Author Topic: Disturbing Question on 2019 IRS Tax Form  (Read 4498 times)

joer1212

  • Bristles
  • ***
  • Posts: 330
Disturbing Question on 2019 IRS Tax Form
« on: February 02, 2020, 02:18:49 PM »
For the first time ever, the IRS has included the following question on its Schedule 1 1040 tax form for 2019:

“At anytime during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”


My question is, am I legally obligated to answer this question truthfully, and if so, what are the legal consequences of not telling the truth?

My hunch is that the IRS is bluffing, trying to scare people into voluntarily disclosing their private information, so that they can later be audited. Correct me if I'm wrong, but isn't the function of the IRS to collect taxes, rather than probing into whether individuals own certain assets?

It's one thing if the IRS was trying to recover taxes on digital currency sales, it's quite another when they demand to know if you had anything to do with cryptocurrencies at all. It seems that the IRS is overstepping its legal authority here. If they now can force you to divulge whether you own digital assets, they can also force you to disclose all your possessions, including your furniture, electronic items, jewelry, clothes, etc. It's an Orwellian slippery slope, and we shouldn't be going there.

Mind you, I owe no taxes on my cryptocurrency holdings, as I have only purchased but not sold them. However, I do plan on selling them at some point, once they've reached a certain value. At that time, I will pay any taxes due. Until then, I don't see why the IRS should have any business inquiring about them.

ixtap

  • Handlebar Stache
  • *****
  • Posts: 2215
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #1 on: February 02, 2020, 02:26:03 PM »
The IRS probes certain assets to determine whether or not you owe taxes for them to collect. There are many kinds of assets that they have access to because your brokerage files forms on your behalf.

It is always a legal requirement to fill out your IRS forms truthfully.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5328
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #2 on: February 02, 2020, 02:36:47 PM »
Under current interpretations of the law, any time you trade virtual currency for something else of value it's considered a sale of property that would need to be reported for the purpose of capital gains taxation. That covers the need to report if you "sell, send, or exchange" the currency. I'm less sold on their need to know about whether you "receive or otherwise acquire" said currency, but of course they do want to know about it so they can later ask what happened to it.

Even so, you need to tell the truth on your tax forms. You sign these forms stating that everything contained within is true and correct to the best of your knowledge, under penalty of perjury.

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #3 on: February 02, 2020, 03:06:56 PM »
I'm less sold on their need to know about whether you "receive or otherwise acquire" said currency

This is exactly what I'm talking about. The IRS is not asking me whether I owe taxes on any cryptocurrency holdings, they're asking me if I had anything do with cryptocurrencies AT ALL during 2019! So, my question is, am I legally obligated to divulge the fact that I have purchased cryptocurrency in 2019, and sent it to a digital wallet (Ledger Nano S)?
What happens if I submit "no" on the form and, 5 years from now, I decide to sell that cryptocurrency? Will they know that I purchased it in 2019? Can I just say that it was purchased in 2017, or 2020? (they are, after all, inquiring whether I purchased or sent cryptocurrency specifically in 2019, not any other year).
« Last Edit: February 02, 2020, 03:11:03 PM by joer1212 »

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5328
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #4 on: February 02, 2020, 07:56:31 PM »
See the bottom of Form 1040.

"Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true,
correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge."

I'd guess the likelihood of actually being tried for perjury for lying on this question (or any other part of your tax return) is minuscule, but that's the risk you're taking when you knowingly provide false information on your tax return.

Monerexia

  • Stubble
  • **
  • Posts: 230
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #5 on: February 02, 2020, 08:03:39 PM »
Unless you have the time, interest, resources and organization to be a professional activist, a good default option is to always answer truthfully and pay what you owe, on time.

Lucky13

  • Stubble
  • **
  • Posts: 124
  • Age: 45
  • Location: Seattle, WA
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #6 on: February 02, 2020, 08:27:23 PM »
wow you're right it's the first question on the form, which seems very odd:
https://www.irs.gov/pub/irs-pdf/f1040s1.pdf

Quick web search turns up this analysis from a bitcon tax specialist in Forbes:
"By adding the crypto questions, the IRS believes that the voluntary compliance will increase in future years. Clearly, the question will alert and educate taxpayers to rethink about their crypto activity and determine if they have any taxable transactions during the year. Moreover, tax practitioners asking their clients this question during tax preparation will also lead to an uptick in compliance."

That seems somewhat reasonable, but this bothers me: "The crypto question is also meant to help the IRS with data gathering."
 There are much less heavy-handed ways to gather data that sticking it at the top of a tax form!

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #7 on: February 02, 2020, 10:33:47 PM »
wow you're right it's the first question on the form, which seems very odd:
https://www.irs.gov/pub/irs-pdf/f1040s1.pdf

Quick web search turns up this analysis from a bitcon tax specialist in Forbes:
"By adding the crypto questions, the IRS believes that the voluntary compliance will increase in future years. Clearly, the question will alert and educate taxpayers to rethink about their crypto activity and determine if they have any taxable transactions during the year. Moreover, tax practitioners asking their clients this question during tax preparation will also lead to an uptick in compliance."

That seems somewhat reasonable, but this bothers me: "The crypto question is also meant to help the IRS with data gathering."
 There are much less heavy-handed ways to gather data that sticking it at the top of a tax form!
I agree, and I'll be frank. I'm leaning towards checking 'no' on this tax form, rather than checking 'yes' and getting on the IRS's radar, which can potentially subject me to being questioned, or even audited, for years to come. I mean, why else would they ask this invasive question to begin with?

I spoke to my financial adviser friend tonight, and he agreed with me. He said that, unless the IRS was sent form 1099 from the exchange from which I purchased my cryptocurrencies, they will have no way of knowing that I have them. He further stated that, even if these currencies went parabolic, and I sold them at a profit 5 years from now, I can always claim that I purchased them in 2017 or 2018 (which are the years that I bought most of my holdings), not 2019. He claimed that, as long as the IRS gets its taxes, they're not going to care when I bought them at that point.

The issue I see with this, however, is if I get audited after paying my taxes when cashing out my cryptocurrency. The IRS may ask me to provide documentation of my cost basis from my exchange. Once I procure a printout from them, it's going to reveal that some of my digital assets were, in fact, purchased in 2019. Whether the IRS is going to match this up with my 2019 tax return (where I claimed that I did NOT purchase cryptocurrency that year) is the question.

Another potential problem is this: Let's say that I cash out my cryptocurrency several years from now, after some enjoying some extraordinary gains, and pay taxes on the profits. Surely, such a dramatic rise in the digital asset market would pique the interest of the IRS, which may subpoena the major exchanges in the United States to hand over the personal information and transaction records of its users (This happened once before, when the IRS sued Coinbase [and won] to hand over the personal info of its users from 2010 to 2015). In the future, the IRS may request the transaction records of users from, say, 2016 to the present.

Now, since I have no intention of not paying my cryptocurrency taxes when I finally cash them out, tax evasion won't be an issue for me. The only potential problem I see the is IRS holding me accountable for making a false claim by checking 'no' on the 2019 tax form question of whether I've purchased cryptocurrency that year.
« Last Edit: February 02, 2020, 10:55:15 PM by joer1212 »

ixtap

  • Handlebar Stache
  • *****
  • Posts: 2215
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #8 on: February 02, 2020, 10:46:05 PM »
Well, if you and your financial advisor are willing to break the law, and post about it on the internet...

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4916
  • Age: 12
  • Location: UTC-10:00
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #9 on: February 02, 2020, 11:03:34 PM »
If you traded currencies, virtual or not, you either took a loss, or a gain. There's nothing disturbing about the IRS wanting to know whether that's the case when it's a trillion dollar market.

If trading dirty underwear becomes the next big thing in 2021, I hope they ask taxpayers whether they engaged in that too.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4916
  • Age: 12
  • Location: UTC-10:00
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #10 on: February 02, 2020, 11:05:32 PM »
That seems somewhat reasonable, but this bothers me: "The crypto question is also meant to help the IRS with data gathering."
 There are much less heavy-handed ways to gather data that sticking it at the top of a tax form!
If putting a question on.a tax form is heavy-handed, wait until you see what happens to people who don't pay their taxes!

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #11 on: February 03, 2020, 07:48:55 AM »
If you traded currencies, virtual or not, you either took a loss, or a gain. There's nothing disturbing about the IRS wanting to know whether that's the case when it's a trillion dollar market.

If trading dirty underwear becomes the next big thing in 2021, I hope they ask taxpayers whether they engaged in that too.
Why does it sound like you're taking the side of the IRS and acting as their spokesperson? How does that benefit you as an investor?? I'm curious.

It's sickening how the government has consolidated its power to such an extent over the past half century, that they have effectively stamped out all dissent toward things that people used to openly complain about, such as taxes. It's gotten so bad now that even investors, who should regard the IRS as their natural enemy, are embracing it like it's their best friend. If only the IRS was so kind to reciprocate these warm, fuzzy sentiments....
« Last Edit: February 03, 2020, 07:54:31 AM by joer1212 »

ixtap

  • Handlebar Stache
  • *****
  • Posts: 2215
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #12 on: February 03, 2020, 07:51:54 AM »
If you traded currencies, virtual or not, you either took a loss, or a gain. There's nothing disturbing about the IRS wanting to know whether that's the case when it's a trillion dollar market.

If trading dirty underwear becomes the next big thing in 2021, I hope they ask taxpayers whether they engaged in that too.
Why does it sound like you're taking the side of the IRS and acting as their spokesperson? How does that benefit you as an investor?? I'm curious.

It's sickening how the government has consolidated its power to such an extent over the past half century, that they have effectively quelled all dissent toward things that people used to openly complain about, such as taxes. It's gotten so bad now that even investors, who should regard the IRS as their natural enemy, are embracing it like it's their best friend. If only the IRS was so kind to reciprocate these warm, fuzzy sentiments towards us.

Quelled dissent against taxes?! You don't get out much!

You think we got to the current low tax rates, despite causing a deficit, because there isn't dissent?!

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #13 on: February 03, 2020, 08:19:56 AM »
Quelled dissent against taxes?! You don't get out much!

You think we got to the current low tax rates, despite causing a deficit, because there isn't dissent?!
We got to the current tax rates largely because of dissent from previous generations (WWii, Silent Generation, some older Boomers), many of whom are no longer around. But, judging by the kind sentiments towards the IRS on forums like this one, it would appear as if people are suffering from Stockholm syndrome, and actually embrace a powerful IRS. How else can you explain gems like these?


I fully support the IRS taking steps to enforce tax compliance where they see a problem


I'm all for the IRS targeting its resources at known areas of non-compliance


If trading dirty underwear becomes the next big thing in 2021, I hope they ask taxpayers whether they engaged in that too.



Mind you, these are the words of investors, who should regard the IRS as their enemy! I can only imagine how the average person, who has less to lose by a strong IRS, feels.
But, if this wasn't proof enough of how cucked people have become today, then look no further than the hostile, adversarial tone towards me on this forum. It should be exactly the opposite. You should be wholeheartedly sympathizing with the spirit of my argument, not fighting against it. That speaks speaks volumes right there.
« Last Edit: February 03, 2020, 08:22:41 AM by joer1212 »

ixtap

  • Handlebar Stache
  • *****
  • Posts: 2215
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #14 on: February 03, 2020, 08:28:13 AM »


Mind you, these are the words of investors, who should regard the IRS as their enemy!


Me, I like having paved roads and public schools and I even think we should have universal healthcare.

As investor, I have more at stake than most in a stable government that funds such projects, and so allows my investments to grow.


Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4916
  • Age: 12
  • Location: UTC-10:00
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #15 on: February 03, 2020, 09:05:33 AM »
Quelled dissent against taxes?! You don't get out much!

You think we got to the current low tax rates, despite causing a deficit, because there isn't dissent?!
We got to the current tax rates largely because of dissent from previous generations (WWii, Silent Generation, some older Boomers), many of whom are no longer around. But, judging by the kind sentiments towards the IRS on forums like this one, it would appear as if people are suffering from Stockholm syndrome, and actually embrace a powerful IRS. How else can you explain gems like these?


I fully support the IRS taking steps to enforce tax compliance where they see a problem


I'm all for the IRS targeting its resources at known areas of non-compliance


If trading dirty underwear becomes the next big thing in 2021, I hope they ask taxpayers whether they engaged in that too.



Mind you, these are the words of investors, who should regard the IRS as their enemy! I can only imagine how the average person, who has less to lose by a strong IRS, feels.
But, if this wasn't proof enough of how cucked people have become today, then look no further than the hostile, adversarial tone towards me on this forum. It should be exactly the opposite. You should be wholeheartedly sympathizing with the spirit of my argument, not fighting against it. That speaks speaks volumes right there.
The IRS merely enforces Congress's will.

In 2019, they collected about 80k in taxes from my family, on behalf of the federal government. A good chunk of that went to fund stuff I find abhorrent, but I am completely neutral to the IRS collecting it. That doesn't make me their spokesperson.

You're getting a lot of pushback because you sound a hell of a lot like those annoying cryptolibertarians who brag online about not paying their taxes on their crypto gains. I have no idea whether you actually are a tax evader, but boy do you sound like one.

erutio

  • Pencil Stache
  • ****
  • Posts: 564
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #16 on: February 03, 2020, 09:06:44 AM »
I have never bought or sold crypto, but when you buy it, do you not have a cost basis you have to keep track of, like your broker does for your stocks or mutual funds?

When you sell in hypothetical 5 years, wouldn't you then have to calculate capital gains, and also have know when you bought it, to know if to use long vs short-term capital gain calculations?

Honest questions.  No comment on legality of those IRS questions.

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 2828
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #17 on: February 03, 2020, 09:50:13 AM »
Most people don't reach out to their local congress member.  The reason messing with social security has been a "third rail" is that AARP will report on it, and many elderly who depend on it will all call to express their concern.  And then they'll vote on that concern.  So if you take a page from that play book, you might reach out to your member of congress and tell them you don't like the IRS asking this question.

If you answer "no" to the question on buying crypto, and several years from now you sell, you have a problem.  To get the lower tax rate, you need to say you held it more than 1 year... which then reveals you were lying on prior tax returns.  You also can't predict what bitcoin exchanges will be required to report to the IRS in the future.

JLee

  • Walrus Stache
  • *******
  • Posts: 6070
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #18 on: February 03, 2020, 09:57:51 AM »
Quelled dissent against taxes?! You don't get out much!

You think we got to the current low tax rates, despite causing a deficit, because there isn't dissent?!
We got to the current tax rates largely because of dissent from previous generations (WWii, Silent Generation, some older Boomers), many of whom are no longer around. But, judging by the kind sentiments towards the IRS on forums like this one, it would appear as if people are suffering from Stockholm syndrome, and actually embrace a powerful IRS. How else can you explain gems like these?


I fully support the IRS taking steps to enforce tax compliance where they see a problem


I'm all for the IRS targeting its resources at known areas of non-compliance


If trading dirty underwear becomes the next big thing in 2021, I hope they ask taxpayers whether they engaged in that too.



Mind you, these are the words of investors, who should regard the IRS as their enemy! I can only imagine how the average person, who has less to lose by a strong IRS, feels.
But, if this wasn't proof enough of how cucked people have become today, then look no further than the hostile, adversarial tone towards me on this forum. It should be exactly the opposite. You should be wholeheartedly sympathizing with the spirit of my argument, not fighting against it. That speaks speaks volumes right there.

You sound mad that you got honest answers to your initial inquiry.

Quote from: joer1212
My question is, am I legally obligated to answer this question truthfully, and if so, what are the legal consequences of not telling the truth?

You are the one with the hostile/adversarial tone here.

wbranch

  • Stubble
  • **
  • Posts: 180
  • Age: 31
  • Location: Some Mountain Ridge
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #19 on: February 03, 2020, 10:39:12 AM »
I thought I recognized the OP's username. Does anyone else remember the cannabis business planned with his felon brother and asking how to get around various laws?

Are you also offended that banks send out 1099-INT if you have over $10 of interest on your savings account? There are ways for the IRS to get info. If you are using a US based digital wallet they are required by law (not tax laws) to collect information on you. The IRS is able to get access to your information from those companies. Last year over 13,000 people received letters from the IRS who most likely did have taxable transactions related to virtual currencies.
https://www.irs.gov/newsroom/irs-has-begun-sending-letters-to-virtual-currency-owners-advising-them-to-pay-back-taxes-file-amended-returns-part-of-agencys-larger-efforts




norajean

  • Stubble
  • **
  • Posts: 247
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #20 on: February 03, 2020, 10:52:48 AM »
Crypto is used for money laundering, tax evasion and assorted other nefarious pursuits. Expert further IRS scrutiny if you own and trade it.

trollwithamustache

  • Pencil Stache
  • ****
  • Posts: 774
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #21 on: February 03, 2020, 12:43:44 PM »
how is this disturbing? if you are trading crypto, it is very likely an exchange has or will report a 1099 of some variety to the IRS. Same as any brokerage account or paypal ect.

So... if you answer truthfully as others have suggested, the computer can match your info up. If you think that saying no will keep you off a list, thats just not gonna happen. The exchanges will be reporting the data.

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #22 on: February 03, 2020, 07:37:02 PM »
how is this disturbing? if you are trading crypto, it is very likely an exchange has or will report a 1099 of some variety to the IRS. Same as any brokerage account or paypal ect.

So... if you answer truthfully as others have suggested, the computer can match your info up. If you think that saying no will keep you off a list, thats just not gonna happen. The exchanges will be reporting the data.
My exchange did not send me a 1099. Only those that spent over 20k in a year and/or made more than 200 transactions received one and got reported to the IRS.

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #23 on: February 03, 2020, 07:45:42 PM »
If you answer "no" to the question on buying crypto, and several years from now you sell, you have a problem.  To get the lower tax rate, you need to say you held it more than 1 year... which then reveals you were lying on prior tax returns.  You also can't predict what bitcoin exchanges will be required to report to the IRS in the future.
This is pretty much the best answer I've received so far on this forum. It perfectly summarizes my concerns about answering 'no' on the tax form.

But, here's a question: Let's say that I sell my cryptocurrency 8 years from now at a profit and pay taxes on it. Will the IRS know what year I purchased these digital assets? My guess is no, unless, of course, my tax return gets audited. Then they will know that I did, in fact, purchase some cryptocurrency in 2019. But, barring this, I can claim that I purchased all my cryptocurrency in 2017 and 2018 (which is actually when I purchased most of my holdings). The question is, will they match up my 2019 tax return (where I checked 'no' on the cryptocurrency question) to my audit 8 years later? And, more importantly, what are the penalties for not answering this question truthfully? It's not like I evaded taxes by lying on the form, as I had no taxes due.
« Last Edit: February 03, 2020, 08:20:53 PM by joer1212 »

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #24 on: February 03, 2020, 08:00:24 PM »
Are you also offended that banks send out 1099-INT if you have over $10 of interest on your savings account? There are ways for the IRS to get info. If you are using a US based digital wallet they are required by law (not tax laws) to collect information on you. The IRS is able to get access to your information from those companies.
I'm afraid you're missing the point. This thread is not, and never was, about evading taxes. I have always faithfully paid taxes on all my income, and cryptocurrency income will be no exception when I decide to cash it out.
This thread is about whether I am legally obligated to truthfully answer the new cryptocurrency question that the IRS has added to the 2019 tax form. If this question is a bluff on the part of the IRS, and there are no penalties associated with not answering it truthfully, then I will answer 'no'.

Also, I hold my cryptocurrency on a Ledger Nano S digital wallet, not at any "company" that reports my activity to the IRS. Therefore, I am the only person that knows about and controls my digital asset activity.
« Last Edit: February 03, 2020, 08:05:14 PM by joer1212 »

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #25 on: February 03, 2020, 08:07:31 PM »
You sound mad that you got honest answers to your initial inquiry.

Wrong. I sound mad because some posters here act as if they're business partners with the IRS, and have a stake in its enforcement success.

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #26 on: February 03, 2020, 08:16:29 PM »
I have never bought or sold crypto, but when you buy it, do you not have a cost basis you have to keep track of, like your broker does for your stocks or mutual funds?

When you sell in hypothetical 5 years, wouldn't you then have to calculate capital gains, and also have know when you bought it, to know if to use long vs short-term capital gain calculations?

Honest questions.  No comment on legality of those IRS questions.
I do have a cost basis for some of my digital currency, but not all. This is because I did a lot of trading in 2017 & 2018, exchanging one cryptocurrency for another, so the cost basis is now very difficult to calculate for most of my holdings, as all the activity obscured it. The way I plan to deal with this issue when I finally sell is to pay the IRS more tax than I owe them. I will take the financial hit in order to ensure that I'm square with them.

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #27 on: February 03, 2020, 08:22:52 PM »
You're getting a lot of pushback because you sound a hell of a lot like those annoying cryptolibertarians who brag online about not paying their taxes on their crypto gains. I have no idea whether you actually are a tax evader, but boy do you sound like one.
Again, this thread is NOT about evading taxes. Please read my thread more carefully before making accusations.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4916
  • Age: 12
  • Location: UTC-10:00
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #28 on: February 03, 2020, 09:34:40 PM »
You sound mad that you got honest answers to your initial inquiry.

Wrong. I sound mad because some posters here act as if they're business partners with the IRS, and have a stake in its enforcement success.
Of course we have a stake in its enforcement success. You do too, whether you realize it or not. If you're not convinced, go vacation in a country with a weak government and report back.

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #29 on: February 04, 2020, 07:11:12 AM »
You sound mad that you got honest answers to your initial inquiry.

Wrong. I sound mad because some posters here act as if they're business partners with the IRS, and have a stake in its enforcement success.
Of course we have a stake in its enforcement success. You do too, whether you realize it or not. If you're not convinced, go vacation in a country with a weak government and report back.
First of all, I've been to 30 countries on 5 continents, and for your information, there is no correlation between how powerful any given country's tax authority is and how safe its streets are (excluding some war-torn countries in Africa and elsewhere, of course). To the contrary, some of the most dangerous areas I've been to are right here, in the inner cities of the United States.

Secondly, there is a fine line between an efficient tax-collecting agency, which does its job well enough to fund the operations of its government, and an oppressive one that seeks to monitor and micromanage every financial aspect of its citizens' life. Politicians (especially conservative ones) used to openly talk about stuff like this circa 30 years ago, when some semblance of free speech still existed in this country, and people were independent-minded and hadn't yet become cucked by their government.
« Last Edit: February 04, 2020, 07:22:12 AM by joer1212 »

erutio

  • Pencil Stache
  • ****
  • Posts: 564
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #30 on: February 04, 2020, 07:50:59 AM »
If you answer "no" to the question on buying crypto, and several years from now you sell, you have a problem.  To get the lower tax rate, you need to say you held it more than 1 year... which then reveals you were lying on prior tax returns.  You also can't predict what bitcoin exchanges will be required to report to the IRS in the future.
This is pretty much the best answer I've received so far on this forum. It perfectly summarizes my concerns about answering 'no' on the tax form.

But, here's a question: Let's say that I sell my cryptocurrency 8 years from now at a profit and pay taxes on it. Will the IRS know what year I purchased these digital assets? My guess is no, unless, of course, my tax return gets audited. Then they will know that I did, in fact, purchase some cryptocurrency in 2019. But, barring this, I can claim that I purchased all my cryptocurrency in 2017 and 2018 (which is actually when I purchased most of my holdings). The question is, will they match up my 2019 tax return (where I checked 'no' on the cryptocurrency question) to my audit 8 years later? And, more importantly, what are the penalties for not answering this question truthfully? It's not like I evaded taxes by lying on the form, as I had no taxes due.

Another honest question:  If you plan to let them know you purchases some of these assets in 2017 and 2018, what harm is there in letting them know you also purchased some in 2019?

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #31 on: February 04, 2020, 09:04:30 AM »
If you answer "no" to the question on buying crypto, and several years from now you sell, you have a problem.  To get the lower tax rate, you need to say you held it more than 1 year... which then reveals you were lying on prior tax returns.  You also can't predict what bitcoin exchanges will be required to report to the IRS in the future.
This is pretty much the best answer I've received so far on this forum. It perfectly summarizes my concerns about answering 'no' on the tax form.

But, here's a question: Let's say that I sell my cryptocurrency 8 years from now at a profit and pay taxes on it. Will the IRS know what year I purchased these digital assets? My guess is no, unless, of course, my tax return gets audited. Then they will know that I did, in fact, purchase some cryptocurrency in 2019. But, barring this, I can claim that I purchased all my cryptocurrency in 2017 and 2018 (which is actually when I purchased most of my holdings). The question is, will they match up my 2019 tax return (where I checked 'no' on the cryptocurrency question) to my audit 8 years later? And, more importantly, what are the penalties for not answering this question truthfully? It's not like I evaded taxes by lying on the form, as I had no taxes due.

Another honest question:  If you plan to let them know you purchases some of these assets in 2017 and 2018, what harm is there in letting them know you also purchased some in 2019?
I'm not legally required to tell the IRS that I purchased cryptocurrency in 2017 and 2018, since they're not asking me about those years. Therefore, I have the option of keeping these purchases hidden from the IRS until I finally decide to cash out and pay taxes on them, which may be years from now.
But, for my 2019 cryptocurrency purchases, it's a different story. The IRS is specifically asking me whether I purchased digital assets that year, which forces me to either lie, or disclose the fact that I have cryptocurrency. See the difference?

JLee

  • Walrus Stache
  • *******
  • Posts: 6070
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #32 on: February 04, 2020, 09:08:51 AM »
So you can either do your taxes honestly or lie.

It's an exceptionally simple decision, and your difficulty with this is telling.

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #33 on: February 04, 2020, 09:21:47 AM »
So you can either do your taxes honestly or lie.

It's an exceptionally simple decision, and your difficulty with this is telling.
Please keep your moral judgements to yourself. This isn't a thread about morality. It's about finding a legal loophole to a tax question. While you're at it, I would appreciate if you also refrained from virtue-signalling to gain status points on this forum.
« Last Edit: February 05, 2020, 08:32:50 PM by joer1212 »

trollwithamustache

  • Pencil Stache
  • ****
  • Posts: 774
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #34 on: February 04, 2020, 09:31:19 AM »
how is this disturbing? if you are trading crypto, it is very likely an exchange has or will report a 1099 of some variety to the IRS. Same as any brokerage account or paypal ect.

So... if you answer truthfully as others have suggested, the computer can match your info up. If you think that saying no will keep you off a list, thats just not gonna happen. The exchanges will be reporting the data.
My exchange did not send me a 1099. Only those that spent over 20k in a year and/or made more than 200 transactions received one and got reported to the IRS.

How confident are you that there are no more lawsuits and the threshold doesn't change? Coinbase for one had to hand over a lot of records...  Even if they didn't this year its foolish to think the exchanges don't have records that could be handed over in the future.

CareCPA

  • Bristles
  • ***
  • Posts: 342
  • Location: Northcentral PA
    • Care CPA - Tax, Accounting and Payroll
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #35 on: February 04, 2020, 09:34:40 AM »
I have never bought or sold crypto, but when you buy it, do you not have a cost basis you have to keep track of, like your broker does for your stocks or mutual funds?

When you sell in hypothetical 5 years, wouldn't you then have to calculate capital gains, and also have know when you bought it, to know if to use long vs short-term capital gain calculations?

Honest questions.  No comment on legality of those IRS questions.
I do have a cost basis for some of my digital currency, but not all. This is because I did a lot of trading in 2017 & 2018, exchanging one cryptocurrency for another, so the cost basis is now very difficult to calculate for most of my holdings, as all the activity obscured it. The way I plan to deal with this issue when I finally sell is to pay the IRS more tax than I owe them. I will take the financial hit in order to ensure that I'm square with them.

If you were exchanging cryptocurrencies in 2017 and 2018, the IRS already knows you have cryptocurrency. Each exchange is a taxable event, not just when you convert them to dollars.

As was pointed out before, there is no legal loophole here just because you want there to be one. There is a statement where you sign, as pointed out by @seattlecyclone, stating that the return is true, accurate, and complete, under penalty of perjury.

Just because you want it to be optional, doesn't make it optional.

Cpa Cat

  • Handlebar Stache
  • *****
  • Posts: 1697
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #36 on: February 04, 2020, 09:35:52 AM »
Prior to the IRS cracking down on cryptocurrency, fewer than 1000 people in the USA were reporting their crypto transactions, despite the fact that Coinbase had 10 million users in the same period.

So while tax evasion may not be a problem for you, it is definitely a problem in the cryptocurrency sphere.

JLee

  • Walrus Stache
  • *******
  • Posts: 6070
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #37 on: February 04, 2020, 09:37:07 AM »
Quote from: joer1212
But, for my 2019 cryptocurrency purchases, it's a different story. The IRS is specifically asking me whether I purchased digital assets that year, which forces me to either lie, or disclose the fact that I have cryptocurrency.

So you can either do your taxes honestly or lie.

It's an exceptionally simple decision, and your difficulty with this is telling.
Please keep your moral judgements to yourself. This isn't a thread about morality. It's about finding a legal loophole to a tax question. While you're at it, I would also appreciate if you also refrained from virtue-signalling to gain status points on this forum.

lmao.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4916
  • Age: 12
  • Location: UTC-10:00
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #38 on: February 04, 2020, 09:39:41 AM »
Man I have never wished an IRS audit on someone so badly as I do now. OP, you're insufferable.

Maybe a good contender for this thread:
https://forum.mrmoneymustache.com/off-topic/op-is-the-only-one-who-doesn't-see-it/


MoseyingAlong

  • Stubble
  • **
  • Posts: 150
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #39 on: February 04, 2020, 10:38:56 AM »
I'm not a fan of the IRS doing data gathering that doesn't affect that year's taxes. Unfortunately there is precedent with the question about foreign bank accounts. If memory serves, the question on the interest schedule was just whether you had authority over a foreign bank account. Didn't matter if the account was large enough to require the disclosure filing with the Treasury Department.

EvenSteven

  • Bristles
  • ***
  • Posts: 399
  • Location: St. Louis
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #40 on: February 04, 2020, 11:25:12 AM »
Man I have never wished an IRS audit on someone so badly as I do now. OP, you're insufferable.

Maybe a good contender for this thread:
https://forum.mrmoneymustache.com/off-topic/op-is-the-only-one-who-doesn't-see-it/

There is a 99.99% chance that anyone who unironically calls other people "cucked," outside of the kink scene, is going to be an insufferable jackass.

merula

  • Handlebar Stache
  • *****
  • Posts: 1381
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #41 on: February 04, 2020, 01:13:37 PM »
There is a 99.99% chance that anyone who unironically calls other people "cucked," outside of the kink scene, is going to be an insufferable jackass.

I'm so confused about the "become cucked by their government" concept. I'm supposed to be...mad?... that my government has other taxpayers? And collects taxes from them, too, in addition to me?

Someone either needs a primer on kink or on political science.

Lucky13

  • Stubble
  • **
  • Posts: 124
  • Age: 45
  • Location: Seattle, WA
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #42 on: February 04, 2020, 05:32:26 PM »
Prior to the IRS cracking down on cryptocurrency, fewer than 1000 people in the USA were reporting their crypto transactions, despite the fact that Coinbase had 10 million users in the same period.

So while tax evasion may not be a problem for you, it is definitely a problem in the cryptocurrency sphere.
10M unique users?! that seems high to me but I believe you, I guess I'm out of touch and this explains why the IRS may feel it's worth the backlash to try and collect on the taxable transactions.

phildonnia

  • Stubble
  • **
  • Posts: 176
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #43 on: February 04, 2020, 05:53:41 PM »
I've seen similar concerns elsewhere about the Form 1040 asking for your occupation.  There's no reason for the IRS to need to know that, but they ask it so they can use it in their DIF algorithm. 

Does this question generate the same "disturbing" reaction?

Also on Schedule B: "Are you required to file with FinCEN?"  One would think that a constructive answer to this would come in the form of filing (or not) with FinCEN. 

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #44 on: February 04, 2020, 07:09:25 PM »
If you were exchanging cryptocurrencies in 2017 and 2018, the IRS already knows you have cryptocurrency. Each exchange is a taxable event, not just when you convert them to dollars.
It wasn't a taxable event in 2017. It was a like-kind exchange. The law making it a taxable event started on January 1, 2018, at which time I stopped trading and only purchased cryptocurrency.

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #45 on: February 04, 2020, 07:12:15 PM »
How confident are you that there are no more lawsuits and the threshold doesn't change? Coinbase for one had to hand over a lot of records...  Even if they didn't this year its foolish to think the exchanges don't have records that could be handed over in the future.
That is a good point, and one that I have thought of myself. The question is, is the IRS so meticulous to match my 2019 tax return answer to the first question (about cryptocurrency) to my 2019 purchases on Coinbase?

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #46 on: February 04, 2020, 07:14:38 PM »
Man I have never wished an IRS audit on someone so badly as I do now. OP, you're insufferable.

Maybe a good contender for this thread:
https://forum.mrmoneymustache.com/off-topic/op-is-the-only-one-who-doesn't-see-it/
I have no idea what the heck they're discussing in that thread.

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #47 on: February 04, 2020, 07:19:54 PM »
I'm not a fan of the IRS doing data gathering that doesn't affect that year's taxes.
Exactly, and I wouldn't be surprised if the IRS is overstepping its legal authority here. Unfortunately, this disturbing precedent hasn't yet been challenged in federal court. But, I hope it will be soon. If the IRS can ask you about whether you have a foreign bank account, or own cryptocurrencies, what going to stop them from asking if you own jewelry or other expensive personal items? The longer they go unchallenged, the more bold and intrusive they will get.
« Last Edit: February 05, 2020, 06:09:39 AM by joer1212 »

Villanelle

  • Magnum Stache
  • ******
  • Posts: 3539
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #48 on: February 04, 2020, 07:41:23 PM »
How confident are you that there are no more lawsuits and the threshold doesn't change? Coinbase for one had to hand over a lot of records...  Even if they didn't this year its foolish to think the exchanges don't have records that could be handed over in the future.
That is a good point, and one that I have thought of myself. The question is, is the IRS so meticulous to match my 2019 tax return answer to the first question (about cryptocurrency) to my 2019 purchases on Coinbase?

Why would it matter if they match them? You claim you are looking for a *legal* loophole.  So I ASSume you will either find one--in which case it won't matter if anyone matches up anything--or you will answer the question honestly.

So, again, why does it matter if the IRS is meticulous enough to match up returns, if you are supposedly not going to lie on your forms?

joer1212

  • Bristles
  • ***
  • Posts: 330
Re: Disturbing Question on 2019 IRS Tax Form
« Reply #49 on: February 04, 2020, 08:14:41 PM »
How confident are you that there are no more lawsuits and the threshold doesn't change? Coinbase for one had to hand over a lot of records...  Even if they didn't this year its foolish to think the exchanges don't have records that could be handed over in the future.
That is a good point, and one that I have thought of myself. The question is, is the IRS so meticulous to match my 2019 tax return answer to the first question (about cryptocurrency) to my 2019 purchases on Coinbase?

Why would it matter if they match them? You claim you are looking for a *legal* loophole.  So I ASSume you will either find one--in which case it won't matter if anyone matches up anything--or you will answer the question honestly.

So, again, why does it matter if the IRS is meticulous enough to match up returns, if you are supposedly not going to lie on your forms?
To be honest, I don't know what I'm going to do yet. It would be great if I could talk to someone (maybe a tax attorney, but that will cost money) who could tell me if the new cryptocurrency question is legally binding, though I suspect it may be, since it clearly states that by signing the return, I am claiming to tell the truth under penalty of perjury. This will apply until the IRS is challenged in court and is forced to remove these invasive questions that are irrelevant to your taxes.
« Last Edit: February 05, 2020, 06:14:24 AM by joer1212 »