" (it's not really legal because the states really don't have the right or authority to make it legal since it's illegal at the Federal level). Few, if any, of those businesses have a bank account because at the Federal level cannabis is still a class 1 narcotic and banks will not touch these businesses. So they deal in cash most of the time, can't even process credit cards either due to not having a bank account.
Yet, the IRS (a Federal agency) has created rules for them to be able to report income and pay their taxes. So even though the banks won't touch them for fear of the Feds coming after them the IRS has no problem collecting money from something deemed "illegal" at the Federal level.
It won't matter if you decide to make dirt your currency and you have a group of friends who trade dirt for products or services. If the IRS catches wind and finds out, THEY will figure out what you owe them and you'll have to fight them on what they decide. Same goes for bartering schemes. You cannot trade a service or product and not pay taxes on what you receive. That is if you're following the rules/laws, which in those instances I doubt you'll find more than a few dozen Americans, who also all happen to be accountants, who report this sort of stuff on their personal taxes.