Photo by: STRF / STAR MAX / IPx 2021 04/23/21 Over $ 200 billion wiped out the cryptocurrency market in one day … [] when Bitcoin fell below $ 50,000.
The Justice Department issued a press release to fight terror in the hearts of anyone trying to carry out cryptocurrency tax shenanigans. The federal court for the Northern District of California has issued an order approving a subpoena from John Does to Payward Venture Inc and affiliates d / b / a Kraken. The IRS would like to see the records of U.S. taxpayers who made transactions in cryptocurrency worth at least $ 20,000 between 2016 and 2020.
One of the common misconceptions about cryptocurrencies is that they are a legitimate tax avoidance tool. In a recent episode of the Game of Roses podcast, the Bachelor Clues-oriented host pointed out a little that you’ve bought a Tesla
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With Bitcoin there would be no taxes as no dollars were exchanged.
From then on it went a little further and I thought it was worth writing a bit about it. Bachelor Clues is a thoughtful, classy guy who got him invited to a podcast. If you’re sacrificing more than an hour of lifespan that you’ll never get back, this podcast can help you find out a lot more about me than you probably want to know, and a little bit about virtual currency taxation, but there’s a more efficient way to do the latter Achieve.
For key information on the subject, see IRS Notice 2014-21. Here are some of the key points
For federal tax purposes, the virtual currency is treated as property. General tax principles for real estate transactions apply to virtual currency transactions.
A taxpayer who receives virtual currency in payment for goods or services must, when calculating gross income, the market value of the virtual currency in US dollars at the time of receipt of the consider virtual currency.
The second point is the most critical. You don’t avoid tracking income by getting paid in virtual currency. Bitopia is not a tax haven.
The idea that virtual currency is « property » makes trying to use it as a medium of exchange a bit of a challenge. Every time you spend a Bitcoin or Dogecoin or whatever, you can see profits or losses from the difference between what you paid for the coin and the fair market value in dollars of what you received. Thanks to the nature of the blockchain that keeps every transaction forever, there are services that put it all together for you.
You and I are both scrupulous about tax compliance, but you may be shocked that it isn’t everyone is. There are amoral people who shirk their obligations when they can get away with them. And there are principled people who believe that taxes are stealing, or that paying taxes is immoral because governments spend resources on it. Given its suspected anonymity, is cryptocurrency a tax solution for you?
Trying to answer this question can send you down a rabbit hole. I spent time on Reddit and Youtube sifting through material, applying my bs detector and combining this with forty years of tax experience including following many tax disputes which give me the benefit of other people’s experience. The question is, can you use cryptocurrencies to hide your tax shenanigans?
I should say first that you shouldn’t indulge in tax gambling because it’s wrong, but this ship has already sailed. The bottom line is that it does seem that there is a way to hide wealth and income through the use of cryptocurrency, but it takes a lot more effort and expertise than most people will put into it.
If If you want to use exchanges to hold and trade your cryptocurrency, current « privacy » seems to be pretty short-lived. There is no comprehensive reporting infrastructure, but there is the success of the DOJ in obtaining John Doe subpoenas on behalf of the IRS. It seems that in the long run, cryptocurrency exchanges will be like banks when it comes to hiding from the IRS. In some ways they can be worse as the IRS pays a lot of attention to them.
So if you are trying to hide your financial misdeeds, do it yourself instead of taking advantage of stock exchanges. With Bitcoin, still by far the most popular virtual currency by market capitalization, although not the transaction volume, you have to grapple with the reality that every transaction is ever stored on the blockchain and visible to everyone.
There are many techniques to mitigate the blockchain transparency problem, but that is way beyond the scope of this article. There are also cryptocurrencies that are structured differently to make them more privacy-oriented. Monero seems to be at the top of those lists right now.
For what it’s worth in a January article on Forbes.com, Hailey Lennon pointed out that criminal transactions in cryptocurrencies are on the decline. It seems that hundred dollar bills are still the vehicle of choice for such things.
Almost everything I know about keeping your financial transactions, actually your existence, hidden from the authorities is through that Learned to read Repairman Jack Stories from F Paul Wilson. Jack is a kind of urban mercenary who has a very compelling reason to live off the grid. But he’s not in the sticks. He’s in Manhattan. I’ve discussed some of these techniques here and here.
One of the really interesting tricks was Jack’s retirement plan. He buys Krugerrands, for cash of course, and sticks them to pipes in the wall so that a metal detector can’t find them. In any case, I wondered what Jack and his mentor, friend, and arms dealer Abe would think of Bitcoin. Fortunately, its creator is quite approachable so I could ask him,
My question was what Repairman Jack and his mentor would think of Bitcoin. Q Paul Wilson replied:
Abe is the last person to choose Bitcoin – a die-hard man to the core. And he’s influenced Jack a lot since he was 20s. So no of either.
I wondered if Jack would consider this a payment method. His answer was short – CASH!
It can be a generation thing. Wilson is older than me and I’m 69. Still, I’d love to read a bitcoin discussion between Abe and Jack.
Charlie Osborne secured the IRS order to provide Kraken with customer data requests for cryptocurrency traders on ZD Net. The story includes a response from Kraken: « One of Kraken’s guiding principles is to maintain the security and privacy of its customer accounts. We understand the court has raised concerns about the scope of the proposed IRS subpoena. We share similar ones Concerns. «
Aysha Bagchi has Kraken Crypto user information can be obtained from IRS in Tax Fight (1) behind the Bloomberg Tax Paywall.
Jack Townsend ordered the service of John Do Summons to Payward Ventures d / b / a Approved Kraken, a cryptocurrency service provider (05/04/21) for federal tax crimes.
Ed Zollars has granted IRS permission to serve John Doe Summons for Kraken Cryptocurrency Exchange transactional information on current federal tax developments.
I have been a CPA for over 30 years and focus on taxes. I have extensive experience with partnerships, real estate and high net worth individuals.
My ideology can
I have been a CPA for over 30 years and focus on taxes. I have extensive experience with partnerships, real estate and high net worth individuals.
My ideology can be summed up at least metaphorically by this quote:
« I have utter disrespect for anything that has to do with society except what makes the streets safer, the beer stronger, the food cheaper, and the old men and old women warmer in winter and happier in summer. » – Brendan Behan. Nobody I work for has any responsibility for what goes on this blog and you shouldn’t infer that they agree or even read it.
Ref: https://www.forbes.com
