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Every US taxpayer in Crypto should be aware of what’s unfolding

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US taxpayer in Crypto

IRS said it will issue guidance for crypto taxation this year.  “IRS knows what’s going on” said one of the popular IRS’s agents recently. Binance is restricting US residents from trading on its platform starting this September. Only last year, IRS was successful in issuing summons to Coinbase.  

A recently leaked IRS Cyber Crimes training document outlined how far IRS is ready to go to tackle the problem of ‘virtual currency trading’ and ‘transfer of wealth from fiat to bitcoin’.  

It doesn’t take a genius to sense that something is brewing on the tax and FinCEN front, at least in the US.

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Einstein is quoted to have talked about two certainties in life: death and taxes.   Not everyone believes that Governments have the right to tax.  

The percentage of these anarchists is higher in the crypto space. Some may have even gotten into crypto space to amass wealth without declaring anything.

We at CryptoTapas have been calling people to action to never hide anything.  If you don’t like to pay taxes, move to a country where there are no taxes and see how you like it there. 

Ominous signs of impending action are already in the air

US taxpayer in Crypto

IRS is now getting ready to send out 10,000 letters to individuals with virtual currency transactions.  

“Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties,” said IRS Commissioner Chuck Rettig.

Gary Alford, the guy who helped solve Silk Road case said in a recent interview with Forbes that IRS was well aware of what was going on.  In his own words, “We’re usually behind the curve — history is made and then we react to it. But in this case, we are ahead of the curve. We were there on ground zero, and we were waiting for the rest of the world to catch up to what we already knew… We already are aware that there were cases to be made, we just didn’t know if we were at the point where we can bring it for criminal prosecution. We believe we are at that point now. If we had 12 jurors and told them someone made all their money in bitcoin, we believe that they would understand.”

Binance announced that it will stop serving US residents starting September of 2019. This may be a move to avoid US’s legal reach on the basis of Americans trading on its platform. We are not sure if this strategy will shield Binance from the US probes.

Disclosure, whether conservative or aggressive, is the way to go

US Taxpayer in Crypto

Before Trump’s Jobs Act made it clear that like-kind exchange treatment only applies to Real Estate properties and not others, some individuals have used like-kind exchange treatment with bitcoin and crypto transactions.  

Even then, the fact that these folks have gone to the lengths of enduring complexities of disclosing crypto under like-kind exchanges is a far better position than those who refused to disclose anything entirely.

While IRS is due to provide a detailed guidance in 2019, existing guidance from 2014 or even the aggressive like-kind exchange position before 2018 tax year were still grounds for good faith disclosure.

Affirmative guidance creates grounds for IRS to pursue tax evaders

IRS understands that without affirmative guidance they may face an uphill battle in tax courts to prove that not reporting or even reporting inadequately is a crime.

Once the guidance is in place, then the IRS will have all the ammunition it needs to go after those who are deluded to think they can outsmart the agency that brought down Capone.

However, IRS is not waiting until after the guidance is made available, they are already taking action (most probably based on the information they gathered from Coinbase subpoena).  

IRS has won in the court before, it will in future

As we reported earlier, IRS issued a summons to Coinbase to release its customers information.  This was when there was no concrete guidance on what defines evasion as it relates to crypto taxation.  

Now that they are gearing to issue that long eluded guidance, US residents better pay attention.

In some cases, US taxpayers who have not reported transactions that are otherwise reportable may have to go back to amend the tax returns.  You must consult a tax professional who specialises in the digital assets area.

Income tax is the least of your worries

US Taxpayer in Crypto

We issued a detailed guidance on FinCEN Form 114 disclosure last year.  We will update this guidance for 2019 toward the end of the year (another reason to subscribe) because it is, in our view, equally critical to disclose your foreign crypto exchange balances to the United States Treasury.  This requirement is in addition to your tax form disclosures, and continues year over year as long as you hold the crypto or any financial account in a non-US crypto institution or exchange.

 

Your digital wallets are exempt from the FinCEN Form 114 disclosures since you own the private keys and are not considered to be held in a foreign account.

Formation of special Task Force is likely

We speculate that the IRS will form a special task force comprising of law veterans, tax nerds and tech geeks to excavate crypto wealth no matter how deeply it is buried.  

In its training deck, IRS Cyber Crimes has alluded to how they will use the tools that could help them track the owners from back-tracking the wallet addresses to their IPs to the owners.  This will obviously need a concerted effort from the IRS, Blockchain and Crypto community and Cyber Crimes divisions.

Virtual Currency Task Force is not a bad name, but Digital Assets Task Force, or DAT Force, now that’s vogue

Blockchain’s open architecture may actually make this excavating easy for IRS, with the right resources in place.  

In the training deck, IRS Cyber Crimes laid out plans to use ‘Chainalysis’ to backtrack the ownership of bitcoin and other digital currency wallets.    

Again, these developments should only worry those who chose to bypass the law not those who have been diligent in their tax and legal affairs.

Script tightens, rattling will ensue

First the infamous IRS agent, Gary, comments on how IRS knows everything.  Then IRS goes out and gets the subpoena against US’s most popular crypto exchange, then the Cyber Crimes training deck talks about going to lengths to fish out the evaders, Trump joins in on the party calling out bitcoin while the Senate continues its grilling of Facebook Libra.  

The script of ‘anti-nation’ and ‘national security’ are slowly getting tagged to the bitcoin and crypto community.  This is not a good direction but one that we hope will take ‘measured’ turn to protect the citizens who are working with the law while unearthing those who are not.  

This balance is very hard to achieve and we have some of the most uninformed politicians in power who are calling bitcoin a ‘bigger threat to nation’.  

This is an unfortunate rhetoric that we hope the Government will quickly clarify and ensure the progress of this amazing technology with workable legal framework.  If US fails to achieve this harmony – other nations will take over the US’s position in the technology front.

Conclusion

Something is brewing around the world.  Governments are more aware of how blockchain wallets work, what DEx’s are and how the world of crypto trading works.  

Our recommendation continues to be that you stay compliant with country’s laws, not just tax but also financial account disclosure requirements, and stay clear of any nefarious ideas to evade taxes or to break the law.

Thank you for reading the article.

You may be interested:
IRS Cyber Crimes leaked training document

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

Read more about the author here.

 

CryptoSpace

This is What Non-Bitcoiners Think About Bitcoin

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Bitcoin believers

There are two types of people in this world: Bitcoiners and non-bitcoiners.

Many non-bitcoiners stay that way because they have come to associate Bitcoin with certain elements of the society. 

Here is a short list of things non-bitcoiners associate Bitcoin with and whether these allegations have any validity.

Money laundering

moneyBitcoin is criticised to be used for many illegal activities including money laundering. 

Can Bitcoin be used for money laundering?  Sure.

So can gold or cash or you name it.  

Anything of value can be used for money laundering, however, only one of them can be actually tracked forever.

To many people’s surprise, Bitcoin is the only asset among many that is the worst medium to use for money laundering.

Terrorist funding

Haters say that bitcoin is used by terrorist groups to avoid being tracked. 

Fools be those who think Bitcoin is completely anonymous.  

In fact, physical cash is much more anonymous than any medium of exchange out there.

Drugs

Bitcoin was (is) used to buy and sell drugs. 

Bitcoin did not create a single drug and it did not create commerce for drugs either. The drugs commerce has been in existence before bitcoin.  What bitcoin did was create this false illusion that it is anonymous money.

To the dismay of many those who thought they were being smart have etched their dealings on the blockchain for anyone with the right tools to find out.

Dark web

darkwebYes, the dark web has made Bitcoin popular.

Silk Road, illegal weapons, transferring money without going through banks or other legal entities, all of these have colored Bitcoin as Dark Web money.

However, once people understood the myriad of applications that bitcoin and blockchain can help with, the dark web allegations have faded.

We would scorn anyone suggesting that the internet should be banned because there is illegal stuff going on (dark web lives on the internet too).

However, these very people would call for a ban on Bitcoin without understanding that Bitcoin is the next phase of the internet’s evolution.

Gambling

Gambling cryptocurrencyGamblers love to squander their wealth. And those who dabble with Bitcoin with their life savings are no better than gamblers.

This has some truth because there are no guarantees that Bitcoin will succeed (although one could argue that it has already succeeded in bringing blockchain to the consciousness of mainstream).

As such, those putting money in bitcoin understand that they could lose their investment.

While many invest in bitcoin in the hopes of getting rich, there are few who invest in it to own a piece of technology and be part of the history in the making. 

In that sense, Bitcoin is way different than gambling.

Is Bitcoin the panacea?

While Bitcoin is far better than the existing fiat system, we do not think Bitcoin as the panacea.

We believe that Bitcoin will build bridges and connect the world which was deprived of access to financial inclusion and in doing so it will become part of the world financial ecosystem.

It will not replace the fiat system, rather, it will make it more accessible.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Factors adding gasoline to the Bitcoin shortage fire

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Bitcoin shortage

Bitcoin’s creation and its subsequent proliferation may have all been planned for a long time, this is the outcry of many conspiracy theorists.  

These conspiracy theorists also believe that whistle blowers are mere plants to help prepare the world for what’s coming.

One of their theories is that the end of physical fiat was planned a long time ago, however, the transition of physical fiat to digital fiat needed a catalyst to drive the conversation.

Either by meticulous design or by sheer coincidence – Bitcoin came to life in 2009.

We personally think that Bitcoin was designed by liberals who believed a ‘fair world’ was possible.

The invincibility of this groundbreaking technology meant that the forces that were working on doing away with physical fiat had a runway built for them.

So, the rhetoric has now changed from ‘Bitcoin is for anti-social elements’ to ‘Bitcoin is the currency for the visionaries’.

Why is that backdrop of conspiracies and layout necessary?

Because, irrespective of the underlying reasons the rhetoric has changed and it has changed for good.  This means, as the physical fiat follows the path of extinction, Bitcoin – the king of digital currency, will see a lot of demand.

We were warned a long time back that there will not be enough bitcoin in the world for everyone to buy.

Some studies say that owning .28 Bitcoin will guarantee you a seat in the top 1% bitcoin holders in the world while others say you need 5 bitcoins to claim the top 1% in the Bitcoin rich list.

Point is, even if you have all the fiat in the world, there is a limit on how much bitcoin you can buy.

When people who want to buy bitcoin are ready to pay any price while those who own the fractions of it are unwilling to sell it – the prices have only one way to go: UP.

 

The strategic moves into Bitcoin from MicroStrategy, Square, GrayScale, Fidelity and a host of billionaires who actually know something about money and finance is a tell-tell sign for the rest of the world.

Whether you want to get into Bitcoin to own a piece of technology itself, or to hedge against the inflation, or simply to use it as ‘digital gold’ that you can take with you, any and all of these reasons are good enough to look into Bitcoin.

If you had told us last year that a public limited company will convert its cash reserves into Bitcoin we would have laughed at you, but that is precisely what has happened.

As a result of converting fiat reserves to Bitcoin, the stock price of MicroStrategy saw an immediate boost which was as big as the reserve itself.

Do you think other public companies will stay on the sidelines for long?

When a legend like Paul Tudor Jones says ‘Bitcoin is the fast horse’ to bet on against inflation and he himself invests 2% of his portfolio, how long will it take for other fund managers to take note?

Add to this the demand from retail investors in the form of millennials, who are also set to inherit some $60 Trillion dollars from the baby boomer generation in the coming decade.

Conclusion

We personally think the goldilocks moment for Bitcoin has arrived.  It has the perfect combination of ‘scarce supply’ and ‘growing demand’.  It also has the added elements of adoption and ‘nascentness’ working in its favor.

These factors alone make Bitcoin one of the best investment assets of the century, in our opinion. 

We have been investing in Bitcoin using dollar cost averaging.  We don’t go selling our home or taking on insane loans to invest in bitcoin, rather, we invest $100 here and $100 there.

Before you invest your money into bitcoin or cryptocurrencies, spend some time understanding what Bitcoin is and why it is important in taking the world from the centuries old fiat system to a brand new global currency system.

In our personal view, Bitcoin will become one of the best assets to hold by the next halving.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Why this bull run has no precedence? ONE key metric to rule them all

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bull run 2020

Everyone is singing the praises for the bulls’ arrival in the crypto space.

Some say that 2020 will mark the biggest bull run in cryptos’, albeit short, history.  

We are already in October so we doubt any fireworks will take place now since there is a lot of uncertainty about the US elections.

Add the uncertainty around the stimulus bills, unemployment trends, soon to be lifted forbearances and the list goes on.

2020 still has another 2.5 months to go but most of these uncertainties will take a while to show their true impact.

For instance, what will a Biden presidency mean for the economy and cryptos?  

How many people will be forced to sell their homes once the forbearance’s are lifted?

What happens if the next stimulus bill does not pass through?

When will the vaccine become available?

These are some of the unique situations that we have no precedence for. Do not let anyone convince you that we know what’s going to unfold, because no one does.

Yes, everyone has theories, like the ones we are presenting here, but that is all they are: theories.

The BIGGEST metric that crypto community is not considering

We are no economists nor can we run any fancy charts to impress a point on you.  

We are just good observers and have common sense to deduce a few things based on data.  

For instance, between 2007 and 2010 consumer spending dropped by an overall .2% and we know what that meant for the economy.

Personal consumption expenditure

In 2020, people have literally cut down on their spending.  Some of it is forced due to the restrictions imposed by external forces and most of it is self imposed.

I am sure the spending on marijuana, liquor and food have gone up but what about other spending?

2020 also saw a spike in the savings balances.  

Economy is not stimulated by people hoarding their money. People need to exchange value for the economy to thrive.

What happens to the spending behaviors when the true stats around evictions, lost jobs (that are not coming back) and small businesses that are shutting down permanently are out?

Our guess is that people are going to be weary of spending money in the short to medium term. If we were forced to pick a timeline – we would say about 12-16 months (assuming we get a vaccine in Q1 2021).

When is the next bull run? 

Based on what we have seen in 2007 through 2010 and observing the consumer spending habits in recent times, we think that Bitcoin (and cryptos) will not find their true peak until next halving.

We know this is not what you came to hear.  

If the bull run in your mind is hitting the 2017 highs then we do not think you have to wait until the next bull run.

If the bull run means a $100,000 bitcoin then we stand by our opinion on when that is going to be.

A case for bull run

In spite of what is going on in the street, following factors are acting as strong bull market signals for the crypto space. 

Hype: Crypto space (specifically Bitcoin) has been gathering a lot of steam in terms of brand awareness and mass penetration.  This is great for the long game.

Adoption: More than ever, private and public enterprises are becoming serious about bitcoin and underlying blockchain technology.  What is good for bitcoin is good for blockchain and vice-versa.  MicroStrategy investment, Paul Tudor Jones getting involved with bitcoin are some examples.

Tech explosion: Crypto space is home to some of the brilliant minds in the tech space. Add Big Techs interest in the crypto space and you have a perfect recipe for monumental shifts in crypto perception. Tech giants like Microsoft, Google, Twitter, Facebook are all getting involved with blockchain and cryptocurrencies in some shape or form.

Retail demand: More and more retail investors are looking for alternative investments and they are waiting on the sidelines to get involved with Bitcoin.  As soon as companies like Fidelity or other brands offer crypto investment through retirement plans – there would be a massive influx into this space.

DeFi: DeFi in its current state might be infested with shittty projects but as a concept and technological shift to turn the current banking system upside down – it holds great potential. Any demand to DeFi brings more demand to bitcoin, ethereum and blockchain in general.

Conclusion

The debate around when is the next bull run will hinge on how the market recovers from this pandemic. How soon will we get the vaccine and how many of the lost small businesses and jobs are we going to resurrect?

From a macro perspective, Bitcoin and few select cryptocurrencies will continue their upward trajectory so if you looked back to 2020 five years from now, you might think bitcoin was on sale.  

Question is: how many people have that kind of patience?

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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