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

Evading taxes?

[Anonymous Coward]

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

Re:Evading taxes?

[John Napkintosh]

You most certainly enjoy many benefits of taxation; you just don't want to pony up your contribution. Enjoying benefits without contribution is theft.

Re: Evading taxes?

[Opportunist]

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.

Re:Evading taxes?

[mlw4428]

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.

bitcoin carries a permanent log

[Anonymous Coward]

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.

Re:bitcoin carries a permanent log

[MrLogic17]

^ This.

The distributed ledger is the opposite of anonymous- everyone has a full copy of all transactions. To use a bank analogy, you have a land of numbered Swiss bank accounts, and the transactions are published in a daily newspaper. Cracking who owns what is simply an exercise in meta data analysis.

Taxes != theft

[sjbe]

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.

Re:Taxes != theft

[Opportunist]

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

Re:Taxes != theft

[BarbaraHudson]

Venezuela is getting there pretty damn fast. And the shit-hole known as India*, where tax evasion was so bad that they had to change the currency. 60% of households are without a toilet, no proper sewer system, people shitting in the open on sidewalks, that's what tax avoidance gets you. It's now even grounds for divorce because an Indian court has finally ruled that making women hold it in until after sunset so they can take a dump outside (hopefully unseen) is cruelty.

They keep saying "taxation is theft," but ignore the fact that if you don't pay your fair share, you're stealing from everyone else who has to make up the difference. Not paying tax is theft.

Re:Taxes != theft

[jittles]

Taxation to provide benefits that are Not common goods is also theft. For example: If the government collects $100 from 1000 taxpayers, and then spends $100000 on a project or service that only benefits 100 taxpayers, for example, maybe that tax money goes to a service that only helps parents with children, and 900 taxpayers don't have kids, then that is stealing $100 from 900 taxpayers.

I agree with you wholeheartedly. That's why we need to end public education. I don't receive ANY benefit whatsoever from public schools. It's not like those schools keep children busy and out of trouble. And I don't want educated employees for my company. I want poor, uneducated masses that I can exploit for as little as possible. It's not like they'll turn to crime out of boredom or sheer desperation or anything like that.

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.