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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.
"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.
How dare the little people!??? Only corporations who purchased the proper politician get to evade their personal responsibility.
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.
But it may be easier to prove they did not pay their taxes than to prove they sold drugs. IE, IRS: Where did that 500K in your bitcoin account come from? Drug seller: I don't know. IRS: You failed to declare that on your 1040, tax evasion, go directly to jail. Many criminals have been brought down by the IRS.
"It's a strong indication that Bitcoin is mostly used for criminal activity."
Hardly. By that logic everyone using cash are mostly engaged in criminal activity. Day-to-day people just aren't thinking about everything in terms of taxes. Ted buys Joe lunch, it never even crosses Joe's mind to log the lunch and the amount so he can pay taxes on it later.
This is akin to the IRS announcing they've bought software to perform forensic analysis of lunch purchases because less than 300 people reported income from lunch gains in 2015. Hell, the IRS didn't even have rules that told you HOW to report Bitcoin as such in 2015 a lot of people who did some significant amount of trade likely did report but declared it via some other mechanism like capital gains or business income.
To be brutally honest, the types of transactions that most people make with Bitcoin (drug buys, money laundering, etc) aren't exactly the ones you want to report to the government. If they were dumb enough to report those to the IRS, they'll have problems worse than tax evasion to worry about.
I wouldn't bet on that. Tax evasion is how they put Al Capone in prison. If you look on line 21 of the standard 1040 form you will see it says "Other income. List type and amount". It may as well say "report earnings from illegal drugs and other crimes here". This is where they get drug dealers because ANY income has to be reported by law, whether or not it was legally obtained. So if you don't report the earnings from drug deals (or any other crime) they bust you for tax evasion even if you manage to avoid prosecution for the crime itself.
Being a buyer doesn't really save you either. Use taxes, sales taxes, excise taxes, and more can all apply depending on what state you live in.
There are some interesting fifth amendment constitutional law issues regarding mechanisms used to collect taxes on illegal drugs. In some cases reporting drug earnings can violate your rights against self incrimination depending on how it is done.
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.
Funny. A bunch of US dollars in one hand versus a bitcoin wallet address in the other - guess which one is earning me more right now? And no, financial instruments and investments are not USD.
Long signatures suck.
I didn't know that going directly to jail for tax evasion was actually a thing anymore. I thought that what they did now was they would assume it was an error, and notify the person, providing them with an opportunity to correct it by paying the amount owed (with interest, of course). I would imagine that one would only actually go to jail if they could be found to be deliberately avoiding paying the amount that they supposed to owe. This should require going to court first and so one wouldn't really go directly to jail, not to mention also getting lots of notice.
File under 'M' for 'Manic ranting'
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.
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.
"It is the business of the future to be dangerous" -Alfred North Whitehead
Came to post something like this.
Anonymous currencies (which Bitcoin really isn't) and currencies not controlled by central banks (which Bitcoin is) are quite useful under authoritarian and/or despotic governments.
I expect Bitcion use to increase significantly in the USA over the next few years.
Have gnu, will travel.
There is no reason to allow someone to moderate in a discussion and then post anonymously. That's a bug - one that can be easily fixed. It's also dishonest. Then again, most logged-in users hide behind nyms anyway, so they're more like "semi-anonymous cowards."
Now back on topic. The bitcoin chain holds a record of every transaction. The IRS shouldn't have too hard a time now going back over years of transaction records. There's the flaw of bitcoin - if anonymity is broken, every transaction is on record, not just the most recent activity. And for bitcoin to work, every transaction needs to be recorded. And if history has taught us anything, it's that any encryption can be broken given enough resources and motivation. Just more proof that those who don't learn from history are doomed to repeat it, I guess.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.