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THE IRS WANTS YOUR POUND OF BITCOIN FLESH
December 1, 2017
The same day Bitcoin
cracked its all-time high above $11,000, the
government dealt its first blow to the
On Wednesday, a federal judge in San
Francisco ordered the popular Bitcoin
exchange, Coinbase, to provide the IRS with
information on over 14,000 account holders.
The taxman noticed that only 800-900 people
reported gains related to Bitcoin in each of
the years between 2013-2015. It seemed
unusual given Bitcoin’s meteoric rise.
So the IRS went for its pound of flesh.
Initially, the government wanted complete
every Coinbase user that
transacted between 2013 and 2015. The
exchange’s website says it has 13 million
users (more than the number of Schwab
But Coinbase pushed back… and the government
agreed to only take limited data (including
name, date of birth, address, tax ID number,
transaction statements and account logs) for
accounts that have bought, sold, sent or
received at least $20,000 worth of Bitcoin
in a given year.
If you’re tempted to purchase Bitcoin from
the popular Coinbase exchange, don’t bother.
They’ve sold out to regulators.
The IRS is calling this a “partial win.”
But you can be sure, there will be a public
beheading. This is something governments
almost always do.
They’ll find a prominent Bitcoin person,
someone that’s polarizing to the public –
like “pharma bro” Martin Shkreli.
It will be a very public trial… and they’ll
throw his ass in the slammer.
Government’s always do this because they
want to scare people.
Kim Dotcom is the perfect example. Kim
founded the popular file-sharing site
The government wanted to stop illegal
downloads, so they raided his guy’s house in
New Zealand for violating US law.
The government also does this for taxes…
Look at Wesley Snipes. The IRS accused him
of felony tax evasion. He spent three years
They had to take a celebrity and throw him
in jail to scare everyone else.
Back to Bitcoin…
Now that it’s at all-time highs, the
government wants its piece of the action.
Read the 400+ pages of the proposed tax
code. How many lines in there do you think
deal with cryptocurrency? ZERO.
How many lines deal with e-commerce? ZERO.
The government had every opportunity to set
the rules for the 21st century. And they
So the rules remain as clear as mud.
Instead of trying to make it clear, their
tactic is intimidation, force and coercion.
This is just the beginning. There will be
And my advice is don’t be one of those guys.
Every transaction that you make in Bitcoin
is potentially a taxable event.
Let’s say you bought Bitcoin for $1,000 and
after it went to $10,000 you buy a business
class trip to Australia for $10k. When you
pay the airline with one Bitcoin, you’ve
just triggered a taxable event.
The IRS would say that you essentially sold
your Bitcoin, have a $9k gain and used those
proceeds to buy the ticket.
Which means you owe the IRS capital gains
tax on $9k, which is 20% plus the Obamacare
So, don’t be that guy. If you’ve been doing
this, trust me, you don’t want the IRS to
You’d rather come forward yourself and
disclose it and pay taxes… Rather than be
the next Martin Shkreli.
- RESPONDS TO IRS/BITCOIN
Regarding Bitcoin And The
This is a
tempest in a teapot, for the CtC-educated.
THERE HAS BEEN A
FLURRY OF WORRY and fuss over recent IRS
efforts to secure information on bitcoin
transactors. The anxiety is misplaced.
Let me say first
that there is nothing inherently taxable
about using or receiving bitcoin. It's just
a medium of exchange like any other. There
is no tax on exchanges per se, nor on
profits, gains or receipts, per se.
By the same
token, however, there is a tax--
measurable by the value of bitcoin
received-- for doing taxable things
resulting in those receipts. That is, not
all things done for which bitcoin might be
received are taxable, but the receipt of
bitcoin is relevant to the tax when received
for doing taxable things.
THE BOTTOM LINE
IS that concern about IRS prying into
records of bitcoin transactions is
misdirected. The concern should be at the
prying itself, without regard to the bitcoin
Unless it has
been previously established that a taxable
activity has been conducted, the IRS has no
valid interest in any transaction. Thus, a
blanket demand for information on all
transactions is an offensive,
AT THE SAME
TIME, anyone and everyone engaging in
bitcoin transactions and troubled by these
bureaucratic intrusions MUST BECOME
CtC-EDUCATED. That and that alone will
protect from all the practical ill-effects
of such intrusions (which routinely happen
in other venues, such as conventional
ignorant of the hidden truths about the
income tax have reason to fear information
falling into the hands of the IRS. So, keep
on keeping crypto. Just
get educated about the tax, too.
Peter, see my post on this at