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The Empire Strikes Back as IRS Expands Hunt for Bitcoin Users Who Don’t Report Capital Gains Taxes

by Kenneth Schortgen, The Daily Economist:

Sovereign governments around the world have instituted a number of different programs and processes to deal with the rise of crypto-currencies, and the use of ones like Bitcoin to function outside their controlled monetary systems. In China for example, new guidelines were put in place for Bitcoin exchanges that now require identity checks and monitoring of all transactions.

But the U.S. has chosen a different path, and it stems from a ruling in 2014 by the U.S. district court of jurisdiction in Southern New York where judges determined that Bitcoin was an security rather than a currency, and as such was to be treated like an investment requiring the filing of capital gains taxes on the holder’s tax returns.

And while little actual investigation or pursuit of individuals failing to file their Bitcoin profits with the IRS has taken place over the past two to three years, that appears to be changing now with the government’s monitoring of exchanges like Coinbase and their ramping up of their intention to go after individuals who do not report their Bitcoin capital gains profits on their annual tax returns.

The Internal Revenue Service revealed new details about its investigation into tax evasion related to bitcoin, filing court documents that suggest only a tiny percentage of virtual currency owners are reporting profits or losses in their annual returns.

The new documents, filed Thursday in San Francisco federal court, come in the midst of a closely-watched legal fight between the IRS and Coinbase, a popular service for buying and selling bitcoins that hosts over a million customer accounts.

The dispute began last year when the IRS issued a sweeping summons for Coinbase to turn over a vast amount of customer data, including every customer account as well as detailed transaction records.

Coinbase claimed the IRS demands are illegally broad and refused to comply, which in turn led the IRS to file a federal lawsuit last week to enforce the summons. – Fortune

Read More @ TheDailyEconomist.com

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5 comments to The Empire Strikes Back as IRS Expands Hunt for Bitcoin Users Who Don’t Report Capital Gains Taxes

  • Minuteman

    Crypto currencies = Huge counterparty risk

  • Trespass Unwanted

    I remember a three letter agency confiscated like 2 million bitcoin from some guy found guilty of a few felonies. Coordinating drug sales was it.

    Imagine 6 trillion dollars missing, and some of that used to raise the price of bitcoin so they can sell it, and launder out the 2 million they got for free.

    Then imagine, sticking it to the people who rode it from $3 to over $1000 and each transaction is a capital gain and taxable.

    Imagine the ability to trace the transactions in those bottlenecked purchases where you reveal yourself when you are willing to pay 50 cents or something to bump up in the queue.

    Just saying, rolling capital wealth in digits rarely transfer to physical fiat when the tax man cometh.

    He ain’t taking gold and silver and he ain’t taking bitcoin cause it’s not legal tender.

    He can lien the bank account if there is any traceable way a transaction appears on the accounting from a known bitcoin vendor or wallet or however that works.

    There really is no anonymity, especially after that guy was arrested and his bitcoin confiscated.

    It’s an opinion. I am not going to comment on this, further.

  • Millicent

    They will not confiscate PM’s… They will simply make it illegal to use them as a medium of exchange. You can sit and polish your stacks all day long but you won’t be able to do jack with it. The minute people know you have a lot of PM’s someone will rat you out to the guberment or come to take it from you.

  • videoctr

    Is this also part of the confusion Clif High mentioned, to be followed by chaos? The IRS will want their fair share, that is clear.

    Bitcoin is an algorithmic construct, it is man made, and and has a complex man-made digital infrastructure. In the span of time it has appeared overnight. Because it is a man-made construct, that could be it’s weakness.

    Gold and silver are based in atoms and has stood the test of time as real money. However, we see how the rigged casino has skewed the system to favor the house.

    Can the little guy ever catch a break? I suppose it’s all about timing, knowing which wave to catch, then get out before you hit the rocks. Then catch another wave.

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