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

Posted by BeauHD on from the you-can-run-but-you-can't-hide dept.

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.

5 of 210 comments (clear)

  1. Evading taxes? by Anonymous Coward · · Score: 4, Insightful

    How dare the little people!??? Only corporations who purchased the proper politician get to evade their personal responsibility.

    1. Re: Evading taxes? by Opportunist · · Score: 4, Insightful

      You may be joking, but there's plenty of assholes who think that they don't owe jack shit... but then turn around and use public roads, public services and enjoy living in a free country the freedom of which is paid for by tax money.

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    2. Re:Evading taxes? by mlw4428 · · Score: 4, Insightful

      Theft is a crime. The US Constitution specifically calls out the government's ability to tax. For all of your patriotism spouting, you don't seem like you've read the Constitution. And no, the Constitution places absolutely ZERO limits on the amount it may or may not tax you. It merely stipulates that what it taxes you must be used for debts, defence, and the General Welfare of the people.

      So no, it is not patriotic to avoid paying your taxes. It is laziness and against our very Constitution. Pay your debt to society or give up your citizenship and leave. Find yourself a nice 3rd world shithole Libertarian nation and live there. Freeloader.

  2. bitcoin carries a permanent log by Anonymous Coward · · Score: 5, Insightful

    Bitcoin has a permanent log of all transactions going back to the very beginning. The log never goes away.

    As soon as a single trasnaction become tied to a real person then every transaction ever made by the person is exposed.

    Bitcoin is not anonymous. Never was never will be. Using for that purpose = fool. There are other cryptocurrencies designed for anonymous, bu tthey are not as popular so also not as useful.

  3. Taxes != theft by sjbe · · Score: 5, Insightful

    Fuck you. Taxation is theft.

    If you don't want to pay taxes go live in somewhere where you don't use any of the benefits of paying taxes. No rule of law, no police or other first responders, no roads, no military, no contract enforcement, no judicial system, limited health care, no public education, no science research, no parks, no vaccines, no space program, no internet, no food safety, no drug safety, etc. If you want to live in a civilized society shut up and pay your taxes and stop selfishly whining about it. You benefit from the results too. Taxes are only theft in the minds of stupid and selfish people.