So the IRS wants crypto service providers to gather a ton of data on users, like names and Social Security numbers.
I mean, I bet Coinbase is already doing that, but now they seem to want even decentralized exchanges on board... interesting.
Thinking back to 2021, the Infrastructure Investment and Jobs Act was all about infrastructure stuff, roads and bridges, not really related to crypto or financial oversight. But when they needed cash to cover spending, some Congress members tossed in a couple of provisions aimed at ramping up financial snooping on crypto users. They claim this would boost tax revenue, basically suggesting crypto folks are dodging taxes.
Honestly, bitcoin isn't meant for people in the USA anymore. Seriously. With this kind of thing happening, who wants to be a target? Getting into crypto just makes you a big target if you’re a US citizen...
They can bend terms, laws and create new laws to regulate crytocurrency market more and to get more tax for government.
The PATRIOT Act comes to cryptocurrency
Why KYC is extremely dangerous - and useless?
Don't do KYC, use DEX as much as you can do.
No-KYC Exchange Encylopedia
https://bitcoiner.guide/nokyconly/
https://kycnot.me/
you can say that but they have other things in mind. to put DEXs on the same footing as places like coinbase.
For this reason, the proposal states that the IRS expects some decentralized exchanges and selfhosted wallets may be forced to report their customers private information.
enjoy those things while they last because there are people behind sites like Bisq and Localmonero. And if the IRS comes breathing down their neck they'll drop USA customers like a hot potato.
The premise seems to be partly based on whether a person is in a position to know information about the identity of a customer, rather than whether a person ordinarily would know such information. The proposal states that this distinction is made because some platforms have a policy of not requesting customer information or requesting only limited information [but] have the ability to obtain information about their customers by updating their protocols.
The plan is the same or sounds very similar to the one the European Union is trying to implment, which in short tries to control Bitcoin transactions like banking transactions. Only P2P and transactions made from one's custodial wallet with non-EU entities would escape. But of course, if the USA follows the same path and more and more countries join, in the end there will be less and less room for freedom.
I'm friends with a retired tax collector who all but assured me that the chances of being audited for not reporting crypto-related stuff were slim. First of all, as an American, you're only subjected to taxes on trades made on exchanges that report data to the IRS. This may already be all major America-based crypto exchanges, but if you are a casual trader who, let's say, has less than $30k of tax obligations in a year, you are highly unlikely to be audited. This is because the cost of the audit exceeds the amount the IRS could potentially recover during the course of collections.
If you are using exchanges that don't report to the IRS, then the activity on those exchanges may have well never existed at all...
BTW I'm not advocating that people cheat on their taxes, just relaying info from a knowledgeable source.
This does not surprise me one bit, its the price we have to pay for increased adoption, more widespread usage & higher prices. Service providers have to get in line & satisfy what regulators demand. As long as you pay your taxes & dont commit financial crimes it shouldnt really bother you.
I don't live in the US, but I understand that this type of scenario might come up in our country as cryptocurrencies gain more popularity. The term "obligation" clearly implies that we, as taxpayers, need to ensure that we maintain proper records of our trading activities. It's like we become business entities responsible for maintaining financial statements to determine our tax liabilities. I bet not all profitable crypto traders are really committed to reporting their tax obligations. Some might not even keep track of their trading transactions.
I'm curious about the consequences of failing to report. What kind of sanctions could we potentially face if the IRS decides to conduct a thorough audit?
Sure that's true, but are we gonna trust these exchanges?
You know, there's this saying that goes, "It's only called cheating if you get caught." But if you can employ some accounting tricks that make your actions appear legally as "tax avoidance," then there's probably no risk involved.
Someone said the same thing about authorities not pursuing a case if the cost exceeds the benefits or something like that. I think it's a common occurrence around the world that the tax collectors prioritize bigger fish. The thing with the data collection is that they will still have your information at the end of the day. You may escape the audit for now but who knows what happens when you make it big?
Don't they have a database for all their users? I'm assuming they're still required to keep a few years of data.
Well, if you can give over a Billion Dollars to Israel to build a "Iron Dome" and to fund the Ukraine to fight the Russians and also spend more than 1 Trillion Dollars on the war in Afghanistan.... then you have to get the money from somewhere.
It is expensive to be the global hero in all the conflicts in the world, but I guess Crypto currencies should also contribute to funding these wars, because it's the tax payers that are paying these bills.
Imagine all that money going into a cheaper Health care system for their own people or proper funding to combat crime and drugs.
Developers of these services will get into trouble as they may be arrested or prosecuted, and people known to them will be forced to add side doors or identity verification procedures. Therefore, using open source services from unknown developers with the ability to host them is safer than using a DEX hosted on servers or closed source.
I am not calling here for non-compliance with IRS, but if it is difficult for you to comply, you should move to a country where taxes are lower or restrictions on cryptocurrencies are non-existent.
AFAIK, crypto exchanges outside of the US don't report customer tax information to the IRS. Legally speaking, however, US citizens are supposed to self-report trading activity on these exchanges. Its hard to imagine a scenario where international exchanges would provide customer data to the IRS... If they do report it to US authorities, it would be more likely because they are cooperating in a federal investigation for crimes not related to tax fraud.
I cant say anything with confidence about crypto exchanges that they transmit data to the IRS, and perhaps this is done upon request. But foreign banks are required to transfer data on the accounts of American citizens to the IRS. And this is all very interconnected.
Please do not tell me that you guys did not expect this to happen! It was just a matter of time before IRS starts collecting data from the crypto exchanges. And just do not blame IRS, any other country will do the same. Even in my country, the government has mandated for the crypto exchanges to share there user data with the tex authority.
Us once you to understand one simple thing. If you are using cryptocurrency you got to pay taxes. They are slowly closing out all other avenues for crypto users to skip the taxes.
It is why doing things like selling 2 btc at a 60k loss that carries over is not that stupid. If you sell btc at a gain a year or more later you pay no tax.
yeah but isnt paying taxes on crypto outside of most peoples' expertise about how to keep records and calculate it? i know it is for me. so it must be for other people to.
get ready for jail if you're doing that.
https://www.thebalancemoney.com/can-a-capital-loss-carryover-to-the-next-year-2388983
Tax-loss harvesting is when you realize a capital loss on purpose so that you can use it to offset gains and income in the future.
Also, it's going to take you 20 years of dishonesty and lies on your future tax returns to recoup that 60k loss:
The IRS allows you to deduct $3,000 from your taxable income if your capital losses exceed your capital gains.
Capital losses beyond $3,000 can be rolled over to next year to offset capital gains and ordinary income.
Well last year I lost 59k in cap gains. long term .This year I have 9,000 in gains short term.
It is impossible to know you will have a short term gain. thus I did not tax harvest the 9 k.
and the 59k is directly apliable to the 9k. which will leave me 50k for next year.
Tax harvesting applies more is all your shit is long term since you already know there is a gain you can take.
When I choose to take that 59k lose i zeroed out every coin I owned. paid debts and used to cash to allow me to continue to mine.
So I did not tax harvest.
Another advantage of mining over just buying coins.
i don't know how you are getting around this rule then. about the $3000 per year.
https://cointelegraph.com/news/what-is-crypto-tax-loss-harvesting-and-how-does-it-work
Additionally, the IRS limits the amount of capital losses that can be offset against ordinary income to $3,000 per year.
it doesn't sound like it since you put the money into something else.
yeah, that and mining is just cool.
that does sound reasonable but you do realize that just because they don't audit someone doesn't mean they can't generate a letter and put in the mail telling someone how much money they owe because they didn't pay enough taxes. The computer system figured it all out, so it doesn't take any manpower at all. So yes, they will go after you for a couple hundred bucks. Don't believe it?
You can just keep printing it. Raising taxes is not the only option.
Regarding what nutildah says, nothing new. In general tax inspectors give preference to large amounts over small amounts, unless they get evidence by someone rerporting or something like that. In the case of other countries the threshold for not being so interesting for the tax authorities is obviously lower, as USA is (still) the country with the highest GDP in the world. But in general things like you earn $70 a week in a signature campaign which is about $3500 a year and you don't declare it doesn't make you interesting for the IRS or the equivalent in other countries, as to begin with they should find out from which country you connect to the forum, if you do it with a vpn, etc. The cost profit ratio doesn't pay off for them.
That said, I pay my taxes and recommend everyone to do so.
The automated letter part I believe is possible, though I've never heard of it happening to crypto traders (who knows, it may happen). The audit portion requires actual human intervention. This means resources need to be dedicated and people have to be paid for their work... everyone from the data analyst to the auditor to the collector to the manager. Not to mention travel expenses. Additionally, collectors are often entitled to a cut of whatever they are able to retrieve.
The letter part is easy. The "going after you" part costs a lot of money.
So no, they won't go after you for a couple hundred bucks.