U.S. Treasury mandating cryptocurrency sales over $10K be reported to IRS

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In an attempt to crack down on tax evasion and illegal activity, the U.S. Treasury Department has begun taking steps to mitigate potential problems relating to cryptocurrencies.

U.S. Treasury calls for increased regulation on cryptocurrencies


On Thursday, the U.S. Treasury Department announced a plan to tighten regulations on cryptocurrency markets and cryptocurrency holders.

The department worries that cryptocurrency could be used to facilitate tax evasion, among other illegal activities. Now it requires any transfer worth $10,000 or more to be reported to the IRS.

According to the CNBC, the move is a part of the Biden administration's broader plan to crack down on tax evasion. The treasury estimates the difference between taxes owed and taxes paid to the U.S. government to be nearly $600 billion in 2019.

The administration is looking for ways to ensure that the government gets the tax money that it is owed. Current proposals include increasing funding to the IRS, investing in new technology, and issuing more severe penalties for tax evasion.

News of the tightening regulations were likely to blame for the cryptocurrency slide over the last month. Bitcoin, for example, saw a 25% decrease in its value in the previous month.

Tesla recently stopped accepting Bitcoin after the company had cited environmental concerns, and the value of Bitcoin tumbled 15% as a response.

The Chinese government has banned financial institutions from conducting any business involving cryptocurrency, and warned against trading. The ban is not applied to individual holders.

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Comments

  • Reply 1 of 12
    mac_dogmac_dog Posts: 1,069member
    But it’s not accepted anywhere as currency here.

    NOW they’re  worried about tax evasion? What about going after individuals and corporations that set up shell companies to evade paying taxes?
    edited May 2021 ciadhawkins541
  • Reply 2 of 12
    MplsPMplsP Posts: 3,931member
    mac_dog said:
    But it’s not accepted anywhere as currency here.

    NOW they’re  worried about tax evasion? What about going after individuals and corporations that set up shell companies to evade paying taxes?
    There were some smaller online retailers that would accept it. I don’t know if that’s still the case or not. 

    The IRS views crypto as an asset rather than a currency, which is probably the proper category for it. Bitcoin acts more like a stock than a currency. 

    As far as tax evasion goes, they should be going after everyone but the IRS has been significantly underfunded. As someone who pays his taxes I fully support prosecuting anyone who doesn’t. 
    dewmerobin huberradarthekat
  • Reply 3 of 12
    hmlongcohmlongco Posts: 537member
    mac_dog said:
    But it’s not accepted anywhere as currency here.

    NOW they’re  worried about tax evasion? What about going after individuals and corporations that set up shell companies to evade paying taxes?
    You're kidding, right? Much easier to set things up so you can hammer the people who lack the means to spend millions of dollars in legal fees defending themselves. I mean, what's a couple of million in legal fees when it prevents you from having to pay a billion or so in taxes?

    Of course, that's an ongoing expense. Much better to spend the million or so on a few political "donations" that let you set things up such that your swindling is legal in the first place....
    beowulfschmidt
  • Reply 4 of 12
    sflocalsflocal Posts: 6,096member
    I find it interesting that the headline says "sales".  I was thinking of cashing-out anything above $10K, but they're now saying if I buy something  - say a car - for $20K in Bitcoin, not cash... then I technically have to report that?  I do understand their mentality on some level, but if I have to report buy something in bitcoin, will the IRS allow me to deduct the devaluation of bitcoin as well?

    Good luck tracking that.  I don't have any bitcoin, but if I did, I would certainly test the ability for the IRS to determine the gazillion, relatively anonymous transactions in a blockchain were from U.S. transactions, and to determine the identity of the person(s) that did those transactions and whether they were reported.  That's a whole level of forensics I'm curious if the I.R.S. is even capable of.
  • Reply 5 of 12
    glennhglennh Posts: 72member
    It looks like the “Clepto-currencies”days are numbered just like the “DotCon”! 

    Do you think IRS was told to crack down after the ransomware pipeline extortion?

    No government on the planet will allow any currencies to exist that it or other governments can’t control, manipulate or SEIZE! 
  • Reply 6 of 12
    dewmedewme Posts: 5,375member
    sflocal said:
    I find it interesting that the headline says "sales".  I was thinking of cashing-out anything above $10K, but they're now saying if I buy something  - say a car - for $20K in Bitcoin, not cash... then I technically have to report that?  I do understand their mentality on some level, but if I have to report buy something in bitcoin, will the IRS allow me to deduct the devaluation of bitcoin as well?

    Good luck tracking that.  I don't have any bitcoin, but if I did, I would certainly test the ability for the IRS to determine the gazillion, relatively anonymous transactions in a blockchain were from U.S. transactions, and to determine the identity of the person(s) that did those transactions and whether they were reported.  That's a whole level of forensics I'm curious if the I.R.S. is even capable of.
    Yeah, enforcement will be tough. The IRS requires cash sales above $10,000 to be reported (https://www.irs.gov/newsroom/heres-what-people-should-know-about-reporting-cash-payments) but I imagine compliance rates are very low.
    randominternetperson
  • Reply 7 of 12
    robin huberrobin huber Posts: 3,962member
    Bitcoin: “money for nothin’ and chicks for free.”
  • Reply 8 of 12
    citpekscitpeks Posts: 246member
    The tax evasion angle may get the attention, and raise the hackles of average folks, but this is just as much about money laundering, illicit financing and other forms of dirty money.

    It's not just the IRS division that wants this, but also FinCEN.  Tough task, since they rely on self-reporting, or whistleblower reports (SARs) as inputs to help monitor things.
  • Reply 9 of 12
    davidwdavidw Posts: 2,053member
    sflocal said:
    I find it interesting that the headline says "sales".  I was thinking of cashing-out anything above $10K, but they're now saying if I buy something  - say a car - for $20K in Bitcoin, not cash... then I technically have to report that?  I do understand their mentality on some level, but if I have to report buy something in bitcoin, will the IRS allow me to deduct the devaluation of bitcoin as well?

    Good luck tracking that.  I don't have any bitcoin, but if I did, I would certainly test the ability for the IRS to determine the gazillion, relatively anonymous transactions in a blockchain were from U.S. transactions, and to determine the identity of the person(s) that did those transactions and whether they were reported.  That's a whole level of forensics I'm curious if the I.R.S. is even capable of.
    It's the business that accepted your $20K in Bitcoin that has to report it. No different now with businesses having to report any cash transaction over $10K. Even my bank have to report any deposit I make to my checking account, that is over $10K. 

    It's not a problem for you, if the IRS investigate the transaction and you have sufficient wages, income, savings or investments, to come up with the $10K in cash or to buy Bitcoins. Most likely you already paid the taxes on that $10K or the money you used to buy Bitcoins.

    However with Bitcoin, there's the factor that you may have paid a lot less for a Bitcoin than what it was worth when you spent it. IRS will want to look into that and tax that gain. No different that capital gains on stocks or other investments.

    But if you're dealing in illegal activities like selling illegal drugs, then buying Bitcoins is a way to launder the money you got from selling drugs. Right now, it can leaves very little paper trail. Unlike a $10K transaction in cash.  
  • Reply 10 of 12
    22july201322july2013 Posts: 3,573member
    I'm not even going to try to correct anyone here who is wrong. I'm too tired to try to educate people about cryptography.

    But let me point out something. The recent government recommendation from the Treasury Department doesn't just want you to report your transactions, (sales and purchases) it also wants you to report any Bitcoin that you generate on your computer and never spend. But even if you object to these things, you may not object to the recommendation that the US government make it illegal to manipulate the cryptocurrency markets (e.g., through public statements.) Most people are against stock market (or currency, or digital currency) manipulation.

    Be happy it's just voluntary reporting (i.e., the government can't get your account password, and therefore prove you are the owner of any specific account even with a warrant.) The US Supreme Court has said that the 5th (and 4th) amendment prohibits the government from demanding anything that's stored in your head*, like your Bitcoin password. As long as you don't record your password anywhere, (and as long as you don't pay third party brokers to handle your digital currency) you are safe from direct evidence of account ownership. However you are still vulnerable to "preponderance of evidence" prosecutions. In other words, if it looks like you are spending and acquiring digital currency in large quantities, even without direct proof, that's enough to get most juries to convict. You don't need a dead body to convict someone of murder, either.

    The new Digital Yuan has a backdoor that allows the government to see, control and delete your digital currency there. The US government could ask the CCP to report the holdings of American citizens. I'm not sure if China would comply with those requests, at least not before their currency is the strongest digital currency in the world. You might wonder why any American would invest in the Digital Yuan. That's because the government of China will likely make it a requirement that anyone doing business in China has to use it to purchase Chinese goods and services. And lots of Americans (both corporations and people) do business with China. A significant percentage of the groceries in our stores and the plates and cutlery we eat on and with are made in China.

    * United States v. Kirschner, 823 F. Supp. 2d 665, 669 (E.D. Mich. 2010); see also United States v. Hubbell, 530 U.S. 27, 43 (2000). 

    P.S. If you can be taxed on crypto currency gains, then you should also be able to get your taxes reduced on crypto currency losses. This is a big loophole ready to be exploited. E.g., the purchasing of Bitcoin accounts that have lost value over the last year for the purpose of getting your taxes reduced. I have no idea how the government could stop this scam. They can't stop it because they can't track ownership changes of an account over time.
    edited May 2021
  • Reply 11 of 12
    P.S. If you can be taxed on crypto currency gains, then you should also be able to get your taxes reduced on crypto currency losses. This is a big loophole ready to be exploited. E.g., the purchasing of Bitcoin accounts that have lost value over the last year for the purpose of getting your taxes reduced. I have no idea how the government could stop this scam. They can't stop it because they can't track ownership changes of an account over time.
    Same way they catch any tax fraud.  In an audit the burden of proof is on you to show documentation of a loss.  Most of the tax systems is based on the honor code (with audit as a deterrent).
    radarthekat
  • Reply 12 of 12
    radarthekatradarthekat Posts: 3,843moderator
    sflocal said:
    I find it interesting that the headline says "sales".  I was thinking of cashing-out anything above $10K, but they're now saying if I buy something  - say a car - for $20K in Bitcoin, not cash... then I technically have to report that?  I do understand their mentality on some level, but if I have to report buy something in bitcoin, will the IRS allow me to deduct the devaluation of bitcoin as well?

    Good luck tracking that.  I don't have any bitcoin, but if I did, I would certainly test the ability for the IRS to determine the gazillion, relatively anonymous transactions in a blockchain were from U.S. transactions, and to determine the identity of the person(s) that did those transactions and whether they were reported.  That's a whole level of forensics I'm curious if the I.R.S. is even capable of.
    Sales doesn’t only mean when you buy something. Cryptocurrencies are considered an asset, like art, stocks, antiques, etc.  When you sell a stock you incur either a profit or a loss.  The profit is required to be reported on your tax return, and any losses can be used to offset gains elsewhere and, up to a limit, regular income.  It just so happens that when you use bitcoin or another cryptocurrency to directly buy something, it is considered that you have sold that cryptocurrency, incurring the tax reporting obligation. 
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