[HN Gopher] U.S. Treasury calls for stricter cryptocurrency comp...
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U.S. Treasury calls for stricter cryptocurrency compliance with IRS
Author : ASinclair
Score : 100 points
Date : 2021-05-20 16:48 UTC (6 hours ago)
(HTM) web link (www.cnbc.com)
(TXT) w3m dump (www.cnbc.com)
| awrence wrote:
| The burden seems to be on the business side here. So I'm not sure
| what changes tax wise for end users who were using centralized
| exchanges to monetize their holdings. If they weren't assuming
| the IRS was monitoring everything they were doing to begin with
| they were fooling themselves.
|
| It'd be interesting to see though if you opened a lightning
| channel with an exchange and transferred funds back and forth to
| yourself millions of times. Seems like that would create infinite
| spam and flood these reporting requirements.
| AlchemistCamp wrote:
| It's completely reasonable to tax investment earnings. That said,
| these regulations are concerning to me as a developer interested
| in actually building on blockchain technology.
|
| At least from what I understand, just doing what's rapidly
| becoming run of the mill Web3 development is becoming extremely
| fraught territory for US citizens who want to comply with
| accounting and tax rules. It's an even bigger deterrent for
| students with limited ability to hire an accountant.
|
| It wouldn't have been good for the US to stifle the web 25 years
| ago and I don't think regulating blockchain tech worldwide will
| work any better than trying to restrict the export of PGP did.
| Talent will just leave.
| matheusmoreira wrote:
| > It's completely reasonable to tax investment earnings.
|
| Why? Don't americans have access to tax-free investment
| accounts like Roth?
| metalliqaz wrote:
| Why can't you do run of the mill Web3 development without
| transferring >$10K ???
| LiquidSky wrote:
| >It wouldn't have been good for the US to stifle the web 25
| years ago
|
| Bitcoin was developed in 2008. The WWW opened to the general
| public in 1991. This would be the equivalent of the US
| government starting to regulate the web in 2004.
|
| Crypto enthusiasts like to pretend we're still in the early
| days to try and deal with the extremely embarrassing reality
| that almost a decade and a half on it's still utterly useless.
| Daishiman wrote:
| I keep hearing about all these amazing crypto products, yet
| outside of this very specific scene, where curiously _only_ the
| VCs and devs involved wax poetic about it, you can never seem
| to find a real customer talking about their experience.
|
| You either acknowledge that cryptocurrencies look close enough
| to currencies or securities and regulate them as such, or you
| promote them for illegal and ambiguously legal reasons for
| which there is little rationale for a commercial endeavor.
|
| Anything else is just basically letting people slowly reinvent
| the finance system, with all the inevitable pitfalls it will
| have. Yes, it's regulated, so are most industries that have
| substantial systemic risks. The web was an anomaly, but as its
| proponents and participants acquired more power in society,
| society sought to regulate the rougher edges (for better or
| worse).
| Barrin92 wrote:
| >"I keep hearing about all these amazing crypto products, yet
| outside of this very specific scene, where curiously only the
| VCs and devs involved wax poetic about it, you can never seem
| to find a real customer talking about their experience."
|
| because there is none. A paper[1] described this as
| 'Veblenian Entrepreneurship'. Being 'in crypto' isn't
| actually about producing any tangible goods or services, but
| _consuming_ the 'crypto/entrepreneur' lifestyle. It's a way
| for people to LARP as technologists or entrepreneurs without
| actually producing anything of use to the general public at
| large.
|
| [1]https://papers.ssrn.com/sol3/papers.cfm?abstract_id=347904
| 2
| dataflow wrote:
| > with all the inevitable pitfalls it will have
|
| Exhibit A (which I routinely get downvoted for mentioning on
| HN, as nobody likes to hear it): Ransomware
| jandrese wrote:
| Exhibit B: Drugs
|
| Sadly you can't buy your getaway car with Bitcoin anymore.
| scsilver wrote:
| Decentralized securities havfe a different flavor than
| traditional securities, I like whos in charge, Gensler, to
| determine how they are going to regulate them if they are
| considered securities.
| pradn wrote:
| It seems to me that the US government is doing this at the
| right time. We're not in the early stages of cryptocurrency.
| We've had 10 years for lots of new ideas to mature, and we're
| on the verge of the most promising of all - Etherium
| transitioning from PoW to PoS. I'd say this is somewhat late
| given the Bitcoin/Etherium's popularity among small investors
| with much to lose, immense greenhouse gas emissions, and
| facilitation of ransomware and dark markets.
|
| Any crytocurrency good enough to be useful will be large enough
| to have an ecosystem that complies with these rules.
|
| Our society regulates money exchange for a reason. It can be
| put to tremendous negative use - funding criminal activities,
| siphoning money from public investment, etc.
| noofen wrote:
| > It can be put to tremendous negative use - funding criminal
| activities, siphoning money from public investment, etc.
|
| And just like fiat, these activities will continue in the
| shadows, while innovation is harmed by regulation.
| [deleted]
| sandworm101 wrote:
| I'm all for reporting cryptocurrency as income. Bring on the tax
| deductions. Now my graphics card is an expense. So too the rest
| of my gaming rig, a rig that spends more time mining coin than it
| does playing games. My power bill? What accelerated depreciation
| can I take on a graphics card? Did I even turn a profit this
| year?
|
| A few decades ago the IRS looked into rewards schemes, air miles
| and grocery store loyalty points. Those are technically income
| that must be declared. The result of the IRS investigation was
| that the entire are is too difficult to assess, too riddled with
| negative valuations that could be declared as losses (ie points
| that expire). I think they will come to the same conclusions for
| small bitcoin miners.
| qeternity wrote:
| If you're actually mining, you're better off setting up a Sole
| Prop and filing.
| Pulcinella wrote:
| You could already do that, but generally the standard deduction
| is better for most people than whatever they get by itemizing.
| sandworm101 wrote:
| Graphics cards are selling for thousands of dollars. Small
| dedicated mining rigs cost upwards of 10k. It doesn't take
| many of those to get beyond standard deductions.
| toss1 wrote:
| GP could likely do it next week if he formed a business
| entity (Corp, LLC, etc.), which could properly take
| deductions from the first dollar of expense, as (s)he
| described.
|
| Form the company, fund it with initial capital, then spend on
| rigs, utilities, & currencies. Your costs are expense-able,
| profits are taxable, and it all goes on a Schedule C, K, or
| whatever, depending on your corp type. You can probably take
| loss-carry-forwards from loss-making years to apply against
| profitable years,, and you can still likely use the standard
| personal deduction.
|
| Absolutely check with your accountant and attny for local,
| state, national rules, this is not advice, just general
| experience.
|
| I'd also advise using a proper accountant to file your taxes.
| Accountants put their reputation (and even their liscence) on
| the line and reduces the chances of audit. I've known several
| people who got audited, all of them had the IRS write checks
| to them at the end, but it was a huge pain in the arse, and
| they all did their own taxes, which seems like kind of a red
| flag (or extra demerits in their scoring systems) to the IRS.
| [deleted]
| mdorazio wrote:
| As someone with a decent amount of money in crypto, I welcome
| this. I want to pay taxes on crypto capital gains in a way that
| makes sense instead of trying to guess my way through it, and I
| also want clear rules for exchanges, pools, etc. to follow to
| make reporting easy at tax time.
| xur17 wrote:
| Is this actually going to help with that though? It sounds like
| this is just going to force exchanges and businesses to report
| transfers that are >= $10k to the federal government. In some
| ways this might make it worse since the federal government will
| have incomplete information and might audit you because they
| think you owe taxes when you really don't.
|
| That said, I'd also really like to have clearer guidance around
| different crypto tax situations. Buying, selling, and
| transferring are all pretty darn clear to me. Wrapping tokens,
| staking tokens, merging multiple tokens into one, etc are all
| extremely unclear and result in inefficient technical solutions
| right now. It's horribly frustrating.
|
| To give a simple example, I'd love to stake my ETH via a
| decentralized staking pool. To do so I have to convert my ETH
| into another token that is convertible back into ETH when I go
| to withdraw. In theory that might be a taxable event. In my
| mind it really shouldn't though because it's still ETH, just
| deposited somewhere.
| brightball wrote:
| Yea, what I don't understand is how something like using ETH to
| buy another coin should be taxed? I totally get converting it
| back to dollars and calling that capital gains but trying to
| tax conversions from one to another seems nutty to me.
| scsilver wrote:
| You just take the current fair market value of the assets in
| question. You realize the gains on the asset you are selling,
| and you start your cost basis on the asset you are buying.
| Now thats easy for liquid crypto markets, its harder for when
| you are trading a paperclip into a house. At the end of the
| day, you self declare and you do your best to justify
| yourself. If the irs has a problem, they will let you know.
| garmaine wrote:
| Why? If you trade Apple stock for Tesla, it's a taxable
| event. There isn't any requirement that USD be involved.
| dclaw wrote:
| You do not trade 1 stock for another, you have to sell it,
| wait t+2 days for it to clear, then use those proceeds to
| buy the other stock. It's not the same in any manner.
| stale2002 wrote:
| So if I _could_ find someone who was willing to trade
| shares with me, for other shares, then I could just not
| have to pay taxes?
|
| Sounds like an awesome financial strategy! Sounds like
| someone could make a whole bunch of money doing this.
|
| But they aren't. Nobody is doing this. Even though, there
| would be a huge amount of money to make, from doing it.
| novok wrote:
| That is just a side effect about how certain exchanges
| work, you can still trade one good for another without
| using cash, and it's a taxable event because your
| 'liquidating' property. It's known as bartering income:
| https://www.irs.gov/taxtopics/tc420
| dclaw wrote:
| Very true, it's mainly an exchange thing. Thanks for
| pointing that out.
| garmaine wrote:
| If I have a stock certificate for AAPL, and you have a
| TSLA stock certificate (I'm talking about actual paper
| certificates), we can trade them and it is a taxable
| event.
| dclaw wrote:
| Ahh man, you are indeed right. But I seriously haven't
| seen a paper stock certificate in person this century.
| voidfunc wrote:
| I have some Disney ones from the 90s. They are actually
| very very nice artwork.
| mancerayder wrote:
| The bigger problem is that the automation behind sufficient
| tracking to make it easier to report is missing - or was. I
| bought stuff from Bittrex years ago, and I was forced to buy
| BTC to convert it to buy something else, Bittrex went away
| (and never cared anyway), so now I have some headaches to
| report. I'm glad my holdings were small.
|
| All this goes away if there's automation and agreement among
| the exchanges. Of course, for those with wallets, I'm not
| sure what the solution there is. I'm guessing there should be
| some software one can use to track transfer times + prices
| and aggregate that, based on address... or something.
| Analemma_ wrote:
| All transfers are taxable unless they are "in-kind", which is
| a very limited carve-out (e.g. you exchange gold for other
| gold).
| nightski wrote:
| I feel like it would get really complicated to determine cost
| basis and actual capital gains if you did not do this. But
| maybe it's easy and I am missing something.
| chollida1 wrote:
| If I were to swap some Apple shares for Microsoft shares ,
| without selling one for cash first, that would still be a
| taxable event.
|
| I know this because we did such a trade with another fund.
|
| Swapping one crypto for another is the same thing, the fact
| that fiat isn't involved doesn't change much in this
| scenario.
| quotha wrote:
| No one offers swapping x shares for y shares, you have to
| sell and buy. You can swap currency and some people believe
| crypto is currency, so it is different.
| tehlike wrote:
| Then there's a loophole right? Create a stable coin, and
| never have to cashout.
| blibble wrote:
| the common analogy would be an FX pair (like GBPUSD)
| nerdponx wrote:
| And how are forex transactions taxed? Why don't we just
| apply that policy to crypto?
| ska wrote:
| > Why don't we just apply that policy to crypto?
|
| This is the core of the whole issue; IRS (and similar
| bodies) are deciding what crypto "is", at least for tax
| purposes (as is their purview). That has implication for
| how and when things are taxed.
| blibble wrote:
| in the UK it depends on the intent of the transaction
|
| speculation is treated differently to full-time trading,
| which is in term treated differently to trying to make
| some money on the side
| ska wrote:
| It doesn't really matter if you make the analogy of asset
| or FX; you owe tax on gains in either case.
| ska wrote:
| Even giving the stock to someone else can be a taxable
| event (e.g. in lieu of cash you owed).
| nonameiguess wrote:
| This isn't actually true as companies routinely acquire
| each other using mostly or only stock. However, the IRS
| does not consider exchange of stock for stock in mergers
| and acquisitions to be a taxable event.
| chollida1 wrote:
| Different case than what we're talking about here. Your
| case would be the same if it was cash buying a company.
|
| Here we're talking about something different, which is an
| individual trading one form of crypto for another and
| showing how the same trade donew ith stock would be taxed
| similarly if you just swapped stock with another trader.
| robot_no_419 wrote:
| You are also taxed if you use cryptocurrency to directly
| buy goods or services as well. Based on my understanding,
| that would include using cryptocurrency to buy a company.
| retrac wrote:
| Forex is often subject to such taxes. If the USD and CAD were
| trading 1:1 then if I buy 1000 USD with 1000 CAD in cash I
| have right now, and then immediately buy 1000 CAD worth of
| products with those USD, there are no taxes due.
|
| If I buy 1000 of USD with 1000 CAD, with the expectation CAD
| will fall, then since my taxes are due in CAD in my case,
| when I sell those USD for 1500 CAD I've realized a gain of
| 500 CAD that would be considered taxable income. But if CAD
| goes up and I have to sell those USD for only 500 CAD, then
| I've realized a loss of 500 CAD and I could deduct it on my
| taxes.
|
| Seems reasonable enough to tax currencies like investments
| when they're used as investments. Any asset held in that
| manner usually would be taxed like that.
| [deleted]
| paulpauper wrote:
| As if it was not strict enough
| madamelic wrote:
| >could provide a regulatory moat around existing cryptocurrency
| exchanges
|
| Because if there is one thing we need more of, it is government-
| sponsored oligopolies.
| tldrthelaw wrote:
| It was only a matter of time. I've been advising clients to
| retain every scrap of information regarding every trade they make
| for a while now. The hammer is coming.
| andred14 wrote:
| GFY.
|
| I DO NOT consent to my hard earned money being spent on wars and
| experimental drugs.
| golover721 wrote:
| This seems like a positive for the legitimization of
| cryptocurrency. Of course if you were trying to use it to avoid
| paying taxes you may feel otherwise. Hopefully it leads better
| forms and adoption by exchanges to provide useful tax documents.
| fragileone wrote:
| Except the SEC is trying to classify all blockchain products as
| securities, which massives harms onboarding for people who want
| to try these fringe creative new apps.
| BitwiseFool wrote:
| If "Legitimate" means having to comply with all these
| regulations and decisions from unelected bureaucrats, then I
| prefer fringe and bizarre.
| vorpalhex wrote:
| If paying your taxes and not shoveling money to criminals is
| "complying with regulations from unelected bureaucrats" then
| you have an ethical quandry as much as a practical one to
| sort through.
| tluyben2 wrote:
| This is what I feel; becoming more normal. Sure a lot of people
| don't want to report it; don't think those people will start
| now anyway.
| x3n0ph3n3 wrote:
| I think we should all be incredulous that any of this is
| "normal."
| the-dude wrote:
| Be careful what you wish for.
| raziel2701 wrote:
| A carbon tax should be levied on the miners too.
| matheusmoreira wrote:
| Why? You can mine cryptocurrency using solar energy.
| frankbreetz wrote:
| A carbon tax should be levied on everything that emits carbon
| tick_tock_tick wrote:
| The simplest is your electric bill should fully encompass the
| externalities of the electricity you use. No one is going to
| self report crypto mining.
| vorpalhex wrote:
| We want poor people to still have things like refridgerators.
| bronzeage wrote:
| The most urgent regulation in crypto needs to deal with Tether.
| Exchanges are practically faking a market with fake printed
| dollars.
|
| I'm not touching cryptocurrencies until after Tether is banned
| and the scheme collapses.
|
| Imagine if you could just open an "exchange" and show your
| customers transactions with your monopoly dollars, and say, don't
| worry, my monopoly dollars are backed by real dollars, pinky
| promise!
|
| I see a future for crypto just not while the exchanges are
| unregulated and show me practically fake transactions.
| swiley wrote:
| IMO: the IRS really needs to re-think the way crypto currency
| gets reported, the way it's actually used is more or less
| incompatible with the 8949 form and popular exchanges (coinbase
| in particular) generate reports that can't be directly converted
| to it.
| hcurtiss wrote:
| I use koinly.io and it does a nice job of preparing the 8949
| for me, and syncs with my various wallets and exchanges. Plugs
| right into TurboTax.
| filoleg wrote:
| Bookmarked, thanks for the rec!
|
| I used Cointracker for generating tax forms from Coinbase to
| plug into TurboTax for the past 2 years, but Koinly website
| looks really nice and clean, and it feels less bloated than
| Cointracker, so I will give it a try next year. Especially
| since Cointracker started ramping up their pricing.
| hcurtiss wrote:
| Yeah, I subscribed to three other services before I landed
| on Koinly. I also like that it properly handles fees.
| qeternity wrote:
| This seems more like a problem for Coinbase et al, and not the
| IRS. Unlike the SEC, the IRS doesn't actually care how you make
| your money as long as they get their cut.
| nrmitchi wrote:
| > popular exchanges (coinbase in particular) generate reports
| that can't be directly converted to it
|
| Isn't this really more of a Coinbase issue?
|
| If my brokerage started sending me invalid forms at the end of
| the year, I would expect my brokerage to fix it. I wouldn't
| expect the IRS to change to match whatever the brokerage is
| sending out.
| Consultant32452 wrote:
| The powers that be will not give up their monopoly not he
| issuance of currency lightly. Classifying crypto as an asset
| rather than a currency was the first step. The hand will squeeze
| tighter and tighter.
| pessimizer wrote:
| They won't give it up at all, because there's absolutely no
| reason for them to. The reason they have this power is because
| they wield force legitimately, not because fiat is special.
| Consultant32452 wrote:
| Our nation's ideological self-segregation is proceeding
| nicely. I don't want to argue with you or change your mind,
| but I don't want to share a country with you either.
| bingbong70 wrote:
| A private organization (central bank) having a monopoly on
| printing and lending money to your government is acting
| "legitimately"?
|
| Many that have studied this system would disagree.
| drummer wrote:
| Ah yes, the government mafia wants a bigger cut. A reminder:
| taxation is theft and slavery. The Crypto movement was created by
| people who recognize that.
| archagon wrote:
| If you really think that, then go live on an island somewhere
| and stop using our roads and other amenities, please.
| RichardHeart wrote:
| With something that averages 200% a year growth, you really can
| just deposit your gains in your bank and pay your taxes with a
| smile.
| kinghajj wrote:
| Especially for us old-timers; gotta love that long-term capital
| gains tax rate! Set aside some of the gains into a high-yield
| savings account for making estimated tax payments, pay off some
| small debts, buy a couple nice things, and put the rest into a
| brokerage account to buy Vanguard ETFs.
| BitwiseFool wrote:
| Isn't Joe Biden planning to make the top capital gains rate
| the same as the short term rate?
| kinghajj wrote:
| For long-term capital gains above $1m, yes. I'm not lucky
| enough (yet?) for that to apply to me this year anyway.
| Plus, that change would probably apply from 2022 onwards,
| so there's a chance that if another crypto bull run happens
| later this year (a la 2013), one could still cash out gains
| under the current rate structure.
|
| I also wouldn't be surprised if there's some negotiation
| with Republicans to raise the proposed bracket from $1m to
| $5-10m: pull out enough sad old widows with homes that have
| appreciated $1.5m+ such that the $250k exemption would
| still put them in the $1m+ bracket, etc.
| standardUser wrote:
| Only for households with earnings over $1 million. So no,
| not for the vast majority of people.
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