IRS Hunts Cryptos | Is This the End of the Line for ICOs?
First things first, I am not a tax expert and I am in no way giving advice for how you should be approaching this subject of taxes. All information I am presenting to you today is the result of my own research. I will be including links to official IRS tax guidelines and links to cryptocurrency tax experts. Those are the people you should be asking how to properly report your cryptocurrency gains or losses.
A couple days ago Coinbase was ordered to release the personal information of about 13,000 users to the IRS.
Considering that the IRS initially requested a sweeping “John Doe” summons for every single user of coinbase from the years 2013-2015, which would have included about 500,000 people, this is certainly a reduction. The reason these 13,000 individuals information was released to the IRS is because they had either bought, sold, sent or received a transaction valued at $20,000 in a single transaction in any given year between 2013-2015.
So what this means for those individuals is that their information has indeed been handed over, and if they are found to have improperly reported their gains, or failed to report them altogether, I’m going to go out on a limb and say they are probably anxiously awaiting a call from the IRS.
The reason the IRS began this in the first place is due to their suspicion that Coinbase users were not properly reporting their gains on their tax returns.
Right now, the IRS is handling cryptocurrencies like property so similar to transactions with properties, transactions with cryptos are applicable in the same way.
As many of you may be aware, new tax laws are dictating that any trade with any cryptocurrency is a taxable event.
A great way for you to get some peace of mind and answers to your questions is to seek out tax professionals who specialize in cryptocurrencies. If you’re wondering where you should start, please be sure to check out the links down below for some companies that I’ve found.
On a lighter, slightly humorous, slightly disturbing note, the SEC has found a way to scare some companies out of holding an ICO.
Literally, all they are doing is making phone calls to individuals who have identified themselves as part of the team of an ICO and poof, that ICO is off the table. It’s funny to think that a simple phone call is enough to scare a scammer and prevent them from stealing funds from uneducated investors. It’s also disturbing to think a simple phone call is all that is needed to keep the thieves away.
I wonder if there are any efforts being made by non-governmental agencies to help protect the reputation of ICOs by working to keep the scammers at bay.
I have many thoughts regarding regulations and what they will ultimately mean for the small time investors. Both good and bad, but in an effort to keep this video short I want to leave you with this little thought nugget:
Are you ready for the government to step in and regulate this space, even if it results in barriers of entry that will most likely keep you from participating in the ultimate form of currency competition?
If your wondering if the ICO bubble is over, consider this:
Even despite the wildly different claims of the ICO earnings of 2017, some claim 5.6 billion, while others say 3.7 billion or 4 billion, it’s only the end of February and so far ICOs have raised over 1.7 billion.
Additional Reading/Sources:
Official guidelines from IRS
Coinbase Tax FAQs
Article on Coinbase Users and IRS
Parameters for IRS Summons
Initial Summons of Coinbase Users
SEC Scares Scammers from holding ICOs
ICO funding stats
IRS looking for my crypto gains like...
I only make small inconspicuous transactions on coinbase.
What everyone needs to keep in mind is that the entire point of blockchain/DLT technology is to maintain a permanent, immutable, publically distributed ledger. Re-read that last part.
This means that the IRS has all of the information they need to track down people avoiding taxes and prosecute to the full extent of the law, which they will undoubtedly do. It is all about maintaining their tax base and their sense of control. This isn't just fear-mongering either, this is a simple fact of governance going back all throughout humanity.
For those in the space who still believe that they (the IRS) cannot fully track down users who use TOR, VPN's, and any number of additional layers often cited, you are mistaken. TOR has proven to be breached, as have VPN's, the international standard for WiFi encryption, etc. In the world of cyber, state-backed entities are not the entities you wish to go up against. They have infinite resources to throw at you. The IRS is the definition of state-backed as they are the government's debt collector.
Not to mention they have publically stated they are working hand in hand with blockchain auditors and are actively employing blockchain engineers in relatively new positions.
http://fortune.com/2017/08/22/irs-tax-cheats-bitcoin-chainalysis/
https://www.ethnews.com/six-us-government-agencies-hire-investigative-blockchain-firm-chainalysis
Highly encourage everyone to consult with a tax professional should you be sitting on cashed out gains. Shamelessly upvoting my own comment here because I think it's very important people understand this!
I think its insane how we have to pay taxes for crypto to crypto transactions. But from what I understand its only if you have transaction bigger than 10,000$ but I could be wrong.
The IRS has jurisdiction to tax crypto for crypto transactions, as a taxable exchange of property without regard to a dollar threshold (in most situations).
Yeah definitely going to go see an expert to make sure im all good even though im only trading a few grand. I dont plan to cash out anytime soon. But i make alot of small transactions crypto to crypto as everyone does.
I wish Coinbase would provide detailed information to each user affected by the Coinbase/IRS situation. I think it would be good if they had to create tax documents as part of their services. Banks have to and it allows tax payers to know exactly what the IRS sees. This should be coinbase responsibility to its users.
@heiditravels I know it's not normally appropriate to share one's own blog links on others' blogs, but this seems like an appropriate occasion. Here is another resource for your list that might be work linking to, particularly because it covers Steemit taxation issues.
https://steemit.com/money/@cryptotax/crypto-tax-series-e-book-february-2018-edition-u-s
Great! Thank you for supplementing and helping answer other questions on this post, I appreciate it.
I think that a lot of ICOs will do much more private sales only in the future.
Nice your post
To me it is no surprise and I have no issues paying taxes on my gains when I then sell the crypto I bought. It was just common knowledge from the start that you where going to have to do this.
I'm not really clear on what is being reported to the IRS. What information, exactly, is Coinbase handing over? Just names and email addresses? A list of names and associated bank account info? A list of all transactions in chronological order?
For example, when I signed up for Coinbase, I think the only information that I gave them was my email address and real name (and not my social security # or other tax ID). I did give them my bank account info, though, which is where I think the real issues could come from. For example, if someone reports $20,000 in income for a year and the IRS can clearly see that hundreds of thousands of $$$ have been flowing through a bank account, then there might be a red flag.
Definitely an area worth keeping track of, to be sure.
@askquestion also explained that Coinbase tells 13,000 users their data will be sent to the IRS soon ,