The IRS Says Crypto is Currency, Warns Against Tax Evasion


via Bitcoinist

The Internal Revenue Service (IRS) — the United States’ tax collection agency who administers the Internal Revenue Code enacted by Congress — once again provided taxpayers with a friendly reminder that income from virtual currency transactions is reportable on their income tax returns.

The Taxman Issues a Warning

On Friday, the IRS shared a reminder of the tax rules regarding cryptocurrency transactions on the agency’s official website.

The notice explains that cryptocurrencies — also known as virtual currencies or digital currencies — are taxable by law just like transactions of any other property. Both taxpayers and preparers are expected to abide by the guidelines outlined in IRS Notice 2014-21.

The IRS also reminds taxpayers that those “who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest.”

IRS Stymied Over American Cryptocurrency Traders’ Reluctance to Report Earnings

Those dealing in large amounts of cryptocurrency may also be subject to criminal prosecution, should they fail to correctly report the income tax consequences of digital currency transactions. Notes the release from the IRS:

Criminal charges could include tax evasion and filing a false tax return. Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000.

Crypto Is Currency, and Property, and Anything Else That Can Be Taxed

Cryptocurrency opponents might like to claim that Bitcoin and other cryptocurrencies have failed to live up to their namesake, but the IRS reminds taxpayers that — as far as the agency is concerned — digital currencies are indeed currencies. Notes the release:

Virtual currency, as generally defined, is a digital representation of value that functions in the same manner as a country’s traditional currency.

However, the IRS is also keenly aware of the difficulties involved in tracing cryptocurrency transactions, especially when compared to traditional fiat transactions. Still, the agency cautions against those interested in trying to slip through under the radar. Notes the release:

There are currently more than 1,500 known virtual currencies. Because transactions in virtual currencies can be difficult to trace and have an inherently pseudo-anonymous aspect, some taxpayers may be tempted to hide taxable income from the IRS.

IRS Tax Form 1040

Cryptocurrency isn’t just digital currencies in the eyes of the tax collectors, however. It’s also property. Says the IRS:

Notice 2014-21 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.

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So from what I read, a 35-37% tax on what you make ? How does anyone profit at all?

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That is the maximum for short terms. Buying low and selling high is the best way to make profit less taxes.

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So glad I’m past this point. Ended up owing around $1800 once it was all tallied up. $1600 of that would have been a tax return, so psychologically, at least, I was only down $200.

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As Peter says better to pay off the mafia

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So, how exactly do you make money off of this than? Mining the coin directly?

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Three ways I’m thinking about :

  1. You don’t pay taxes and ignore their empty threat (they don’t have enough enforcement personnel to catch the small fish, personally I haven’t reported my biggest earnings for the last seven years and nothing happened to me … yet).
  2. You only sell the same amount of $ you put into, and keep the profits in BTC.
  3. You report a trillion fake transactions that makes you loose money. You file for a loss. And tell them to fuck off.
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There is no evading the tax in the U.S. Im not going to get audited in 10 years and owe tons of money lol. The only way I see it worth it is through mining. In which you put all your money back into the Rigs and it becomes a business expense.

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You can come to Australia, we don’t have these silly taxes :sunglasses:

Australia does not recognise Cryptographic Digital Assets as a currency.
There is no Goods and Services tax on the purchase of said Digital Assets.
The only tax that applies is Capital Gains Tax when you convert your Digital Assets back to fiat and you actually make a profit. There is an exception that if you held the Digital Asset for a period of 10 years, the tax does not apply.

Maybe us dumb Roo Ball sniffing Aussies are getting it right?

Serious though, if your country isn’t doing right by you, move. I’m sure Australia would love to have all your Crypto Riches spent in our country and you only need AUD $10k in an Aussie bank to apply for citizenship.

Stay Fishy

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I honestly see a lot of those as idle threats. I’m always willing to pay my taxes, but the reason why many aren’t paying taxes on crypto gains isn’t due to not wanting to. The main reason is that the IRS and several different branches of the US government can’t decide on whether it’s an asset, currency, property, and so on. People don’t know how to pay gains on crypto. If the IRS was more helpful when it came to paying taxes via crypto, it wouldn’t be as much of an “issue” for them.

@Peter.0x First point is in the same route as to what I’m talking about.

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Yes there is. It’s called cryptocurrencies. It’s going to be even easier when USD are tokenized and we have plenty of decentralized exchanges.

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Well if you withdraw through coinbase you will be paying taxes in the U.S since its a U.S based company and they are paying/filing taxes too.

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I always feel shame when I see how much taxes I pay. I feel so bad to see how that money is used to kill people I’ve never met in countries I’ve never been. I feel bad to fund corruption, poverty and monopolies. That really fucks with my mind and I don’t want to have to explain to my children that I blindly followed the rules because I was too afraid to loose my comfortable life. If we have a chance not pay taxes, I think it’s the moral thing to do to take that chance.

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If you withdraw more than you put in on coinbase, yes you will be tracked. But why would you do that ? I can understand if you do it for trading, but you can keep the profits in BTC. Why would you get back the profits in fiat ? It’s like selling your car to buy a horse. It doesn’t make sense to me.

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I m sorry, but that is THE most ridiculous thing I have ever heard of. If you live in the United States, you pay taxes. Those taxes, whether you agree with them or not, keep everything in motion. They keep it so that comfortable life can be maintained for all. Your taxes pay for your schools, your roadways and a number of other public facility. All of that infrastructure that you take for granted is paid for with taxes.

Really really immature response, to a very serious topic.

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  • The problem is not about paying for services that I need, it’s about being coerced to do so. If I ask you to pay me 10k$ so I can give it to charity, then I keep 5k$ for me and if you disagree I send you to prison. Do you agree ? But … but I don’t understand … you don’t want to pay to help people ? It’s by helping to pay for this charity that we maintain our society and “insert generic platitude here”.

  • Schools are important, and I want the ability to choose where my money goes. I don’t want my children to go to a brainwashing camp called public school. Where do you think you learned all that “we need to pay taxes to support our society, bla, bla, bla” crap ?

  • Infrastructure are important I want the ability to choose which one I want. Come to France and experience the difference between public and private roads. Private roads are smooth, always well managed and maintained. Public roads are crap, full of holes. Why ? Because it belongs to society, therefore it belongs to no one … also it doesn’t get you elected to say you will pay for roads.

  • Funding wars in other countries is not something I want. Do you ?

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Lol, people are making risky trades and then risking getting hacked. The IRS wants a huge slice of your pie without offering any protections.

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US Citizens are taxed on worldwide income. It does not matter where you live.

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If you live in France, than all of what I said does not apply to you. Maybe they are a little more relaxed in France than they are in the U.S. Here, when you goto claim taxes, they will dock pay, and take your possessions. They really don’t play around here.

You speak like someone that feels entitled to not having to pay taxes. The government isn’t going to care about those excuses.

You are not donating to a charity. Your responsibility as a citizen is to pay taxes and help your country prosper as one. Your being completely irrational, and irresponsible, and I hope you do not teach your children such foolish ways.

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He is simply stating the fact that most of the tax money gets squandered and does not directly help this society you speak of. Their is mass corruption in all countries which are all funded by tax money. He wishes to attribute as little as possible to this broken system

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