Cryptocurrency exchange Coinbase ordered to release identities of thousands of traders...

William Gayde

TS Addict
Staff member

Bitcoin's price has skyrocketed and that has drawn lots of attention from consumers and the government alike. Bitcoin was designted to be decentralized and unregulated. However, federal agencies like the IRS are seeking to monitor large transactions to ensure traders are paying their fair share of taxes.

A judge this week sided with the IRS and has ordered Coinbase, one of the largest cryptocurrency exchanges, to turn over records for roughly 14,000 traders. The decision specifically requests the name, birthdate, address, and transaction history for users who had more than $20,000 worth of BTC in their accounts back in 2013-2015.

This decision is the culmination of a legal battle that began last November where the IRS originally sought the records of all Coinbase customers regardless of their balance. After strong resistance, the IRS narrowed their scope to the $20,000 number.

Coinbase claimed that more than 10,000 people sold over $20,000 worth of Bitcoin, but IRS records show that fewer than 10% actually paid taxes on those gains.

This decision appears to be a win-win for both parties. Coinbase was able to protect the privacy of 97% of their customers and is required to report substantially less than was originally requested. The IRS appears to have understood the privacy concerns of Bitcoin and its users. However, for the small percentage of people that do trade large amounts of BTC, this decision may be cause for panic.

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cuerdc

TS Booster
Governments will take money from anywhere they can except banks and big business, too bad they will never really know how much bitcoin anyone has.
But they are right the tax evasion and illegal trade will be huge even more so with value up to what it is.
If only the government kept all there seized bitcoin over the past few years or did they?
 

Hazydave

TS Rookie
Panic, more like catching tax dodgers.

But I dont think money made via bitcoin has been classified yet as capital gains. So who knows what the IRS will make up to collect taxes.
Capital gains are defined independently of any specific kind of investment -- it's money in vs. money out. In the case of bitcoin, you might have put no money in at all... expect you did. You had the expense of running your PC and GPU or ASIC mining engine, etc. The total cost of that would be your investment basis. The first time you withdraw cash from this investment (think of it like a stock or foreign currency, they work pretty much the same way), you subtract that basis, the cash over that is your taxable profit.

The one thing the IRS might have to clarify is that they consider bitcoin the same as any other investment, which means the tax rate is 0, 15%, or 20%, depending on your income level.
 

Trillionsin

TS Evangelist

lostinlodos

TS Booster
[Capital gains are defined independently of any specific kind of investment -- it's money in vs. money out. In the case of bitcoin, you might have put no money in at all... expect you did. You had the expense of running your PC and GPU or ASIC mining engine, etc. The total cost of that would be your investment basis. The first time you withdraw cash from this investment (think of it like a stock or foreign currency, they work pretty much the same way), you subtract that basis, the cash over that is your taxable profit.

The one thing the IRS might have to clarify is that they consider bitcoin the same as any other investment, which means the tax rate is 0, 15%, or 20%, depending on your income level.
Exactly correct. Not sure this is wise for the irs. A smart person has receipts for their equipment. If you build a 25,000 gpu system and sell $20,000 in bitcoin you’ve got a net loss and therefore a deduction.
This is going to blow up in the agency’s face.
Anyone in the targeted range is going to be smart enough to bite back.