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.

Comments

TRUMP approves!

[Anonymous Coward]

These hooligans must be taxed.

Re:TRUMP approves!

[SirGeek]

No.. He wouldn't.. They're "using the system to their advantage". He'd tell the IRS to shut down, they're all fired.

Re:TRUMP approves!

[Anonymous Coward]

Had they made "donations" to the Clinton foundation this wouldn't be a problem.

Re:TRUMP approves!

[NatasRevol]

Honestly, nobody knows what the fuck he would say.

Or whether or not he'd change his opinion the next day, depending on who he met with that night.

Re:TRUMP approves!

[Anonymous Coward]

Should Coinbase have their entire business model in a template? So they can just shut down instead and re-instantiate into a new name?

Re:TRUMP approves!

[mrclevesque]

Like to the Trump foundation, well not really cause the Trump foundation really did ...

http://www.forbes.com/sites/ta...

Re:TRUMP approves!

[mrclevesque]

"Which Is The Trump Foundation's Bigger Crime, Self-Dealing Or Keeping It Secret?"

Re:TRUMP approves!

[mwvdlee]

But it's not him doing it, so therefore it can be safely taxed without hurting anybody he cares about.

Re: TRUMP approves!

[radiumsoup]

They are regulated by the Feds and by all 50 states* as money transmitters. That isn't cheap nor is it easy to just replicate quickly, let alone overnight.

* I think 1 or 2 states don't require a fee or registration, but there is enormous pressure for all states to regulate money transmitters

Re:TRUMP approves!

[Anonymous Coward]

1849. 'nuff said.

Re: TRUMP approves!

[Anonymous Coward]

Yet another brain dead pig fucker who doesn't realize that the POTUS is Obama.

I don't know what Trump will do and didn't vote for him, but the Democrats are the party of large corporations and Hillary was selling your ass into slavery for personal gain.

Re:TRUMP approves!

[mrclevesque]

Adding a correction to a comment even gets zeroed, sad

ussa

[harvey the nerd]

Prison Planet, USA.

Re:ussa

[Anonymous Coward]

Gas the kikes.

Hail Trump!

Re:ussa

[eric_harris_76]

You do know he's not president yet, right?

It's Trumps Fault!

[Anonymous Coward]

oh wait, Obama is still president.
It's okay then.

Re: It's Trumps Fault!

[Anonymous Coward]

I didn't click the NYT link. Does it contain random anti-Trump digs?

Re: It's Trumps Fault!

[NatasRevol]

I hate it when they use his own words against him.

It makes them look so bad.

Re: It's Trumps Fault!

[tomhath]

It's NYT, those digs aren't random.

Re: It's Trumps Fault!

[dbIII]

Trump has repeatedly declared war on the press.
Some have accepted the declaration and see themselves as an "opposition" since cuddling up to get interviews is only delivering deception instead of factual news.
Expect things to get very ugly.

Re: It's Trumps Fault!

[Anonymous Coward]

I think it's more like they declared war on him but he won, and didn't feel like pretending they weren't actively working against him once the election was over.

Re: It's Trumps Fault!

[dbIII]

I think it's more like they declared war on him

The way he has been whipping up crowd hatred against media members at his rallies for months is what has been referred to as well as his comments.
Now we are seeing the sort of reaction that happens from media outlets when they have nothing to lose.
Attempting to be nice to Trump and pretending that his deceptions are real is getting the media nothing but more hate, so why play nice?


At least that's the way a professor of Journalism was describing the situation - I can't find the quote on the net since it was a radio interview. If you don't want to take my word that some people have opinions like that then you wouldn't believe a citation anyway.

IRS is illegal

[Anonymous Coward]

The IRS is illegal under the Constitution of United States of America and the 18th Amendment. IRS is a terrorist organization that should be disabled immediately. BitCOIN will be around long after the collaps of the United States Dollar and all the constitutional currencies. Nancy Pelosi sucks.

Re:IRS is illegal

[Anonymous Coward]

The prohibition amendment? i am so confused as to wtf you are talking about.

Re:IRS is illegal

[mark-t]

You have no idea what you are talking about.

Seriously... you don't know what you are talking about. The 18th amendment established prohibition against alcohol, and was utterly repealed by the 21st amendment, so technically it is the 18th amendment itself that is unconstitutional, not the IRS.

Re:IRS is illegal

[Anonymous Coward]

BitCoin is as relevant as the hair on my ass.

Re:IRS is illegal

[Anonymous Coward]

You need to STFU. I'm a lawyer, bitch.

Re: IRS is illegal

[Anonymous Coward]

The 18th amendment established prohibition against alcohol, and was utterly repealed by the 21st amendment, so technically it is the 18th amendment itself that is unconstitutional, not the IRS.

Not quite. The 18th Amendment mandated prohibition. The 21st took away the mandate, but left the authority.

Section 1. After one year from the ratification of this article the manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all the territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited.

Section 2. The Congress and the several States shall have concurrent power to enforce this article by appropriate legislation.

See, it forces a course of action.

Section 1. The eighteenth article of amendment to the Constitution of the United States is hereby repealed.

Section 2. The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited./i

Now the 21st, repeals the 18th's mandate but reinforces that prohibition is itself, still a legal option.

Re:IRS is illegal

[Anonymous Coward]

The prohibition amendment? i am so confused as to wtf you are talking about.

The Jefferson Clause of the United States Constitution wholly outlaws the IRS. You do NOT have to pay any taxes to the IRS, and anyone who tells you otherwise is probably an agent of the State.

Re:IRS is illegal

[Anonymous Coward]

The Jefferson Clause makes the IRS illegal.

Re:IRS is illegal

[Anonymous Coward]

Shut up and pay your damn taxes asshole

Re:IRS is illegal

[Anonymous Coward]

The Santa Clause brings me presents.

Re:IRS is illegal

[FatdogHaiku]

The Jefferson Clause of the United States Constitution...

Is that the one that talks about a guy and his wife that are movin' on up (movin' on up) to the East Side (movin' on up), To a deluxe apartment in the sky?

Re:IRS is illegal

[mark-t]

Do you want to try explaining how you think that works with something more elaborate than a vacuous claim, or should I conclude more or less the same thing about how much you know what you are talking about as I concluded about the AC to which I responded, earlier? If you are the same AC, then this already explains a lot, but I'll give you the benefit of the doubt.

Re: IRS is illegal

[ShanghaiBill]

Now the 21st, repeals the 18th's mandate but reinforces that prohibition is itself, still a legal option.

It is not just an option, but in practice in many locations. Many dry counties, mostly in the Southeast, prohibit the sale of alcohol. Alcohol is also prohibited on many Native American reservations.

Dry communities in America.

Re:IRS is illegal

[Anonymous Coward]

You might be retarded. There is no Jefferson Clause in the constitution. It was a *failed* provision of the Declaration of Independence addressing slavery

Re:IRS is illegal

[Anonymous Coward]

> Nancy Pelosi sucks.

Not according to her husband :(

Re: IRS is illegal

[Anonymous Coward]

All the reservations I've visited offer tax free alcohol and cigarettes.

Re: IRS is illegal

[Anonymous Coward]

All the reservations I've visited offer tax free alcohol and cigarettes.

Native Americans process alcohol differently from Anglo-Saxons and are more susceptible to drunkenness.

Re:IRS is illegal

[Anonymous Coward]

> Nancy Pelosi sucks.

Not according to her husband.

Re:IRS is illegal

[Anonymous Coward]

Again... still retarded.

Re: IRS is illegal

[Anonymous Coward]

When was the last time you visited a reservation? Federal law applies. Cigs are still taxed by the federal goverment. On many reservations State taxes do not as apply since they are not part of State.

Re: IRS is illegal

[Anonymous Coward]

Nah, man, the Jefferson Clause authorizes southern Oregon and northern California to secede from their respective states and create a new state.

Re: IRS is illegal

[No Longer an AC]

Doesn't that just reinforce what was already in place prior to the 18th?

That is, alcohol would be something covered by the 10th Amendment ("The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people".)?

I also recall that prior to alcohol prohibition some states were banning the sale of tobacco:

Between 1895 and 1921, 14 states banned the sale of cigarettes (Neuberger, 1963: 52). Even in the city of New York it was declared unlawful for women to smoke in public

And I can't find a citation now, but I'm sure I've read that there was an effort to have it banned at the federal level but a Congressional committee decided that they did not have that authority and that it was a state issue protected by the 10th.

Then they figured out the power of the Interstate Commerce Clause and we ended up with decisions like Wickard v. Filburn and later Gonzales v. Raich.

I am no legal scholar (certainly not a lawyer), but it seems to me that based on those decisions we didn't actually need an Amendment to enact Prohibition. Or maybe we did and those decisions were wrong and thus the federal prohibition on marijuana and other drugs is unconstitutional. But that's not what SCOTUS has said since so we have to accept those decisions as Constitutional.

I'm in favor of legal marijuana and alcohol but I'm not so sure about all the other drugs including ones available only by prescription - like antibiotics.

I suspect that reflects most American's opinions too so how do we resolve this without passing a new Amendment giving the Feds authority over so many things? Each state could pass their own laws, which would result in a crazy patchwork (kind of like we have now with alcohol at least, but with every other drug thrown in) or the state law could say they'd go along with whatever the feds (DEA? FDA?) decided on most drugs.

Or should the ICC really cover that - and if so, what if the feds wanted to control alcohol again? Well, they do at least impose taxes and we do have the ATF or rather the BATFE. Let's just add marijuana for now and call it "the BATFEM".

I've been in dry counties in Texas, but instead of going to a bar you go to a "club" and most of them just give you a membership or charge you a small fee for one. It kind of blew my mind when I found out that in some parts of Alaska even possession of alcohol was illegal.

Oh well, this was supposed to be about the IRS, Coinbase and Bitcoin.

Bitcoin presents a bunch of legal challenges as well. Should Coinbase have to report bitcoin transactions greater than $10,000 like my bank would if I make a transaction for that amount? It's not even issued by the government.

Where does my Bitcoin wallet even exist?

I don't actually have a bitcoin wallet or any bitcoins and the whole thing seems....somewhat risky at the very least.

hmm

[Anonymous Coward]

so if they don't release the records and delete them instead, would they be pulling a trump or a clinton?

Re:hmm

[Anonymous Coward]

If they delete them, is it a crime?

Re:hmm

[Anonymous Coward]

What difference, at this point, does it make?

Re:hmm

[mrclevesque]

Depends on how much of a crime deleting then would be

Re:hmm

[Anonymous Coward]

If they lose them because of a hardware failure, is it a crime? Because it sure isn't a crime when it happens to politicians.

Are we there yet?

[avandesande]

What is the difference between this and the IRS asking for banks to release 3 years of all of its customers records, because cash is anonymous?

Re:Are we there yet?

[Anonymous Coward]

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.

Re:Are we there yet?

[Anonymous Coward]

If cash is anonymous then there won't be any customer records.

Re: Are we there yet?

[orlanz]

Agreed. I am surprised that they don't go after any exchange that transacts more than 6 figures. It would be a high risk, medium return situation. Well worth the resources expended.

Re:Are we there yet?

[avandesande]

No more or less than Coinbase's records.

Re: Are we there yet?

[lxs]

Most crypto exchanges are located outside of the US. "They" have no jurisdiction there.

Re:Are we there yet?

[bill_mcgonigle]

What is the difference between this and the IRS asking for banks to release 3 years of all of its customers records, because cash is anonymous?

And there are people here who want to get rid of cash.

Re:Are we there yet?

[Gravis Zero]

What is the difference between this and the IRS asking for banks to release 3 years of all of its customers records, because cash is anonymous?

The difference is that the IRS defines bitcoin as being property.

Re:Are we there yet?

[Anonymous Coward]

They already do that for transaction is above a certain amount (I think $10k). The bank has to report all of those to the IRS even for cash.

Re:Are we there yet?

[Anonymous Coward]

They already do that for transaction is above a certain amount (I think $10k). The bank has to report all of those to the IRS even for cash.

Anything above $5000 in a single day has to be reported.

Re:Are we there yet?

[avandesande]

That 10,000$ specified by the 'Bank Secrecy Act' when passed in 1970 is worth 62,000$ today.

Re:Are we there yet?

[avandesande]

That's equivalent to 802$ in 1970 dollars when the bank secrecy act was first passed....

Re:Are we there yet?

[deadwill69]

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.

Re:Are we there yet?

[Anonymous Coward]

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.

Re: Are we there yet?

[Anonymous Coward]

You write about it as if you think there's something wrong or inappropriate about it. The IRS should take no position whatsoever on a business' legality, they should merely tax income to the business. You'll recall Al Capone being convicted for tax evasion- and nothing else- right? Oops, PharmaCorp, your labels weren't accurate so you broke FDA regulations and thereby the law- now we can't tax you on the profits?

How else should any of this work?

Re:Are we there yet?

[countach]

Well.. can the IRS prove much if you are shoving money into and out of these accounts? All the actual bitcoin transactions I presume are beyond their knowledge, they will only find out the interface with real money, when you deposit and take out. Unless are claiming to be dirt poor with unexplained millions sloshing about this probably won't affect you.

Re:Are we there yet?

[MikeKD]

Because bitcoin is not anonymous?

Re: Are we there yet?

[avandesande]

They aren't saying coinbase broke any laws. If they want to bust someone for tax evasion, by all means get a warrant and have coinbase release their records. What the IRS is asking to do is a huge overreach.

Re: Are we there yet?

[Anonymous Coward]

Not sure how you read that into it, but no, I don't think there is anything wrong or inappropriate about it. I was responding to the parent post making a comment about how bitcoin isn't considered currency in the US and that quiet frankly the IRS doesn't care and it doesn't matter if its real currency in the eyes of the Feds or not. If you are trading in clam shells they will figure out a way to tax you on it.

Re: Are we there yet?

[orlanz]

True, I only meant US based entities. But just because a financial institution is not in the US doesn't mean it is out of reach. Many countries in the EU, Australia, Canada, India, etc actually have similar organizations that ask for reporting. They also network and provide this information to each other.

Re:Are we there yet?

[zlives]

wonder where this puts FIFA coins

Re:Are we there yet?

[mysidia]

They'll find out your Wallet addresses for Bitcoin. Then they'll start identifying Coinbase customers and initiating Audits where the customers will be required to prove their innocence or be presumed guilty.

Re:Are we there yet?

[Ritz_Just_Ritz]

The IRS needs to seek new avenues to fleece the populace now that it's about to be pried out of the middle of 17.5% of the US GDP (healthcare industry).

Abolish most of the IRS and all the parasites that feed off the ridiculous and intentionally complex tax code. A flat tax plus perhaps a consumption tax would allow most Americans to do their taxes on a post card. Of course, millions of tax accountants and attorneys would then need to find honest work, but that's a small price to pay for complete transparency. A scenario where half of the citizenry pays virtually nothing (or gets net payments) while the others foot the bill is unsustainable.

Re:Are we there yet?

[smooth wombat]

Yet, the IRS (a Federal agency) has created rules for them to be able to report income and pay their taxes.

The overriding rule of the IRS is income (or revenue in this case) is defined as money derived from any source, unless explicitly exempted by law. As said just below you, the IRS makes no differentiation between money made by some guy working in a cube or the drug dealer on the corner. So long as both report how much money they brought in, and pay taxes on that money, the IRS is satisfied.

And no, I'm not kidding about paying taxes on money from dealing drugs. Read for yourself.

Therefore, the IRS expects these shops to pay their federal taxes just like the states expect them to pay their state taxes. There is no contradiction.

Re:Are we there yet?

[Anonymous Coward]

however, people selling bitcoin results in income, which can be taxed.

Re: Are we there yet?

[DanielRavenNest]

> Agreed. I am surprised that they don't go after any exchange that transacts more than 6 figures.

Coinbase, in fact, does run a bitcoin exchange, which traded $96.6 million USD worth in the last 30 days:

https://bitcoincharts.com/mark...

Re:Are we there yet?

[Anonymous Coward]

and when you sell property, you make money. that money can be taxed.

Re: Are we there yet?

[dbIII]

Most crypto exchanges are located outside of the US. "They" have no jurisdiction there.

Have you heard of FIFA?

Re: Are we there yet?

[SvnLyrBrto]

Also: Julian Assange, Kim Dotcom, and more than a few others. The government's habit of exporting and enforcing our laws beyond our own borders (Not that we're alone. France is fairly notorious for the same.) is one of the more troublesome... outright despicable even... habits of washington dc.

Re: Are we there yet?

[lxs]

Oh I know about the US acting across borders.
I had to sign a form from my bank saying that I'm not a US citizen, and have no financial ties to the US just to keep my account. Complying with US financial law on top of local laws is simply too much of a hassle for most non-US banks.

This is a new thing so it stands to reason that they try it out locally before making the rest of the world miserable. Besides, after the Snowden leaks and a successful challenge to the Safe Harbor agreement, the EU for one is a lot less keen on sharing financial information of their citizens.

Re: Are we there yet?

[gumbi west]

Washington DC? They don't even have Senators or a voting House member. It's the people that the rest of the country send to DC.

Re:Are we there yet?

[NotAPK]

The guy is right. From the link:

"Illegal activities. Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity."

Re:Are we there yet?

[NotAPK]

This is pretty ridiculous when you think about it. I hit the limits and run afoul of money laundering laws all the time.

Why hasn't this been updated to match inflation?

Was there a larger plan in play all along? Impose the limits knowing that over 50 years the effective value of the limits would drop to the point where more and more individuals would be caught in the drag net?

Or do people just not care?

How does one find out *who* exactly is responsible for these kinds of rules and regs with the banking industry? In my experience the bank always blames them on the government, yet we have a shady interplay between the bank (a private company), the government, the federal reserve (an anointed private company) and "industry groups" which are set up to give the impression of control and restraint when it's really just self regulation.

Re:Are we there yet?

[Anonymous Coward]

Thank you for explaining that.

Re:Are we there yet?

[jandersen]

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

Tax, as far as I know, should be paid on any transaction that results in somebody receiving something of real value. I don't know if bitcoin falls into that category, but in most countries, if you receive payment in kind, you still have to pay tax of the value, which seems perfectly reasonable to me. So whichever way you turn it, it is reasonably that the revenue services know; bitcoin doesn't need to be "currency" or legal tender, it doesn't even have to be inherently valuable (if that even has any meaning) it only needs to have a trade value.

Re: Are we there yet?

[orlanz]

Germany, UK, France, and even Switzerland have been sharing financial information with the US (and vice verse) for over a decade. The US has been recording all global SWIFT transactions for well over 2 decades. Most banks that span across countries and participate in the SWIFT system already provide this information. Even from countries such as India, and Singapore.

If you are not a US citizen, the other members don't actively report on you but will upon request. It's not just a US thing. Germany/India/Canada can request as such in reverse.

This isn't some US overreach concept. The global banks were already doing this and had the capability. The governments just decided to plug into the system for tracking funds going to terrorists and tax havens.

The hard part for the governments is linking a specific person to all their foreign account numbers. For rich folks and companies, they can easily make accounts under aliases/shells/agents. It's the common citizen that can't really hide. But then again, the common citizen isn't worth going after.

Re:Are we there yet?

[Anonymous Coward]

>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

The contract between states known as the US Constitution does not grant the authority to the federal government to regulate private property of The People within the states. Therefore, it is really legal, even if the Federal level legislators have legislated outside of their authority.

It's no different than if I were to legislate (write down on paper and claim its the law of the land) that I own all property on earth. I might even be able to enforce it if I was backed by the largest military on the planet, too. That still doesn't make it law, merely legislation that's being enforced and going unchallenged or improperly challenged or isn't having proper checks and balances worked.

Such legislation and government activity is called "de facto", meaning of fact, and is used as an antonym of de jure, or of law. Legislation that is not valid yet is being enforced is de fact and is NOT law. Legislation that is de jure and enforced is law.

Re:Are we there yet?

[Anonymous Coward]

All bitcoin transactions are recorded in the blockchain. Bitcoin isn't an anonymous currency, and it wasn't designed to be one. It is because bitcoin transactions are public we can know that Satoshi Nakamoto has ~1 million unspent bitcoins. What is trickier is identifying the actual owners of the bitcoin wallets, but that can probably be worked out from the transactions the owner makes (unless they are very careful)

This is why....

[LaoTzePhuuk]

....cash should be used whenever possible.

Re:This is why....

[Anonymous Coward]

That's dumb. With the IRS, you have the burden of proof for any claim made to them.

Re:This is why....

[ArhcAngel]

Until it is outlawed or becomes too heavy to carry!

Re:This is why....

[citylivin]

This is why ...cash should be used whenever possible.

so you can cheat on your taxes?

Whats all the love for tax cheats in america? In canada, its mostly immigrants who use all cash to specifically avoid paying taxes. I say lock em up! they are defrauding our society for their own gains.

Re:This is why....

[roman_mir]

I say lock up everybody who pays taxes to the government instead of avoiding and evading all taxes. The people paying taxes are directly responsible for the government oppression being perpetrated against individuals, groups, all the war and economic crimes. Governments are the culprit marauders, destroying individual rights and all must be judged and executed AFAIC.

Re:This is why....

[rhodium_mir]

Don't forget to round up any children they may have and grind them up into fine slurry.

Re:This is why....

[knorthern knight]

> Until it is outlawed

India declared the 500 and 1,000 Rupee notes invalid. At current exchange rates that US $7.33 and $14.65. Imagine the chaos in the uSA, if all paper currency worth more than a $5 bill was declared invalid.

Re:This is why....

[surd1618]

Whats all the love for tax cheats in america? In canada, its mostly immigrants who use all cash to specifically avoid paying taxes. I say lock em up! they are defrauding our society for their own gains.

Can I trade places with a Canadian if they support Trump?

Only a matter of time.

[jxander]

As soon as Bitcoin entered common parlance, this became the obvious endgame.

As soon as you could purchase normal day-to-day goods, it became inevitable.

And as much as it sucks ... they're right. Using crypto currency does avoid taxes, even if that isn't the primary intent.

I just wish they'd found a better way to address the issue. A mass subpoena is rather inelegant, and will cause a lot of pushback.

Re:Only a matter of time.

[luther349]

being bitcoin has no tax to avoid i dont see them winning this in any tax court.

Re:Only a matter of time.

[PRMan]

Capital gains based on purchase and sale points.

Re:Only a matter of time.

[geekmux]

As soon as Bitcoin entered common parlance, this became the obvious endgame.

As soon as you could purchase normal day-to-day goods, it became inevitable.

And as much as it sucks ... they're right. Using crypto currency does avoid taxes, even if that isn't the primary intent.

Replace bitcoin with gold in the above statement.

Humans have been using alternatives to taxable currency for a very long time in exchange for goods and services. Mining it out of the earth vs. mining it out of a machine; I fail to see a difference here, and tends to question the tax argument.

Meanwhile, in Ireland, trillions sit quietly...funny how that shit works, ain't it?

Re:Only a matter of time.

[Anonymous Coward]

being bitcoin has no tax to avoid i dont see them winning this in any tax court.

Bitcoin is a good, which has a cash value. Income gained from buying and selling goods must be declared to the IRS. This is why they're targeting an Exchange, whose purpose is to facilitate exchanging Bitcoin for cash. Someone selling a significant amount of Bitcoin without declaring it as income on their tax forms is guilty of tax evasion, and the IRS would have a clear case. Failure to declare and pay taxes on capital gains is tax evasion, and that's a case the IRS can and will win.

being there is no tax in the books for using it its more a scare tacit rember its the irs your dealing with they dont even understand there tax laws.

Again, they're not taxing bitcoin. They're taxing the income gained using bitcoin as a good. If someone's making a million dollars a year farming gold in WoW and selling it for real cash, that's still income and the IRS can get you for it. If you think otherwise, you're deluded.

The only issue here is the overly-broad fishing expedition, and whether the IRS is hurting a legitimate business interest (the bitcoin exchange that is) with its demand. The IRS has every legal right to prosecute anyone it can catch making an income 'anonymously' without declaring it in their tax return.

Re:Only a matter of time.

[msauve]

Aside from the legality of such a broad fishing expedition, Bitcoin is considered an asset, so anyone who "buys low/sells high" would be subject to capital gains tax.

Re:Only a matter of time.

[Anonymous Coward]

You can't say "bitcoin isn't dollars so there are no taxes" -- if your boss pays you in Euros, Pesos, or Yen in the US, you still pay US income tax on it. In fact, if your boss pays you by handing you a live chicken at the end of every workday, you owe income tax on that too, and need to report the value of the chickens on your 1040 form and pay taxes on it, exactly as you would if your boss had handed you an amount of dollars equal to the value of the chicken. If your boss pays you with a brick of cocaine, you have to declare the fair market value of that on your 1040 as well. If your boss pays you with sex, you need to figure out a value for that (and have fun explaining it to your accountant...). Congress doesn't have to pass a special law saying how bitcoins are taxed, because the tax laws already cover the fact that you need to pay income tax on "anything of value", and you need to pay capital gains taxes on anything that you buy for $X and then sell later for $Y (with some special cases for various things like real estate, none of which apply to bitcoins).

In general, you can ignore taxes on anything sufficiently small, as the IRS doesn't care about it, but as soon as you are dealing with anything that is worth much, it is taxed. Ever seen any contest that gives away a car? They all say in small print that the winner has to pay taxes on it, because a car is big enough that it is reportable income. Ever seen someone buy expensive art and then sell it later? They have to pay capital gains tax, because it is something of value that went up in value before they sold it -- there isn't a specific tax law covering paintings, there's a general "buy stuff and sell it later" law.

In general, anytime someone tells you "you don't have to pay taxes on this, the government is too stupid to figure out that we're dodging taxes!", they're lying to you; the tax laws really are quite general. It is possible that in your country the tax laws are stupidly specific and say that you only pay income tax if you are paid in cash, but if so, I'd expect everyone in your country to make a deal with their boss to work for no salary but instead the company gives them a car or a gold brick, or whatever.

Re:Only a matter of time.

[Anonymous Coward]

Captial gains tax is one of the taxes potentially being avoided, Sales tax if you are using it as a currency to make purchases (just because you barter goods doesn't make you exempt from the associated equivalent tax in dollars)

Re: Only a matter of time.

[Anonymous Coward]

Taxable currency? What?

Currency isn't federally taxable, bitcoin or otherwise. Income is, which you then pay taxes on IN currency, regardless of what form that income came to you in.

Re:Only a matter of time.

[stabiesoft]

I'm not sure I agree with the fishing part. My brokerage reports all sales to the IRS every year without even a polite request. As you say, it is an asset, so just like my stock trades are reported, wouldn't bitcoin transaction be subject to the same requirements?

Re:Only a matter of time.

[msauve]

Asset != security. AFAIK, Bitcoin exchanges fall under neither banking nor broker reporting requirements. Bitcoin is more like going down to the local coin dealer and buying gold Maple Leafs with cash - no reporting required.

Re:Only a matter of time.

[mysidia]

My brokerage reports all sales to the IRS every year without even a polite request.

ONLY because there's a law saying what your brokerage has to report.
This is legislative action by congress that has decided that the sales proceeds have to be reported, which is done for income tax purposes.
I believe the same already likely applies to Coinbase, if you sell over some threshold and receive US dollars, then Coinbase likely has to 1099B you.

Note your broker doesn't share ALL your records with the IRS. For example, they don't share records of stock purchases with the IRS, only sales.

Re:Only a matter of time.

[stabiesoft]

Not true anymore, brokers now share basis on most transactions, granted the sharing is done at sale. Previously the IRS "trusted" you to report an accurate basis.

Re:Only a matter of time.

[stabiesoft]

I think it could be argued that a bitcoin is more like a stock share than a maple leaf. The bitcoin has no physical embodiment, which is more like shares of a company, whereas the maple leaf is a real physical object. I expect the IRS will move it that direction and make bitcoin reporting like brokerage reporting.

Re:Only a matter of time.

[msauve]

No. A stock or bond is merely a representation of ownership, so it's a matter of trust. With Bitcoin, you verifiably hold the actual item, just like gold.

Re: Only a matter of time.

[Anonymous Coward]

Not really, people with the money control government, the government isnt exactly going to take they money away now is it. Goverment/IRS is there to find new ways to get more money extracted out of the middle and move it up to the top.

Re:Only a matter of time.

[mysidia]

That's not the same as reporting purchases to the IRS.

Potentially I could go to my broker, tell him I want to withdraw 100 shares of T or X.

This gets me stock certificates issued, which does not generate any 1099 forms.
I could then take my stock certificates, Sign the back, endorse some of them over to you,
and donate some others to a charity, then you go and deposit the shares into your account.

The company then has no idea:
1. (For tax purposes) which of my shares have sold to you. Many of the shares I would own would
likely have a different tax basis. I might own shares of the same company 2 or 3 brokerage accounts, instead of just 1, and I may elect the FIFO or LIFO method of tax basis accounting, which means telling one of my brokers to sell shares in one account is actually selling shares with the cost basis that I purchased at a different broker (Since all your different accounts with the same company's stock are the Same Issue, for tax purposes).

2. None of the brokers, nor their issuer has idea about the consideration you paid me in exchange for these shares.
With this transaction, it would be up to you to report the sales proceeds you paid me. You would have no idea, the cost basis either.

3. The issuer of the stock won't know the actual date we agreed to the sale, again, it will be up to the buyer to report that on presentation of the stock certificates to the company's issuer to update the share ownership of the number of units transferred.

Re:Only a matter of time.

[Anonymous Coward]

better way to address it would be folks in the US, who use bitcoin, would report the buy/earn/sale information on their taxes and pay taxes as necessary.

since they don't, they get a subpoena.

they earned it.

Re:Only a matter of time.

[Anonymous Coward]

if you buy gold now, the price goes up, and you sell it later, you are supposed to report the profit on your taxes so you pay tax on it.

same as bitcoin should.

see how that works?

Re:Only a matter of time.

[stabiesoft]

Except in many cases, you can no longer obtain paper cert's, They are going the way of the dodo bird.

Re:Only a matter of time.

[Anonymous Coward]

I agree, but just want to point out that Amazon basically built their business off of evading sales tax.

There must be some kind of lesson there.

Re:Only a matter of time.

[geekmux]

if you buy gold now, the price goes up, and you sell it later, you are supposed to report the profit on your taxes so you pay tax on it.

same as bitcoin should.

see how that works?

If I mine gold or mine bitcoin, and exchange it for goods and services in much the same way that humans have for thousands of years before we invented this shit called taxes, I'm not reliant upon gold or bitcoin to inflate and create income. See how that works?

And perhaps my point was more centered around corporations that obtain income in a far more traditional sense and then lobby to abuse the shit out of tax havens, who are seemingly immune to this same kind of persecution.

Re:Only a matter of time.

[Anonymous Coward]

In the years before we invented this shit called taxes, the authority just took your stuff when it wanted to. At least now, there are rules about how much the authority can take.

Re:Only a matter of time.

[gumbi west]

I thought you couldn't trade stocks without a brokers license.

Re:Only a matter of time.

[Anonymous Coward]

Why are bitbanks recording transactions?

I thought bitcoins main headline was anonymity? How is this any different to using a regular bank to do business?

Re:Only a matter of time.

[geekmux]

In the years before we invented this shit called taxes, the authority just took your stuff when it wanted to. At least now, there are rules about how much the authority can take.

Oh, so that explains why mega-corps can avoid this shit altogether, along with funneling billions into tax havens. Thanks for the clarification.

Yes, it's soooo much better these days where the authority can just tax the shit out of whatever they want instead...

Re:Only a matter of time.

[david_thornley]

As soon as you could purchase normal day-to-day goods, it became inevitable.

Yup. If you just buy and sell bitcoins, your dollar transactions show all the income the IRS needs to concern itself with. When you buy them, hold them, and then buy stuff with them, you're getting an opportunity to hide capital gains. Say I buy $500 worth of BTC, it goes up to $600, and I sell for a profit of $100. That's taxable income, although it may be capital gains of some sort. If I buy $500 worth of BTC, it goes up to $600, and I buy a $600 3D printer with it, I've still gotten $100 from my speculation, I still owe taxes on it, but my dollar transactions won't show it, and the IRS needs to know more about my dealings to verify my taxes.

How does bitcoin know which customers are American

[mark-t]

Serious question here.... I thought bitcoin was pretty anonymous when all is said and done, so how would they know which wallets belonged to Americans as opposed to people from other countries?

So laundering your bitcoin wasn't paranoia

[Anonymous Coward]

Ineffective. Ham-fisted, and inevitable. Of course, the USA will attempt this.

Of course, in the end, it will fail. All it will do is push for better Bitcoin anonymization, or the creation of cryptocurrencies beyond the reach of the USSA.

Re:So laundering your bitcoin wasn't paranoia

[luther349]

being there is no tax in the books for using it its more a scare tacit rember its the irs your dealing with they dont even understand there tax laws.

Re:So laundering your bitcoin wasn't paranoia

[anegg]

It is my understanding that if a US citizen has any income, they are expected to declare it, whether it is identified in data submitted by other parties (such as your employer) or not. If they don't declare and pay taxes on the income, they have probably violated the US tax code. Since buying and selling Bitcoin can result in income, not declaring that income would probably violate the tax code. The US IRS knows the tax code very well. They may sometimes push the envelope on enforcement, and every once in a while they might lose in court, but I think they win far more often than not.

Re:So laundering your bitcoin wasn't paranoia

[PRMan]

It is a property bought and sold for profit and is subject to capital gains taxes. Just like gold or silver profits would be.

Re:So laundering your bitcoin wasn't paranoia

[Anonymous Coward]

being there is no tax in the books for using it

Yes there is. It's called the capital gains tax, and it applies whether you're selling bitcoins, BMWs, or buttplugs. There doesn't need to be a specific tax law aimed at every possible thing that could be exchanged for money.

Re:So laundering your bitcoin wasn't paranoia

[Anonymous Coward]

Your comment is 100% wrong.

You must pay income tax on anything "of value" that you are given as income. If your boss pays you in pesos, you pay income tax; if your boss pays you in gold bars, you pay income tax; if your boss pays you in bricks of cocaine, you pay income tax (or more likely eventually get hit with a tax evasion charge on top of drug charges when it is discovered); if your boss pays you with live chickens, you pay income tax. For anything other than US dollars you are getting paid in, you must declare it on your taxes, using a "fair market value" of whatever it is (and any decent accountant can help you find the rules for figuring out a reasonable value that won't get you charged with tax evasion). There is a form for this. This applies to bitcoins too, because they obviously have a value (since there are marketplaces where you can buy and sell them).

If you aren't getting paid in bitcoins, but instead buy them and then spend or sell them later, you are liable for capital gains tax, exactly like you would be if you bought some Euros and then later sold them, or bought a gold brick and later sold it, or bought an expensive painting and later sold it.

Amazingly enough, the people who wrote US tax laws are not morons -- they've had quite a few years to discover all of the ways to dodge taxes, and they have absolutely thought of "I'm not getting paid in dollars, I'm getting paid in this other thing!".

Re:So laundering your bitcoin wasn't paranoia

[Known Nutter]

being there is no tax in the books for using it its more a scare tacit rember its the irs your dealing with they dont even understand there tax laws.

I don't always take tax advice on the internet, but when I do, I take it from someone who spells like a twelve year old and can't form a comprehensive sentence.

Re:So laundering your bitcoin wasn't paranoia

[mysidia]

Since buying and selling Bitcoin can result in income, not declaring that income would probably violate the tax code.

The IRS is obviously interested in who is BUYING Bitcoin to investigate, because if you sell more than a few hundred $$$ in Bitcoin through
Coinbase, then Coinbase has to issue a 1099-K to you for the sales proceeds, so the IRS has information about sales anyways.

Apparently there must be some tax liability the IRS believes you incur simply by holding Bitcoin.
Perhaps they are expecting Bitcoin reserve holders to Mark their assets to market periodically and report any increase in market value as income when it occurs.

Re:So laundering your bitcoin wasn't paranoia

[TroII]

Apparently there must be some tax liability the IRS believes you incur simply by holding Bitcoin

Holding alone, doubtful. I bet they're interested in people who bought Bitcoin, saw it appreciate greatly in value, and then used it to make direct purchases.

Suppose you bought 100BTC in January 2015 at $200/BTC, then last month when the value hit $700/BTC, you used your 100BTC to buy a $70,000 BMW. You realized a $50,000 in profit on your initial investment, of course the IRS would love to know about it.

Non Issue

[Trachman]

If somebody had bitcoins, was smart to keep a blockchain in his own computer, and apply some common sense, this is not an issue.

If somebody opened account, provided name other information, then had to realize that their custodian is merely another type of bank, and all of the transactions will be subject to the scrutiny. Just like the regular old fashioned bank.

This is merely a way to scare bitcoin users.

Those who understand bitcoin have enough brain to maintain their anonymity.

Re:Non Issue

[Anonymous Coward]

All you said is true, but coinbase just like many similar institutions offer good on/off ramp from fiat to virtual currency. Even if you have your own wallet you still need to trade fiat to bitcoin from time to time. Even localbitcoin could reveal trading history of their members... my guess is those long arm operation will push people to be even MORE careful and hide even more what they are doing.

Re:Non Issue

[PRMan]

Buying or selling large amounts of bitcoin quickly enough to catch certain price points is very hard if you are selling them by hand for cash...

Re:Non Issue

[Anonymous Coward]

How on earth do you keep the block chain private? It's part of the coin and ALL transactions with coins must be done in public.

Unless the block chain is presented with the coin to be publicly verified by multiple undetermined third parties (i.e. made public so the block chain can be validated and the new transaction verified) it doesn't change hands.

All the authorities need do is collect any submitted transactions which are freely available and actively shared with anybody running a mining operation. Eventually you will have to submit that coin and it's block chain to trade for something, exposing all the transactions made with that coin since it was created.

So, yea, you can keep your coins private.... But what are they worth if you cannot actually spend any of them?

Re:Non Issue

[Anonymous Coward]

Bitcoin -> monero -> bitcoin

Bingo.

Re:Non Issue

[Yunzil]

Those who understand bitcoin have enough brain to maintain their anonymity.

If they had even more of a brain, they wouldn't have bothered with bitcoin in the first place.

Re:Non Issue

[PPH]

The blockchain isn't private. But the individual Bitcoin addresses are. You can shuffle bitcoin back and forth between several addresses and nobody can figure out who the underlying owner(s) are. Of course, once you spend Bitcoin on something, you create a link between an address and a physical recipient of goods/services. Or you can keep your Bitcoin at an exchange which ties Bitcoin addresses to real identities.

Eventually you will have to submit that coin and it's block chain to trade for something, exposing all the transactions made with that coin since it was created.

Pretty much this. There are tricks you can use with multiple addresses, transferring Bitcoin around anonymously. Once an address has been used to trade for some goods, it is 'tainted' in that one can trace that Bitcoin to a person. But you could just retire that address (empty it of Bitcoin) and you could make it difficult to trace back to a source of income through the anonymous transactions.

Re:Non Issue

[Anonymous Coward]

Coinbase is/was mostly used to buy and sell bitcoin. That is, convert to or from fiat to bitcoin.

No (smart) people use it as a general purpose bitcoin wallet.

Re:Non Issue

[mysidia]

You can shuffle bitcoin back and forth between several addresses and nobody can figure out who the underlying owner(s) are.

This is action likely going to be considered money laundering or creating structured transactions designed to conceal
the origin of funds, which is itself a crime in the US.

Re:Non Issue

[Anonymous Coward]

Except it's property, and there is no property laundering offense. Also, it's not illegal to conceal property, see fourth amendment.

Re:Non Issue

[PPH]

It's actually state law. I'm the general manager of several LLCs and I have to maintain separate accounts for the funds for each one. I addition, I have several personal accounts that I use to manage my own finances. The only difference between classical banking and Bitcoin is that tying a Bitcoin address to a tax ID or SSN isn't required like it is for a bank account.

If the IRS doesn't like that, they can go fuck themselves. Business licensing and corporate charters are powers of individual states, not the federal government.

Re:Non Issue

[david_thornley]

I doubt it's illegal, but it probably looks suspicious. It's your responsibility to report your taxable income, and the IRS can audit you if they think you're trying to pull a fast one on them.

Re:Non Issue

[mysidia]

Except it's property, and there is no property laundering offense. Also, it's not illegal to conceal property

That's because the use of property to launder money is still called money laundering.

It becomes laundering, as soon as you engage in transactions with intermediary parties for the sole purpose of hiding the origin of the funds, which can be in any form (Property, cash, etc).

Re:How does bitcoin know which customers are Ameri

[Anonymous Coward]

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.

Re:How does bitcoin know which customers are Ameri

[Dorianny]

Serious question here.... I thought bitcoin was pretty anonymous when all is said and done, so how would they know which wallets belonged to Americans as opposed to people from other countries?

Coinbase requires your personal information top open an account with them. Even if you use a foreign address the IRS can still lookup your name and birthdate in the Social Security database. The purpose of an exchange is to be able to convert bitcoin to other currencies and vice-versa and unless you are handing someone cash for the transfer of bitcoins, there will always be a identifiable record of a electronic transaction going through bank accounts or credits cards. Security (or anonymity) is only as good as its weakest link

Re:How does bitcoin know which customers are Ameri

[Anonymous Coward]

Coinbase provides a service that allows you to cash out bitcoin into dollars which are electronically remitted into a real bank account (you can also go the other way and transfer dollars from your bank account into bitcoin).

Doesn't Make Sense

[organgtool]

Why would anyone use BitCoin for tax evasion when they could just incorporate and use the many legal tax loopholes that the government refuses to close?

Re:Doesn't Make Sense

[UnknownSoldier]

> the many legal tax loopholes that the government refuses to close?

Such as?

Re:Doesn't Make Sense

[edtice1559]

Carried interest, for example

Re:Doesn't Make Sense

[PRMan]

If you can buy and sell them without giving your information, it would be REALLY hard to track. Like, I think the encryption worm guys aren't declaring their income.

Re:Doesn't Make Sense

[Anonymous Coward]

Refuses to disclose? The tax code is in writing. You can get a copy. You also might consider hiring an accountant and or tax attorney, like anyone serious about using tax loopholes does.

Re:Doesn't Make Sense

[deadwill69]

Here's just a couple of links for you:

http://www.bankrate.com/financ...
http://www.investopedia.com/fi...

Some of the second set actually being funny.

Re:Doesn't Make Sense

[Anonymous Coward]

did you realize you could write off your move if you took a new job? starting a new company in a new state and moving there is a tax loophole. i buy a vacation home on the other side of the usa, i incorporate a new company on the other side of the usa. i write myself an offer letter and then move my old furniture to this new vacation home. all of the costs of the move are written off on my taxes to offset the profit my new company has made. that's a pretty serious loophole that is exploited but the government refuses to close (because law abiding citizens can use it too, even though 75% of everyone I ask did not realize this)

Re:How does bitcoin know which customers are Ameri

[Anonymous Coward]

Sometimes services pop like tumbling or whatnot... but in reality what happens is that party "A" gives party "B" some coins. Party "B" is supposed to give back different coins", minus a small fee for the tumbling or anonymization.

In the real world, party "A" gives party "B" some coins, party "B" tells party "A" to bugger off and keeps all the coins. Mount Gox and other fallen exchanges are good examples of this.

Confused

[HuskyDog]

It is very likely that I don't understand enough about Bitcoin!

Question 1: Why would anyone who thought that they might not be paying all their US taxes use an exchange based in the USA? Is it something to do with needing to convert the Bitcoins to Dollars so that you can actually spend them?

Question 2: Given that one of the main selling points of Bitcoin is anonymity, why would someone operating an exchange keep any but the barest records? I appreciate that they can't destroy the information now they have been asked for it, but I am trying to grasp why they would put themselves at risk of being in that position by retaining it in the first place?

Re:Confused

[Anonymous Coward]

Operating as a business, iirc, incurs legal record-keeping requirements. The gray area comes from the nature of the business: they convert from one currency (official legal tender) into another (a currency with a different standard of value). Bitcoin barely has legal precedent for or against it, and the services or goods bought with Bitcoin (if from a legit business) are already taxed. In a case like this, I believe the IRS is over-reaching its authority and asking to tax people who have likely already had the BTC taxed by spending it on things. If they haven't then it's no different than stockpiling cash under your mattress: the IRS has no ground to tax that if it's been taxed already (like, say, income taxes, estate or inheritance tax, etc)

Do banks get taxed by exchanging currencies? If the case is ruled in favor of the IRS, it could open up "normal" currency exchanges with higher fees and weaken the US dollar as a sort of pidgin currency. I am not a lawyer.

Re:Confused

[PRMan]

1. The standard answer on the Bitcoin forums was that they "didn't need to pay taxes. You're a moron if you do." Of course, this was against the tax advice of the IRS, which was to declare them with buying and selling dates as Capital Gains.

2. Well, Coinbase was happy to hold your bitcoins for you and provide an easy way to buy and sell, but then they held your account hostage and demanded more and more information to get your assets back.

Re:Confused

[countach]

As you say, if you were doing serious tax evasion you'd be stupid to use a US based exchange. But some people are stupid, thus the IRS is poking their head in.

Re:Confused

[tlhIngan]

Question 1: Why would anyone who thought that they might not be paying all their US taxes use an exchange based in the USA? Is it something to do with needing to convert the Bitcoins to Dollars so that you can actually spend them?

Question 2: Given that one of the main selling points of Bitcoin is anonymity, why would someone operating an exchange keep any but the barest records? I appreciate that they can't destroy the information now they have been asked for it, but I am trying to grasp why they would put themselves at risk of being in that position by retaining it in the first place?
Flag as Inappropriate

Easy, Coinbase is one of the least sketchiest exchanges around. Given the amount of personal information required (see below) you generally want one that won't go bankrupt overnight (like a certain Magic the Gathering Online Exchange).

Also, they are one of the easier ones to use.

As for your second question - well, you need quite a bit of personal information - at least a name and address if you want to be able to pay someone, banking information if you want to electronically transfer funds. And I believe you can even use debit to buy bitcoins, which requires a bit more information to ensure it isn't fraudulent.

Re:Confused

[Enigma2175]

Operating as a business, iirc, incurs legal record-keeping requirements. The gray area comes from the nature of the business: they convert from one currency (official legal tender) into another (a currency with a different standard of value).

Nope. Bitcoin is not a currency (at least according to the IRS), it is an asset. You are not exchanging currency, you are buying or selling an asset.

Bitcoin barely has legal precedent for or against it, and the services or goods bought with Bitcoin (if from a legit business) are already taxed.

Buying and selling assets has plenty of existing law and legal precedent. Yes, if you "buy" something with Bitcoin (actually a barter transaction) you owe tax on it but that has nothing to do with the IRS, there is no national sales tax or VAT in the US.

In a case like this, I believe the IRS is over-reaching its authority and asking to tax people who have likely already had the BTC taxed by spending it on things.

If you buy BTC then sell it for a higher price you are subject to capital gains tax on the difference. It doesn't matter what happens to the proceeds of the sale -- it is the transaction that is taxed. If you sell stock and buy a car with the proceeds are you exempt from capital gains tax on the sale because you paid sales tax on the car? Of course not. Even if you trade the stock directly for the car, you still have to pay the capital gains tax on any appreciation and the sales tax on the fair market value of the car. These are 2 different taxes levied by 2 different entities.

I am not a lawyer.

No shit.

Re:Confused

[Ash-Fox]

Easy, Coinbase is one of the least sketchiest exchanges around. Given the amount of personal information required (see below) you generally want one that won't go bankrupt overnight (like a certain Magic the Gathering Online Exchange).

Now, now. For a time, everytone was saying mtgox was the most trustworthy, least sketchiest exchange out there.

What does Mt Gox say?

IRS can only pursue taxes on "income"

[scorp1us]

There is no definition of income in the constitution, and there are a bunch of convoluted court rulings on income taxation. (It's not all that comes in.) This move by the IRS is (as I believe) to be unprecedented. It is effectively assuming that any american who traded bitcoin was evading the income tax without any evidence thereof. This presupposition of guilt is what makes it newsworthy. Anyone who traded btc is assumed to have evaded the tax, even though self-reporting is the obligation of the taxpayer always applies. Furthermore, the taxes due would only be on the profits of trading, just like a stock. But unlike a standard stock broker, a 1099-B would not be issued by coinbase automatically. It's not coinbase's responsibility to report, it's the taxpayers.

Good luck evading this one... the blockchain is public. Which begs the question... does the IRS have blockchain analysis tools?

Re:IRS can only pursue taxes on "income"

[PRMan]

Even easier, Coinbase has records of buys and sells, along with your name, address, bank account and SSN. Makes catching people really easy without blockchain tools, which would be much harder.

Re:IRS can only pursue taxes on "income"

[deadwill69]

Depends on how it's used:
https://www.irs.gov/uac/newsro...

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.

Re:IRS can only pursue taxes on "income"

[mysidia]

unlike a standard stock broker, a 1099-B would not be issued by coinbase automatically.

If you move more than 200 transactions or $20k in Cash or Bitcoin through your account in
a Calendar year, then Coinbase issues you a 1099-K. Even if you're just moving your funds
from one account to another.

So there definitely will be reports to the IRS if you move significant capital around.

Re:IRS can only pursue taxes on "income"

[BlueStrat]

There is no definition of income in the constitution, and there are a bunch of convoluted court rulings on income taxation. (It's not all that comes in.) This move by the IRS is (as I believe) to be unprecedented. It is effectively assuming that any american who traded bitcoin was evading the income tax without any evidence thereof. This presupposition of guilt is what makes it newsworthy. Anyone who traded btc is assumed to have evaded the tax, even though self-reporting is the obligation of the taxpayer always applies.

"You are all guilty unless you can prove to our satisfaction that you've not broken any laws."

Yeah, nothing at all for anyone to be concerned about.

What could possibly go wrong?

Strat

Re:IRS can only pursue taxes on "income"

[scorp1us]

Shit. I just realized what this is about. It's about de-anonymizing the block chain. If they can get all the US taxpayers in the blocks chain and their bitcoin addresses, they can continue to erode the pseudo anonymity.

Re:IRS can only pursue taxes on "income"

[scorp1us]

Thanks to you input, I just had this revelation: https://slashdot.org/comments....

If the 1099 documentation is already being generated for the "sizable" transactions (I think the current lower limit to trigger reporting is $600 - but don't quote me) then there is only one purpose: "If they can get all the US taxpayers in the block chain and their bitcoin addresses, they can continue to erode the pseudo anonymity."

Re:IRS can only pursue taxes on "income"

[david_thornley]

"You are all guilty unless you can prove to our satisfaction that you've not broken any laws."

Nope. This is not a presumption of guilt. This is a presumption that investigation is warranted, which is something entirely different.

Re:IRS can only pursue taxes on "income"

[BlueStrat]

Nope. This is not a presumption of guilt. This is a presumption that investigation is warranted, which is something entirely different.

Funny you should use the term "warranted".

"[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."

What probable cause, a well-defined term legally, do they have that each these other individuals have or are about to commit a specific crime? Remember, general warrants are forbidden. They are not even alleging that all are or are about to commit a crime, only that some may be committing a crime.

It's pretty obvious this is a fishing expedition, something most judges frown heavily upon.

If police discover a meth lab in a house on your block, it does not give police the right to search every house on your block. Even if every single other house is somehow discovered to have a meth lab, that still is not sufficient grounds to search *your* house, with no other evidence of a crime.

Strat

Re:IRS can only pursue taxes on "income"

[david_thornley]

I shouldn't have said "warranted". The police, or other law enforcement agencies, can start any investigation they like on anyone with no cause whatsoever. They're limited in the things they can do during the course of an investigation,at least theoretically. However, if this is an investigation of individuals, the Fourth doesn't apply because they're not searching the individual's effects. If it's an investigation of the exchange, then it isn't a general warrant.

Re:IRS can only pursue taxes on "income"

[BlueStrat]

However, if this is an investigation of individuals, the Fourth doesn't apply because they're not searching the individual's effects. If it's an investigation of the exchange, then it isn't a general warrant.

The quotes from the investigators said they were wanting to see if any of the exchange users were using it to evade taxes. That's an investigation of the individuals. They did not say they were investigating the exchange because they had probable cause to believe the exchange was evading taxes. They have no specific probable cause to search the private financial data (papers and effects) of the individuals. It's a fishing expedition using a general warrant. That's the reality.

Of course, a Venn diagram of reality and the US legal system would show only a very modest area of intersection, particularly in more recent times.

Strat

Duplicate

[watermark]

Isn't this a duplicate of https://yro.slashdot.org/story... ? The other one was even posted by BeauHD as well.

Re:Duplicate

[Anonymous Coward]

Looks like its part 2 not a dupe.

Re:Duplicate

[Muntzsky]

No, not a duplicate but an update. The post you linked from Nov. 18 was actually included in this story (2nd link). Today's post says "On Wednesday, a federal judge authorized a summons requiring Coinbase to provide the IRS with those records."

If you do business in the US, the IRS gets to peek

[Sycraft-fu]

You find it is true of most nations, actually. If you are playing with finances in their borders, their tax agencies get to have a look at what is going on. Doesn't matter if you are a citizen or not. There can be tax implications even if you are't a citizen but regardless they want to see what is going on.

I mean look at the FIFA guys who got brought down by the US: It happened because they were doing shit with US currency and US banking. That is why the US took an interest and has legal standing.

i didnt get that far

[Anonymous Coward]

Question 0: What tax on Bitcoin reserves?

Re:i didnt get that far

[PRMan]

reserves? I didn't see that in the summary. It's a capital gains issue, similarly to that of gold or silver.

Cryptocurrency is for CRIMINALS

[Anonymous Coward]

I've been saying it all along, been scoffed at, mocked, and ridiculed for saying it, and now we see how right I've been since I ever heard the word 'bitcoin' in the first place: it's used by criminals, for criminal activities. That's it's most common use, and now you all also see that if you've been using it, you're now going to have your life flayed open like a frog on a dissection tray, because you'll be associated with criminal activity. Meanwhile those of us who were smart enough to see where this was going to go have never been involved with it and are safe from the prying eyes of federal law enforcement. Enjoy your stay at Club Fed, idiots.

Next up:World of Warcraft gold

[Anonymous Coward]

People have been tax free far too long in Azeroth. With people buying and selling with Warcraft gold, the IRS should be stepping in.

How do I transfer them to myself?

[Anonymous Coward]

I have some bitcoin with coinbase. Worth about $300 at today's rates. I bought it just to test it out but I haven't actually used it for anything. Where can I learn about how to transfer it to myself? I still don't have a great idea of how that works.

Re:How does bitcoin know which customers are Ameri

[Anonymous Coward]

The premise of your question is flawed. BitCoin transactions are NOT anonymous,

But, but, but...

the IRS argued that two cases of tax evasion involving Coinbase combined with Bitcoin's "relatively high level of anonymity" serve as that basis.

Oh, that's right, Trump is president-elect. We are in the world of 'post-logic' economics.

not 2013?

[Anonymous Coward]

All the good capital gains were people that bought in 2013 and earlier. I came late to the party. Bought some bitcoin on coinbase after the big bubble to $1200 deflated to $500-600. Sold some at $830 again on coinbase and started buying back in way to early. I didn't claim the loss from hodling my bitcoin through 2014 and 2015, why should I claim any gain from holding it through 2016? I haven't sold a single bit since I started buying back in. I lost a small fortune at Cryptsy in fact. I did a lot of alt coin trading on exchanges that don't even exist anymore. It would be impossible to calculate any gains and losses. I'm just not going to mention anything crypto related to the IRS unless they send me some kind of request.

Blanket Warrant

[DERoss]

The basic issue is not about bitcoin. It is about the scope of warrants, summonses, and subpoenas. The Fourth Amendment to the U.S. Constitution states:
> The right of the people to be secure in their persons, houses,
> papers, and effects, against unreasonable searches and seizures,
> shall not be violated, and no Warrants shall issue, but upon probable
> cause, supported by Oath or affirmation, and particularly describing
> the place to be searched, and the persons or things to be seized.

I doubt there is "probable cause" that tax evasion has indeed been committed by Coinbase's users. Such a broad summons fails to describe which persons' accounts are to be examined. Since the summons was served on Coinbase, which has not been suspected of a crime, a challenge of the summons to appeals courts or the US Supreme Court might be very successful.

Re:Blanket Warrant

[Anonymous Coward]

I'm a coinbase user and I paid short term capital gains on my bitcoins in 2014. No doubt: the IRS used my blockchain transactions as evidence of tax evasion until they saw my tax return. In their minds: I was effectively guilty until proven innocent. What probable cause did they have to connect my SSN to a blockchain transaction? Answer: None.

Re:Blanket Warrant

[Anonymous Coward]

I read about it everyday, the Amendments of the US of A.
As someone who lives in another country, I find it offensive that a country can have ratified by its states 27 amendments and, in this day and age, not hold itself to any of them. Not one.
The 1st? nope, squashed.
The 2nd? Nope, completely squashed in most states.
The 3rd? is that a joke? irrelevant and effectively squashed.
The 4th? Squashed to smithereens.
The 5th? Kinda works, but proves an admission of guilt in most cases to "something" thereby tainting ones character.
The 6th? WTF happened to THIS one? You poor poor bastards. The system is Pay To Win.
The 8th is my favourite, who decides excessive?cruel and unusual punishment?

Your whole justice system is a controlled joke and it affects the rest of the us in the world when you can't even look after your own people because you would rather incarcerate every god forsaken john doe in a carpet bombing raid on your so called "freedoms"?!

Re:Blanket Warrant

[david_thornley]

Your Fourth Amendment rights work, more or less, with your persons, houses, papers, and effects. They don't necessarily apply to information a third party has about you. In this case, Coinbase is a legitimate business, and there are reporting laws that likely come into effect. I'm not a lawyer, and I don't know the legal situation, but this is very likely legal.

Will they be crediting the losses as well?

[phrackthat]

I see that the IRS is eager to tax those who profited off of Bitcoin. Will they be retroactively reducing taxes and issuing refunds for everyone who took a loss on it as well? Only seems fair.

Re:Will they be crediting the losses as well?

[gatfirls]

It is on the taxpayer to show all income and losses. If the IRS sees a person cashing out a bunch of bitcoin and not reporting the income they are going to audit the person.

Not saying I approve of them doing this but that is what's going to happen. A lot of butts are puckered pretty tight after reading this news.

Re:Will they be crediting the losses as well?

[emt377]

They will likely require reporting of capital gains or loss. Either way the IRS requires it to be reported and as far as I can tell reporting capital loss isn't optional. There's no lower limit, like with hobby income or such, so if you lost 10 cents net on trading BC you have to pony up for the CPA to supplement your filing for that year to report your capital loss. And yes, given the general trend of BC there will be more losses than gains reported, and the IRS will end up refunding more than it collects. I don't think it's overly concerned with this though - like any part of the federal government it's an anal-retentive law and regulations enforcer.

Re:Will they be crediting the losses as well?

[coinreturn]

And yes, given the general trend of BC there will be more losses than gains reported, and the IRS will end up refunding more than it collects.

Not likely. First, if they can see buys and sells, they can just audit those that look like profits. Second, if anyone bought/sold for a loss and didn't claim a loss, they are fools.

John Doe warrants are the problem here

[Applehu Akbar]

When the IRS or any other agency wants discovery of evidence in a case, it should be demonstrating interest in a specific person, partnership or corporation being investigated. The whole idea of John Doe warrants is an unconstitutional fishing expedition. Let's hope that now we'll get some new Supreme Court appointees who don't rubberstamp the government's every whim.

Re:John Doe warrants are the problem here

[Xyrus]

When the IRS or any other agency wants discovery of evidence in a case, it should be demonstrating interest in a specific person, partnership or corporation being investigated. The whole idea of John Doe warrants is an unconstitutional fishing expedition. Let's hope that now we'll get some new Supreme Court appointees who don't rubberstamp the government's every whim.

You do know who was elected right? You're aware of the types of people he's filling his cabinet with and listening to?

The same person who tweeted flag burners should be thrown in prison and have their citizenship strip is the same person who will be sitting in the Oval Office. If you think for one second someone like Trump, his cronies, or pretty much anyone in the alt-right gives one shit about your privacy and warrant limitations then you are going to be in for some eye opening surprises over the next four years.

Wow, it's more than doubled...

[Fencepost]

Since I bought 0.1 Bitcoin (long since used) just to be sure I had an easy way to buy Bitcoin in case I needed to do so for someone hit by ransomware but with no backups.

I hope the IRS doesn't come after me for taxes on my approximate increase from $31 to ~$41 that I used on domain renewals. Oh, and the $1.11 worth still in my account.

Re:Wow, it's more than doubled...

[david_thornley]

Legally, you should have reported it. If you've got a fraction of a Bitcoin still, it's still a commodity, not a currency, so you don't need to report anything until you sell or otherwise dispose of it. Practically, the IRS doesn't care.

This is why I'm moving my biz from using exchanges

[Anonymous Coward]

It's not that hard to spend BitCoin like it once was. Years ago when my business adopted BitCoin we adopted BitPay to act as a middlemen for my company during the early days of BitCoin. It made it easy to convert BitCoin to cash so we could spend it. It's no longer that difficult though. Right now BitPay has a record of the transactions, but yet I don't convert *any* BitCoin to USD. They simply forward the BitCoin to our BitCoin wallet that is stored on a computer I control. I can completely eliminate this middle-men exchange and spend the BitCoin directly (which we already do for 100% of the BitCoin received, and we get a decent percentage of transaction paid for in BitCoin).

I have employees who take there entire paycheck in BitCoin (per personal preferences, not because we force it, we're not a 'BitCoin business', we simply accept BitCoin). I pay my car insurance in BitCoin. I purchase all of our electronics in BitCoin through NewEgg and Purse (lets you purchase from Amazon). I eat out at various local restaurants and pay in BitCoin (Local Burger, Little Zoes, a few food trucks, among others). I pay my car mechanic in BitCoin (Wilder Automotive). I buy my computers and electronics in BitCoin (ThinkPenguin). I shop at various local businesses and pay in BitCoin (Corner News, Route 101 Local Goods, Thomas Carroll Garden Center, and some others). All of these local places are within 5 miles of my where I live and work too (Keene, NH). It's a small town of only 23,000 people too.

I'm sorry- but the IRS has no control of anybody who choose to skirt reporting everything provided they report enough or otherwise hide via some front businesses enough profit to avoid being identified as spending more than whats being reported. I run a completely legit business and have no doubts that the government could shut it down- but not for failure to report. But the idea that they'd be able to identify my failing to report everything if I stopped reporting everything is a joke. They'd get us on one of the gazillion other violations. There are so many rules and laws no business can reasonably follow them all. The reality is you merely need to appear to be reporting everything.

Re:How does bitcoin know which customers are Ameri

[Anonymous Coward]

Not entirely true. That is to say if you take BitCoins and you then spend BitCoins it's not going to be traced back to you. Or it would be as difficult as cash. If somebody records your name alongside the transaction then sure. But how often do you tell the person you are buying a snack from your name? Z.Cash is also one it's way which utilize zero proofs so there is some genuine level of anonymity that'll solve these problems.

More JEWISH control...

[Anonymous Coward]

Who do you think runs the IRS? Who runs the Fed? Who runs the U.S. government? Who do your Congress people all bow down to? Netenyahu.

"illegal search and seizure"

[rhyous]

This seems like an "illegal search and seizure" to me. You need evidence an individual has done wrong to get that individuals history.

If you have no evidence of wrong doing be an individual or the company, you should not get a warrant for the company's data on that individual.

This is equivalent to saying: We found evidence of murder in two poeple's homes, so we are requesting all the homes in this city to be opened up for search.

This judge should be fired and fined for failure to follow the constitution.

Re:"illegal search and seizure"

[Anonymous Coward]

This is equivalent to saying: We found evidence of murder in two poeple's homes, so we are requesting all the homes in this city to be opened up for search.

This judge should be fired and fined for failure to follow the constitution.

It is clearly absurd to issue a warrant on such a huge group of people in a nation founded to protect individual rights, but it isn't in the interests of US lawyers to acknowledge that.

None of that large - and anonymous - group of people are paying the lawyers for protection against government abuse of the legal system.

It's the same kind of logic that allowed slavery to exist in a nation founded to protect the rights of man. The slaves weren't in a position to pay the lawyers - and the slave owners were.

Judges at the federal level are selected by politicians who receive enormous campaign contributions from the US legal profession, and are themselves lawyers, so the views of the lawyers will always trump logic or reason or any concept of integrity.

In an unethical legal system, a Bill of Rights is largely irrelevant.

How?

[ebvwfbw]

Recently a judge ruled that Bitcoin is not currency. So how could there be taxes due on something that isn't money that is based on money?

http://www.usatoday.com/story/...