Úno 24

Coinbase Gives IRS More Than 10K Users’ Information

· February 24, 2018 · 9:30 am

After fighting the IRS in court, popular digital currency marketplace Coinbase has been ordered by the Northern District of California to turn over more than 10,000 users’ personal information and trade history — but it could have been much worse.

The Taxman

The Beatles once sang:

If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold, I’ll tax the heat,
If you take a walk, I’ll tax your feet.

Now, you can add “If you sell on Coinbase, I’ll tax your trades.”


According to Coinbase support, the popular cryptocurrency marketplace notified roughly 13,000 users concerning a summons from the Internal Revenue Service — the United States’ tax collection agency and official administers of Congress’ Internal Revenue Code.

As described in the United States District Court’s decision, the IRS served up a summons to the exchange regarding records of almost every single Coinbase user over a period of several years. The exchange, however, failed to comply — leading to the IRS narrowing its request to significantly fewer individuals with larger accounts. The Northern District of California both granted and denied parts of the United States of America’s Petition to Enforce, resulting in Coinbase’s being ordered to turn over more than 10,000 users’ information, on suspicion that they failed to pay federal tax on their cryptocurrency profits.

The information provided to the IRS by the cryptocurrency exchange includes users’ “taxpayer ID, name, birth date, address, and historical transaction records for certain higher-transacting customers during the 2013-2015 period.”

Coinbase Is on Your Side

Though nobody enjoys dealing with the IRS, it’s worth noting that Coinbase sought to protect its users’ information from the federal government’s tax collectors. As explained by the exchange:

In December 2016, the Internal Revenue Service issued a summons demanding that Coinbase produce a wide range of records relating to approximately 500,000 Coinbase customers. Coinbase fought this summons in court in an effort to protect its customers, and the industry as a whole, from unwarranted intrusions from the government.

Bitcoin Taxes

Coinbase also considers the result of its initial non-compliance a victory, writing:

After a long process, the court issued an order that represents a partial, but still significant, victory for Coinbase and its customers: the order requires Coinbase to produce only certain limited categories of information from the accounts of approximately 13,000 customers.

Have you received a notification from Coinbase in regards to your information being turned over to the IRS? Do you appreciate the exchange’s initial non-compliance? Let us know in the comments below!

Images courtesy of Wikipedia Commons, Coinbase, and Bitcoinist archives.

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Úno 18

The New Normal: Cryptocurrency Goes Mainstream This Tax Season

· February 18, 2018 · 7:30 am

Until quite recently, most cryptocurrency investors either did not know or did not care to pay taxes on the capital gains they accumulated buying and selling digital coins. The cryptocurrency community is now facing a hard truth: they have to pay taxes just like all the rest of us.

[Editor’s note: This is a guest article by Mario Costanz, CEO of Happy Tax]

Virtual currencies exploded onto the investment scene last year, due in large part to the astronomical rise in the popularity of Bitcoin and its many successors. Interest in this exciting new investment shows no signs of slowing, and soon cryptocurrency will be as ubiquitous as the other traditional securities traded daily on Wall Street.

Until quite recently, however, most cryptocurrency investors either did not know or did not care to pay taxes on the capital gains they accumulated buying and selling digital coins. The cryptocurrency community is now facing a hard truth: they have to pay taxes just like all the rest of us.

The attention that virtual currencies are receiving from federal and state regulators is a positive sign that this innovative technology is heading towards the mainstream. Of course, it has a long way to go until it gets there. In the meantime, however, cryptocurrency investors need to accept the reality of growing government oversight.

Paying Cryptocurrency Taxes is Not Optional

Bitcoin emerged from an anonymous source far on the fringes of the internet nearly a decade ago. For a time, cryptocurrency traders enjoyed an investment environment free from government oversight. This has caused many investors to turn a blind eye to increasing regulation, particularly from the Internal Revenue Service.

Tax liability for virtual currency investments is still a bit of a gray area in many respects, and new laws and policies are sketching out the boundaries. However, one thing is absolutely clear: if you trade cryptocurrencies, you must report your activity to the IRS.

Internal Revenue Service (IRS) Asked to Provide a Clearer Cryptocurrency Tax Framework

To the great dismay of many early virtual currency investors, the IRS declared virtual currencies to be taxable capital assets back in 2014. Like other capital assets, cryptocurrencies are subject to the capital gains rules. The tax rate depends on how long you held your coins before you sold them, as well as the price you bought in and the price you sold out. If your capital losses on your cryptocurrency investments exceed your capital gains, you can claim the loss as a deduction on your income tax returns, up to $3,000.

In other words, the same rules apply to cryptocurrency investors as taxpayers who trade stocks and other securities. This sounds simple enough for any seasoned trader, but unfortunately, things in the cryptocurrency world tend to get complicated quickly.

Most securities are used only in straightforward buy-and-sell transactions. However, cryptocurrencies are also intended to be used to purchase goods and services. Contrary to the popular belief – and wishful thinking – of many cryptocurrency investors, cashing out of your virtual currency investments isn’t the only taxable event in the lifespan of your investment. Rather, tax liability arises whenever cryptocurrencies are traded for other coins, cashed out into fiat currency, or used to purchase goods and services. So, for example, if you buy a new couch on Overstock.com using bitcoin, your purchase will be subject to capital gains tax in addition to any sales tax that may apply.

Paying Crypto Taxes Using Cryptocurrency

This type of double-taxation poses a real challenge to the integration of cryptocurrency into retail payment systems. Fortunately, however, it isn’t all bad news. Just last week, the Arizona State Senate passed a bill allowing residents to pay their state income taxes using “Bitcoin, Litecoin, or any other cryptocurrency” allowed by the state revenue department. While the bill still needs to go through the Arizona House of Representatives before it becomes a law, it represents a landmark moment in the cryptocurrency world.

The Arizona bill has been received with a mix of enthusiasm and skepticism. On one hand, the inherent value of cryptocurrencies is still up in the air. Virtual currencies have become legendary for their volatility. The price of Bitcoin more than doubled in the last two months of 2017 before falling again to half its value in the first two months of 2018.

Bitcoin Taxes

Well-known cryptocurrency critics, like Warren Buffett and JPMorgan Chase CEO Jamie Dimon, claim that cryptocurrencies offer little to any market value and that current market prices are fueled entirely by speculation. On the other hand, the blockchain technology that supports the virtual currency market is a groundbreaking innovation that has the potential to change the way people use money entirely.

The fate of the Arizona law is now in the hands of state representatives, and it remains to be seen how the saga will unfold. It’s a bold legislative move that may be tossed aside by the state’s more conservative House of Representatives. However, it’s also a sign of the times. Arizona recognizes the potential value of virtual currencies as a technology, not just a security or replacement for traditional cash.

As a result, the state is posturing itself as a cryptocurrency-friendly market in anticipation of greater adoption of virtual currency technology and its derivatives. While the long-term viability of any virtual currency remains to be seen, the integration of cryptocurrency into government revenue streams is a positive sign for the future of this exciting new technology.

Will you be paying taxes on your cryptocurrency income this season? Let us know in the comments below!

Images courtesy of HappyTax, Shutterstock 

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Pro 02

Trump Administration Considering Regulating Bitcoin

· December 2, 2017 · 1:00 am

As Bitcoin and other cryptocurrencies continue to rise in both value and popularity, national governments are starting to scrutinize them more. Case in point is that the Trump administration may be considering regulating Bitcoin.

The last year has been an exciting one for cryptocurrency, especially Bitcoin. The digital currency has skyrocketed in value, with no telling how high it will go. The success of Bitcoin has finally convinced major financial institutions to come on board, but such success also brings a great deal of scrutiny. In a recent press conference, White House Press Secretary Sarah Huckabee Sanders said that the Trump administration is monitoring Bitcoin and may consider regulating it.

Feds Watching Bitcoin

During the daily press briefing in the White House, Press Secretary Sarah Huckabee Sanders was asked by a reporter about President Trump’s views on Bitcoin. In her reply, she said:

I know this is something that is being monitored by our team here. In terms of specific briefings and announcements on it, I don’t have anything that I can share with you right now but would be happy to follow back up with you.

Sanders was then asked about this Bitcoin monitoring, to which she said:

I know this is something that is being monitored by our team here. In terms of specific briefings and announcements on it, I don’t have anything that I can share with you right now but would be happy to follow back up with you.

Is Regulation for Bitcoin Coming?

The fact that the US government is keeping tabs on Bitcoin should not come as a surprise. The IRS just won its lawsuit against Coinbase, causing them to hand over data on more than 14,000 accounts. The IRS suspected many people were evading taxes by using cryptocurrency, and an initial survey found that only 0.2% of Coinbase users reported a loss or gain on their transactions. The silver lining in this case is that the accounts handed over are restricted to those with a Bitcoin equivalent of $20,000 or more in a given year between 2013 and 2015.

There are a number of other reasons why the Trump administration will wish to monitor Bitcoin and other cryptocurrencies. The fact that a growing number of people are willing to use a monetary system outside of federal control is not something that most centralized governments, either politically right or left, will be thrilled with. Then there’s the worry about what impact, if any, cryptocurrency could have upon the economy, not to mention the normal hand-wringing about Bitcoin being used for illegal purposes.

Right now, the federal government is only monitoring Bitcoin, but most users would be very unhappy with any regulation. One of the reasons why Bitcoin has grown so much is due to its unregulated nature, and many view future regulation as hurting the digital currency. The president of Global Blockchain Technologies Corp., Shidan Gouran, states:

We believe that the greatest threat is regulation. Several governments across the world have clamped down on exchanges, some halting trading altogether. Others have gone on to outright ban the use of Bitcoin. Sudden government actions in major Bitcoin trading hubs stand to disrupt the market, with the potential to severely affect the utility of bitcoin – and accordingly, the value.

Right now, we’ll have to wait and see if the Trump administration does anything more than just monitor Bitcoin and its cryptocurrency brethren.

Do you think that the Trump administration will eventually regulate Bitcoin? If so, will this hurt the value of the cryptocurrency? Let us know in the comments below.

Images courtesy of Wikimedia Commons and Bitcoinist archives.