IRS Now Has a Tool To Unmask Bitcoin Tax Evaders (thedailybeast.com)

SonicSpike shares a report from The Daily Beast: You can use bitcoin. But you can't hide from the taxman. At least, that's the hope of the Internal Revenue Service, which has purchased specialist software to track those using bitcoin, according to a contract obtained by The Daily Beast. The document highlights how law enforcement isn't only concerned with criminals accumulating bitcoin from selling drugs or hacking targets, but also those who use the currency to hide wealth or avoid paying taxes. The IRS has claimed that only 802 people declared bitcoin losses or profits in 2015; clearly fewer than the actual number of people trading the cryptocurrency -- especially as more investors dip into the world of cryptocurrencies, and the value of bitcoin punches past the $4,000 mark. Maybe lots of bitcoin traders didn't realize the government expects to collect tax on their digital earnings, or perhaps some thought they'd be able to get away with stockpiling bitcoin thanks to the perception that the cryptocurrency is largely anonymous.

"The purpose of this acquisition is to help us trace the movement of money through the bitcoin economy," a section of the contract reads. The Daily Beast obtained the document through the Freedom of Information Act. The contractor in this case is Chainalysis, a startup offering its "Reactor" tool to visualize, track, and analyze bitcoin transactions. Chainalysis' users include law enforcement agencies, banks, and regulatory entities. The software can follow bitcoin as it moves from one wallet to another, and eventually to an exchange where the bitcoin user will likely cash out into dollars or another currency. This is the point law enforcement could issue a subpoena to the exchange and figure out who is really behind the bitcoin.

Comments

Re:Scary

[Kiuas]

The IRS scares me. They will stop at nothing to get every last penny in taxes owed by everyone.

It scares you that officials seek to do their job effectively? What?

That's what tax officials do. They collect taxes that people owe. Some people, especially wealthier people and large corporations seek to use different mechanisms to avoid paying taxes that they legally owe. If tax officials allow this to happen, they're basically saying that tax evasion is fine at which point everyone with the money to hire a tax advisor/set up a shell company will stop paying taxes, and the entire tax burden will be left on those too poor to be able to use trickery to dodge taxes, which would be destructive to the entire society. There are those who argue this is in fact already at least partially the case seeing how little taxes many megacorporations pay to their respective countries, and seeing how abundant different sorts of tax-havens like Panama and the Caymans are.

Unless you yourself happen to be trying to use Bitcoin to dodge taxes, you should be in favor of this, because the more sucessfully people avoid taxes, the more the pool of tax paying citizens shrinks because tax-evasion, the more taxes you will pay.

Their basically tax-Nazis.

No. Wanting to catch people who break laws does not make anyone a nazi. This is just as stupid as calling the police "the crime-Nazis" for wanting to apprehend criminals. Now you may disagree with certain laws and argue that said laws or said taxes should not be collected, but for that to happen you need to change the law, not point the finger the whoever is enforcing said law and break Godwin's law without clearly having even a modicum of understanding of what the word you're throwing as an insult means.

Re:Taxes != theft

[Opportunist]

Somalia looks like his preferred place to live. No taxation there. Well, provided you can keep the bandits at bay.