The Government Is Coming For Your Bitcoin

Tyler Durden's picture

Authored by Simon Black via SovereignMan.com,

The same day Bitcoin cracked its all-time high above $11,000, the government dealt its first blow to the crypto world...

On Wednesday, a federal judge in San Francisco ordered the popular Bitcoin exchange, Coinbase, to provide the IRS with information on over 14,000 account holders.

The taxman noticed that only 800-900 people reported gains related to Bitcoin in each of the years between 2013-2015. It seemed unusual given Bitcoin’s meteoric rise.

So the IRS went for its pound of flesh.

Initially, the government wanted complete data on every Coinbase user that transacted between 2013 and 2015. The exchange’s website says it has 13 million users (more than the number of Schwab brokerage accounts).

But Coinbase pushed back… and the government agreed to only take limited data (including name, date of birth, address, tax ID number, transaction statements and account logs) for accounts that have bought, sold, sent or received at least $20,000 worth of Bitcoin in a given year.

Don’t say I didn’t warn you about Coinbase. I told Sovereign Man: Confidential readers last month:

If you’re tempted to purchase Bitcoin from the popular Coinbase exchange, don’t bother.

 

They’ve sold out to regulators.

The IRS is calling this a “partial win.”

But you can be sure, there will be a public beheading. This is something governments almost always do.

They’ll find a prominent Bitcoin person, someone that’s polarizing to the public – like “pharma bro” Martin Shkreli.

It will be a very public trial… and they’ll throw his ass in the slammer.

Government’s always do this because they want to scare people.

Kim Dotcom is the perfect example. Kim founded the popular file-sharing site Megaupload.

The government wanted to stop illegal downloads, so they raided his guy’s house in New Zealand for violating US law.

The government also does this for taxes… everything, really.

Look at Wesley Snipes. The IRS accused him of felony tax evasion. He spent three years in jail.

They had to take a celebrity and throw him in jail to scare everyone else.

Back to Bitcoin…

Now that it’s at all-time highs, the government wants its piece.

I read the 400+ pages of the proposed tax code. How many lines in there do you think deal with cryptocurrency? ZERO.

How many lines deal with e-commerce? ZERO.

The government had every opportunity to set the rules for the 21st century. And they failed miserably.

So the rules remain as clear as mud.

Instead of trying to make it clear, their tactic is intimidation, force and coercion.

This is just the beginning. There will be more.

And my advice is don’t be one of those guys.

Every transaction that you make in Bitcoin is potentially a taxable event.

Let’s say you bought Bitcoin for $1,000 and after it went to $10,000 you buy a business class trip to Australia for $10k. When you pay the airline with one Bitcoin, you’ve just triggered a taxable event.

The IRS would say that you essentially sold your Bitcoin, have a $9k gain and used those proceeds to buy the ticket.

Which means you owe the IRS capital gains tax on $9k, which is 20% plus the Obamacare surcharge.

So, don’t be that guy. If you’ve been doing this, trust me, you don’t want the IRS find out.

You’d rather come forward yourself and disclose it and pay taxes… Rather than be the next Martin Shkreli.

And to continue learning how to ensure you thrive no matter what happens next in the world, I encourage you to download our free Perfect Plan B Guide. Because... If you live, work, bank, invest, own a business, and hold your assets all in just one country, you are putting all of your eggs in one basket. You’re making a high-stakes bet that everything is going to be ok in that one country — forever. All it would take is for the economy to tank, a natural disaster to hit, or the political system to go into turmoil and you could lose everything—your money, your assets, and possibly even your freedom. Luckily, there are a number of simple, logical steps you can take to protect yourself from these obvious risks.

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SWE_Misanthrope's picture

laughing in you fucking disgusting bitcoin shills faces...

 

go ahead and invest in your fucking bitcoin i dont give a fuck....im laughing in your fucking disgusting faces as you walk in the trap of total economic capitulation to the new world order.

 

go ahead sheep...give up your rights...you dont deserve to be called an american anyway...fucking cowards

ScratInTheHat's picture

Kill the chicken to scare the monkey!

Croesus's picture

@ SWE:

I'm not laughing at them...I'm disgusted with the IRS, so I'm pissed right along with them.

GovCo steals from people like us, to give to their "more equal" pals. Fuck them.

Chances are good, that some of those taxes will further fund the Killer Kosher Robots©

Stackers's picture

No reason you can’t legally pay zero tax on bitcoin and record it properly on your tax statement. 0% capital gains tax on long term assets. Take the year off from work and have $0 “income” and capital gains are taxed at 0%. Simple

BlindMonkey's picture

Or, do a Simon Black and renounce US papers.  The paper is becoming more of a liability every passing day.  That is the ultimate way to give Trump, HRC and/or the IRS the big middle finger. 

38BWD22's picture

 

 

Apparently it's all a settled issue: if you sell Bitcoin (or trade it, or buy something with it) and you made a profit, then you will/should pay Capital Gains Tax.  Keep records of your BTC purchases and sales/trades too.

Not worth the risk of incompliance.  Pay your taxes that are legally due. 

And then let's try to change the CongressCritters that perpetrate this on us...

monkeyshine's picture

It may not be so simple.  If you bought BTC with cash that was already taxed then probably yes. But if you transacted in BTC in business dealings then some of that BTC could be considered income and taxed at the state and federal income tax rates. 

Just an example - you bought a used motorcyle for $1000 cash and spent $500 cash for parts to fix it and then sold it for 1 BTC when BTC was worth $3000, then you may owe tax on the $1500 profit.  If you sold that BTC for $10,000 more than a year later they might say you owe tax on $1500 in income tax, and then long term gains on the remaining $7000.  

But it could be worse than that because consider BTC was $3000 in July 2017 and now $10,000 in December 2017. If you held your BTC for less than one year - whether you bough it was cash or received it in a business transaction - then they may insist you owe short term gains taxes on the trade - short term gain is the income tax rate.

And it could get even more complicated. If the IRS considers BTC to be an investment (not cash) then it is subject to "first in first out" taxation unless you specify otherwise. So if you deal in BTC often you could be forced to keep track of what came in, when it came out, what it was worth at the time etc... as complicated as if you were a daytrader but with the added complication as if you not only bought and sold stock but exchanged stock for goods and services.   They could make it very complicated indeed if they wanted to. 

IANAL nor CPA. 

38BWD22's picture

 

 

I have used "FIFO" to calculate my BTC gains.  I will explain all that I can to our tax accountant, then we will see what the IRS says or does.

Just trying to do the best I can...

1 Alabama's picture

My sorry ass brother is going to regret..................................................Not giving me 1/2 his money.

rccalhoun's picture

the IRS is going to be punitive on those they consider bitcoin 'tax evaders'.  i can smell the blood in the water.

U4 eee aaa's picture

I wonder what they are going to do to those who transfer their BTC to another exchange to trade for example. Would a transfer be cpnsidered a sale and purchase?

 

It's not a worry for me. I've only sold to either give to charity or used it to invest and buy advertising. So it is expensable

Antifaschistische's picture

as a expert at having the IRS crawl into my orifices...I will tell you what the can DO!.   If they smell the $10,000 coin sale.  They will look into their database...if there is no record of your purchase, they will assign that item a ZERO basis and send you the tax bill based on a 10k capital gain.   It will be 100% YOUR responsibility to prove your cost basis if it is greater than ZERO.

I would strongly urge crypto collectors to start immediately collecting mining costs details.  I'm also guessing there are forums on this somewhere in the crypto world.  get educated.

Urban Roman's picture

Eventually it could simply be your guess vs. the IRS's guess as to how much value was exchanged in a business deal.

Gold is a good analogy -- if you swap some gold bullion for something, and profited by the swap, the IRS can claim some of the profit. But it's kind of fuzzy how the values and basis costs should be calculated .. Gold fluctuates in dollar value. I assume they  have a thick book of rules.

Likewise, if you bought BTC in 2013 for $100, the IRS will want some of the vig when you spend it.

But they aren't "coming for your Bitcoin". They WILL want your Dollars, however, whether you actually received any or not in your transaction.

jin187's picture

That's the thing. It's not legal. BTC is not a recognized currency, so it's only subject to capital gains when it's sold. As long as BTC is not considered currency, it has to be treated as property. People do this all the time. Trading stocks, real estate, and so on for other property. If I obtain a stake in a company with a speculative value of 1 billion for 500 million worth of another stock, I don't have to immediately turn around, and hand the IRS capital gains based on speculation of the value of my new stock.

biloselhi's picture

You can do a 1031 "like-kind" exchange (e.g. gold for silver, or raw land for raw land), but I don't think you can switch between asset classes (e.g. gold for land) without triggering a tax event. Someone correct me if I'm wrong. 

fattail's picture

I thought one of the selling points for BTC was its anonymity?  How can the government know which part of the blockchain is you and which BTC is yours?

Then there was this...  https://www.chainalysis.com/

Add to this the never ending forking and new ICOs, and the deflationary characteristics of all things software, it appears there will be a never ending supply of tokens for your fiat currency.

It is a great speculative product, and if you want to gamble, do it.  It does appear to be a significant amount of dumb money flooding in right now.  i would say the volatility in BTC is some of the large hands booking some, now taxable, profits at the expense of the new money.

Carpe Tutti Bastardi's picture

And why has Trump been named in your rant....he had nothing

to do with the Tax laws as they were written over the years.

Yah, he could try to modify them but the swamp is deep and wide

and it's gonna take several years to completely,i f ever, drain it !

jin187's picture

There's no law involved. The IRS saw something moving, and so they want to tax it. So they up and decided all on their own that BTC is currency just for tax purposes, even though a block away, at all of the other government offices, it is not.

GunnerySgtHartman's picture

I'm not laughing at them...I'm disgusted with the IRS, so I'm pissed right along with them.

Same here.  Yet another reason to drop the nuke on the IRS and go with the FAIRTAX!!!

CJgipper's picture

Not fair.  Flat.  10% flat is good enough for god, its good enough for government

GunnerySgtHartman's picture

The FAIRTAX is a flat tax.  And you get to choose how much FAIRTAX you actually pay.

logicalman's picture

The only 'safe' assets are those Gov doesn't know about or skills that can't be taken from you.

In reality, nothing is truly safe.

greenskeeper carl's picture

Me thinks someone is mad they didn't buy it when they should have. I know I am, but as a rational adult, I congradulate those who did and wish them well rather than act like a petulent child.

cossack55's picture

Ditto, but if BTC can destroy the whole fuckin' global central bank system and their fractional reserve bullshit and behead all the fuckin' banksters, well, more power to em'

beyondtheprogramming's picture

Australia's printing the first cash made for blind people. How again do blind people use cryptos when they cant even see to shop the internet?

RedBaron616's picture

I don't laugh at those in Bitcoin now or in the future, but I knew the IRS wouldn't sit still long with that much money and potential profits not being brought into the U.S. Treasury. If you were smart, perhaps a VPN through some remote country (a different one each time) and using strictly overseas exchanges, you MIGHT get away with it, but no guarantee.

The_merovingian's picture

VPN and Bisq.io for those who value their privacy. Coinbase for the sheeple.

 

Carpe Tutti Bastardi's picture

VPN? which VPN? (one that really works) I have been trying one for months now'

and with adjustments being made all along and now, finally, it now disconnects

me totally from the internet when I try to use it. No you read that right....

it disconnects me from the internet. Utterly Useless!

P.S. What is Bisq.io

MadHatt's picture

the Opera browser has a VPN built in now... might be worth checking out just to see 

Carpe Tutti Bastardi's picture

But can you trust it? The Opera built-in VPN.

Windows 10 has what it calls Random Hardware Addresses which supposedly (I believe)

changes user addresses randomly or once a day???? I believe. But would you trust it?

Not being that computer/internet evasive savvy I don't know exactly what privacy/protection

it provides.

logicalman's picture

Can you trust Microsoft???!!!!

I take it you forgot /s

Carpe Tutti Bastardi's picture

I realize you were being /s sarcastic (euphemistically so) when you concluded I forgot

but did you mean because of my 78 years of age (senility) or just what happens as time passes.

In any case I did not mean to imply that I trust Microsoft....heaven forbid. It was just mentioned in passing.

I really don't trust anything too much when on the internet. And that's the pity!

Carpe Tutti Bastardi's picture

Thanks, I will try AnonymoX. I don't know about Tor.

Many years ago I tried Tor (on Linux) but if I remember correctly I couldn't use it for my intended purpose

as  MLPF&S (my broker at the time) didn't have it's Market Pro (or equivalent) working in Linux system.

Linux being less well known and used it afforded some protection as it wouldn't or couldn't or not worth

being hacked as there were so few users.

Although I use Win 10 mostly now, Linux being beyond my lazy learning skills at my age (78).

[Aside note] did you ever notice the terminology of the market (i.e. the firm that makes you broke is called

a 'Broker' and when you make a trade its called 'executed'...... yeah they just executed your monies!

jin187's picture

The exchanges are the reason I stay away from BTC. They're the weak link. Having BTC stored at an exchange is the equivalent of handing cash to someone you see on the street, and saying "hold this".

Hell, you think if an exchange went poof tomorrow, you're getting a lick of government help in getting your money back?

rosiescenario's picture

Anything that makes people significant amounts of money is either taxed or made illegal, until it can be taxed, such as drugs or booze.

ali-ali-al-qomfri's picture

this is Sparta!

(aka Fight Club)

not Romper Room.

Did Mr. Roger's touch you improperly?

JibjeResearch's picture

lolz ahahaha a ahaha...*rolling... hard man ahahahahah

UndroppedClanger's picture

This is the thing; I looked at the little bit of spare money I had and decided not to risk it, put it into supplies and tools instead. Part of me can't help but think of the good the profit could have done me but the success of others hurts me not one bit. I made my choice, maybe it wasn't the best one but it's done.

house biscuit's picture

Those who invested in BitCoin over the past few years were forward-thinkers who took small risks, made huge gains, & should be applauded for it

What becomes interesting at this point is the benefit-risk balance for new BitCoin investment, now that entry into the game is no longer a trivial price

This does not change several underlying suspicions, which I believe to be fact

#1: Cryptos are part of a broader plan for control &, while designed to disrupt, were not designed a priori to befriend the common man

#2: Be careful with your profits because the gov't thiefs can & will track you & punish you. Aamof, it is at least a theoretical possibility that BC was desgined to trace & entrap 

UndroppedClanger's picture

There are so many uncertainties about crypto, it's one of the things I didn't like. The regulation of that whole arena seems extremely fuzzy which I'm guessing means at some point a big, heavy hand is going to come down hard.

logicalman's picture

You won't know whether you made the right decision until crunch time whatever choices you make.

 

So It Goes's picture

If you want to keep your Bitcoin - you can keep your Bitcoin.

On the other hand, we IRS'd some folks.

Buckaroo Banzai's picture

In other words, the Feds have validated BitCoin in the most profound way they know how-- they have come to terms with the fact that they are so valuable they want to steal some for themselves.

Citxmech's picture

Eh, they'll want their vig in FRNs.

Wonder how many positions will have to be sold-down to pay for the hit?  Reminds me of folks I know who got fucked on company stock compensation plans and then had to pay capital gains taxes.

2_legs_bahhhhhd's picture

I know someone who got fucked like that on a stock compensation plan (on top of that, the stock went from 200 to less than 5 during the mandatory hold period), the trick is do not sell the stock, then bequeth the stock to .gov in your estate.