US Tackles Crypto Tax Mess (wsj.com) 52
The federal government is escalating efforts to make cryptocurrency investors comply with tax law, nearly 15 years after people started trading bitcoin. From a report: The Treasury Department proposed new rules Friday with twin goals: making it harder for crypto investors to dodge income taxes when they sell digital assets, and simplifying complicated tax messes for people who are trying to follow the law. When they are fully implemented, the rules will require crypto exchanges such as Coinbase to deal with the Internal Revenue Service in a manner similar to brokers who handle investors' stock and mutual-fund portfolios.
The crypto exchanges will send annual reports on Form 1099s to the IRS and to taxpayers that show the gross proceeds from transactions. That starts in 2026 for tax year 2025. Later, they will start reporting how much customers paid for the assets, known as their cost basis. Capital gains are the difference between sale price and cost basis, and investors face federal taxes of up to 23.8%.
The crypto exchanges will send annual reports on Form 1099s to the IRS and to taxpayers that show the gross proceeds from transactions. That starts in 2026 for tax year 2025. Later, they will start reporting how much customers paid for the assets, known as their cost basis. Capital gains are the difference between sale price and cost basis, and investors face federal taxes of up to 23.8%.
my Coinbase account already does this (Score:2)
Coinbase has a dedicated taxes section of its website. I'm surprised this is not the normal case
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They had this for 2022 but not for 2021. Had to use a 3rd party in 2021 to be tax compliant.
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Fourth amendment (Score:3, Insightful)
How does financial reporting not violate the fourth amendment? Why should the government be informed of your financial transactions? If they think you're cheating, they can show evidence and get a warrant.
Yes, there are countries that do it that way. Do you trust your citizens, or do you assume they are all dishonest?
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Yes but has no right to your personal information to aid it in doing so without first having evidence a crime is being committed.
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What's being seized is information, which in 1787 was written on paper, but is now electronic. The constitution guarantees a warrant for such invasions of privacy, flouted by current practice.
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Unless you think the government has no right to collect taxes, then they need some mechanism to determine what amount should be properly assessed. Employers reporting income paid to employees seems like the easiest and least invasive way. Work for yourself if you don't want someone else providing your info to the government. Then its just between you and them.
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The transaction is the private information and it is being seized. To pretend a format shift suddenly renders the 4th amendment inapplicable is disingenuous.
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The transaction is the private information and it is being seized. To pretend a format shift suddenly renders the 4th amendment inapplicable is disingenuous.
No, it's not. All financial instituions are required, by law, to report who is transferring what money. Businesses, as a whole, are required to report their financial transactions.
Coinbase and others are simply following the law, just like banks, broker firms credit unions, etc.
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The power of the Constitution comes from the People who won the authority of the Crown in the revolutionary war. All rightful legal authority save that of the people themselves is derived from the authority delegated by the Constitution.
There cannot be a law which violates the Constitution passed by the legislature, only an unlawful violation of oaths of office recorded in a piece of paper. This was made resoundingly clear in the supremacy clause.
I'm aware the justices of the supreme court have failed to st
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The courts have ruled (first in the 1970s) that you are not entitled to an expectation of privacy in information you voluntarily provide to third parties. Since the crypto exchanges are in fact a third party - you do not have any right to privacy in those transactions.
(If you want to know more - look up The Fourth Amendment Third-Party Doctrine)
other countries don't tax lotto and casino (unless (Score:2)
other countries don't tax lotto and casino (unless you are an pro player) and don't have other work.
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The UK is one of those countries that doesn't tax gambling profits.
However they do tax cryptocurrencies and NFTs - https://www.gov.uk/hmrc-intern... [www.gov.uk]
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Re:Fourth amendment (Score:5, Informative)
From the horse's mouth:
https://www.irs.gov/privacy-di... [irs.gov]
In particular:
2. Contention: IRS summonses violate the Fourth Amendment protections against search and seizure.
Some individuals or groups assert that summonses sent by the IRS to taxpayers and to third parties are per se violations of the Fourth Amendment's prohibition against warrantless search and seizure and are therefore unconstitutional.
The Law: The Fourth Amendment to the United States Constitution provides the "right of the people to be secure in their persons, houses, papers, and effects" and prohibits "unreasonable searches and seizures . . . ." The United States Supreme Court has held repeatedly that "the Fourth Amendment does not prohibit the obtaining of information revealed to a third party[.]" United States v. Miller, 425 U.S. 435, 443 (1976). The Fourth Amendment also provides that "no Warrants shall issue" unless there is "probable cause." The United States Supreme Court has ruled that the IRS "need not meet any standard of probable cause to obtain enforcement of [IRS] summons." United States v. Powell, 379 U.S. 48, 52 (1964). Where the enforcement of an IRS summons is challenged, the IRS bears the initial burden of showing "good faith compliance with summons requirements," which may "be demonstrated by the affidavit of the IRS agent." United States v. Norwood, 420 F.3d 888, 892 (8th Cir. 2005).
Relevant Case Law:
United States v. Miller, 425 U.S. 435, 443 (1976) – the Supreme Court held that the "Fourth Amendment does not prohibit the obtaining of information revealed to a third party."
United States v. Powell, 379 U.S. 48, 51 (1964) – the Supreme Court held that "the Government need make no showing of probable cause to suspect fraud unless the taxpayer raises a substantial question that judicial enforcement of the administrative summons would be an abusive use of the court's process."
Taliaferro v. Freeman, 595 F. App'x 961, 962–63 (11th Cir. 2014) – the Eleventh Circuit held that the taxpayer's contention that IRS levies violate the Fourth Amendment right to be free from unreasonable seizures was "simply without merit" and did not even warrant discussion and ordered sanctions against the taxpayer up to and including double the government's costs.
O'Brien v. Green, 114 A.F.T.R.2d (RIA) 2014-5613 (E.D. Va. 2014) – the court rejected O'Brien's Fourth Amendment arguments and characterized them as frivolous.
Nevius v. Tomlinson, 113 A.F.T.R.2d (RIA) 2014-1872 (W.D. Miss. 2014) – Nevius argued that IRS summons issued without probable cause of warrant violated the Fourth Amendment. The court rejected this argument, stating "IRS need not meet any standard of probable cause to obtain enforcement of [a] summons."
Lewis v. United States, 109 A.F.T.R.2d (RIA) 2012-1756 (E.D. Ca. 2012) – the court rejected Lewis's argument that summonses sent to third parties violated the Fourth Amendment, holding that "summonses issued by the IRS seeking documents in the possession of third-parties do not implicate petitioner's rights under the Fourth Amendment."
Other Cases:
Donaldson v. United States, 400 U.S. 517, 522 (1971); United States v. Feminist Fed. Credit Union, 620 F.2d 305 (6th Cir. 1980); United States v. Theep, 502 F.2d 797 (9th Cir. 1974); United States v. Galloway, No. 114CR00114DADBAM, 2017 WL 735730 (E.D. Cal. Feb. 24, 2017), aff'd, 802 F. App'x 247 (9th Cir. 2020).
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Re: Fourth amendment (Score:2)
That's great an all, but: why should the involvement of a third party matter? Confidential information should remain confidential, unless the person affected agrees to its release.
Note that this weird argumentation does not apply in other situations. For example, the police cannot search your house, just because you have a roommate (the third party).
The government has made special rules for money, and the courts have supported that. So it is technically legal, but that doesn't make it right.
I know, I'm t
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This is established case law taken all the way to the Supreme Court. In other words, these are the powers the IRS possesses, tested in court in multiple ways on multiple occasions. If you're not a US citizen then it's not your problem, but I'm going to wager that unless you live in some failed state, that the revenue branch of your government has similar powers.
If you wish further clarification, the case law is cited so you can read the SCOTUS rulings.
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"Confidential information should remain confidential, unless the person affected agrees to its release."
If a workplace wants to report income paid to employees so they can offset their earnings appropriately, how else could they prove that money was used for payroll?
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That's great an all, but: why should the involvement of a third party matter? Confidential information should remain confidential, unless the person affected agrees to its release.
Once you reveal the information to a third party... it is no longer confidential.
Note that this weird argumentation does not apply in other situations. For example, the police cannot search your house, just because you have a roommate (the third party).
If your roommate tells the police you are doing illegal things in the house... they have probable cause to search.
I know, I'm tilting at windmills. However, I live in one of the countries where the government cannot do this. They need a warrant, just as for any other suspected crime. If you refuse to pay, they have to follow the same process as any other debtor to force collection. Not like the IRS that can do whatever it wants.
You are a foreign agent provocateur stirring up shit, trying your best to divide and weaken us. Your third-party interpretation of our rights and obligations is meaningless.
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If your roommate tells the police you are doing illegal things in the house... they have probable cause to search
Do you know what "probable cause" is? Because someone telling the police someone did something illegal ain't it. Hell, you'd have a hard time arguing reasonable suspicion. MAGAhead Johnny thinks everyone a pedophile. Dementia Carol thinks the black neighbor kids are stealing her cans of tuna
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That's great an all, but: why should the involvement of a third party matter? Confidential information should remain confidential, unless the person affected agrees to its release.
I think that's the reasoning. Once you've given the data to a third party, it's theirs to do with what they wish. Unless there are rules about it, such as HIPPA or a contract you both agreed to.
What bothers me is providing confidential financial information to the IRS is completely involuntary. I'll go to jail if I don't provide it. I would have liked the court to acknowledge that key difference.
Note that this weird argumentation does not apply in other situations. For example, the police cannot search your house, just because you have a roommate (the third party).
I'm not sure that's true. As long as one resident of the home consents to a search, they're allowed to make note
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That's great an all, but: why should the involvement of a third party matter? Confidential information should remain confidential, unless the person affected agrees to its release.
it shows you are not keeping the information confidential and are actively letting 3rd parties have it.
Note that this weird argumentation does not apply in other situations. For example, the police cannot search your house, just because you have a roommate (the third party).
The government has made special rules for money, and the courts have supported that. So it is technically legal, but that doesn't make it right.
I know, I'm tilting at windmills. However, I live in one of the countries where the government cannot do this. They need a warrant, just as for any other suspected crime. If you refuse to pay, they have to follow the same process as any other debtor to force collection. Not like the IRS that can do whatever it wants.
The reality is nearly every governments tax department has similar rules, and it is a necessary evil as tax evasion would be even more rampant without it and governments would have no ability to prevent it.
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/Be your own bank./
-Satoshi
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"Look, a new way to scam morons."
- Every Cryptobro
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How does financial reporting not violate the fourth amendment?
Under IRS rules, you are required to report income derived from whatever source [cornell.edu], including drug dealing [irs.gov] (line 8z). Or, if you are self-employed, Schedule C, 1040 [irs.gov].
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"How does financial reporting not violate the fourth amendment? Why should the government be informed of your financial transactions?"
It does and they shouldn't. I can't think why anyone opposes this rather obvious and straightforward message. Any watering down of our rights is a bad thing for all of us, certainly far worse than any perceived benefit used to excuse it.
Sadly, in this case the watering down has been blessed by the courts so far. There is nothing to stop financial institutions from doing the r
Tomfoolery abound (Score:2)
This is only simpler if you bought and sold your digital currencies on the same exchange. If you are purchasing elsewhere and transferring in, or purchasing and transferring out, or buy/selling for other people, this is going to be a bigger mess than what the current scenario is
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You can transfer paper stock certificates to a broker to sell them, and you can [sometimes] ask the broker to send you paper certificates. It will be a lot more expensive than keeping them in the broker's nominee account, and modern online brokers won't want to deal with it, but 30 years ago, this was the normal way to trade on the stock market.
I guess transfers in and out of a physical crypto wallet will work the same way for tax reporting.
Tax Code simplified (Score:1)
From Numbers 18:26
Speak to the Levites and say to them: ‘When you receive from the Israelites the tithe I give you as your inheritance, you must present a tenth of that tithe as the LORD’s offering.'
The Federal Government should get no more than 1/10th of your profits. That would simplify the tax code greatly. No more loopholes, no more corporate giveaways.
Re:Tax Code simplified (Score:5, Funny)
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Well, that depends on whether you're an Old or New Testament follower. But it sounds like bad parenting overall.
Proverbs 13:24
Whoever spares the rod hates their children, but the one who loves their children is careful to discipline them.
Deuteronomy 6:6-7
These commandments that I give you today are to be on your hearts. Impress them on your children. Talk about them when you sit at home, and when you walk along the road, when you lie down, and when you get up.
Matthew 5:44
But I tell you, love your enemies and pray for those who persecute you.
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From Numbers 18:26
Speak to the Levites and say to them: ‘When you receive from the Israelites the tithe I give you as your inheritance, you must present a tenth of that tithe as the LORD’s offering.'
But that's what to give to God. For what to give to the government, we have Matthew 22:21: "Render unto Caesar that which is Caesar's, and unto God the things that are God’s."
Percentage is not specified, but from context, it's "pay the tax they ask".
More Oversight Than SEC? (Score:2)
How's that going to work? (Score:2)
They don't know the basis, though? (Score:2)
Unless you buy your BTC from the exchange, they have no idea what the basis is, right?
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Correct, it will be reported as 100% income or cap gains and then it will be up to you to demonstrate otherwise to the IRS.