If it sounds too good to be true ... it is.
The US Internal Revenue Service (IRS) has laid out a formal set of policies for how it will handle Bitcoin and other virtual currencies for tax purposes. In a guide (PDF) released Tuesday, the IRS said that it would be considering cryptocurrencies to be property, and as such would be subject to US laws regarding the transfer and …
If it sounds too good to be true ... it is.
Interesting that they have included any Bitcoin obtained from mining as assessable business income. From a compliance point of view, one would assume that they have some means of identifying who has mined any coins and whether they are subject to US tax jurisdiction. Or perhaps not, maybe they are just hoping miners will comply.
If I made $1 billion in cash from selling drugs, I'm supposed to report it and pay taxes on it. That's how they took down Al Capone. For tax evasion, not for running the largest bootlegging operation in the country and ordering countless people killed.
The new biography of Eliot Ness suggests that this is because Ness gathered a great deal of information on Capone's illegal businesses, and there was a fear that if the jury knew the extent of this, they would think that convicting him might result in the loss of their jobs, and so acquit.
This is quite a rational fear, given how things go on in the more corrupt parts of the world.
... are wealth creators, and exempt from all taxation, as any fule kno!
The one part of the US that works every time without fail....
No it fails pretty regularly too. It's just the one part of the system where the citizen is legally held accountable regardless of who is actually at fault.
In fact, any day now I expect to see yet another Forbes report where they've sent three sets of tax papers to 40+ accountants and outside of the ones for the folks who should really be filing an EZ or online form, none of the accountants agree how much tax is actually owed.
Yeh - we are getting some of that kind of treatment here.
Organisation so-and-so contractually agrees to take money from person and pay it to another organisation on your behalf. They want to do it. They want to do it without legal consequence or legal responsibility.
They make big mistake = not a problem, it is the person's big problem.
So many able corporations/organisations willing to be so helpful but fouling things up at the same time?
"Bitcoin markets reacted to the IRS release with little outrage or surprise."
Should they have been outraged? Although I read the article, the larger significance of the IRS policy is completely lost on me. What does it mean? What are its practical implications? What is its impact as opposed to the the impact of a different policy?
It'd be nice to know...
El Reg is never above a bit of hyperbole. Essentially the IRS ruled the way everyone expected them to:
1. It isn't legal tender.
2. It is property.
3. Property received in lieu of wages is taxable and will be treated as such under the law.
All (oddly enough) very reasonable and legally defensible policy positions. Whether or not they can monitor and enforce the regulations is a whole other issue. But their point of influence is where it is for almost all real property: Somewhere along the line someone will want to convert it into numbers in their bank account. If that someone is a US citizen, the banks have to file the appropriate paperwork.
Could your mate Razor Eddie give people some advice?
Taxing consumption is both moral and productive. The United States is doing the exact opposite of what it should be doing. It has ruined us.
"Taxing Income is Immoral and counter productive. Taxing consumption is both moral and productive."
Only if you enjoy grinding the poor into the dirt, which is the group that does the most consuming.
The poor do the most consuming? What? How do these poor people afford to consume more than the rich? Some how I think those figures do not add up. If they are doing the most consuming that is purely because they have been given money by the rich to consume with, so in effect it is the rich that do the most consuming, by their own choice and through proxy.
Taxing consumption is both moral and productive
Did you mean to say, "taxing me is immoral, taxing you is moral," because that's what it sounded like...
The rich 'consume' more yachts. And Lambogee... Lombarghi... er, Bentleys (blush).
The poor 'consume' (and pun intended, without ill will) a lot more food. A lot more cheap clothing. A lot more land. Simply because, as Tevya said in 'Fiddler on the Roof' - <insert deity of your choice here> must love the poor, since he made so many of them.
There really, really are a lot of poor. Consuming. consuming not so much with the goal of 'being seen' in St Tropez (yes - I'm showing my age), or so they can pretend they've achieved something by buying another mansion they'll never live in. Rather, consuming because the alternative is to stop breathing. And, in some parts of the world, occupy some more land after they've stopped, even if only as fertiliser.
And as to being 'given money by the rich' - we are, of course, all entitled to our beliefs, interpretations, conceptions, misconceptions and, if we get lucky, Lambo-Bentleys. But there are rather a lot of subsistence farmers out there, I suspect, who might not think anyone is giving them a damn thing, although they're probably pretty sure a bunch of folks are _taking_ rather a lot more than said poor folks have to give.
I know. I'm an Idiot. I'll shut up now...
> "The poor do the most consuming? What? How do these poor people afford to consume more than the rich?
You are mistaking the *absolute* amount spent for the *proportional* amount spent.
To pick some simple figures, if you and I both have monthly expenses of £1500, but you earn £1500 a month and I earn £3000 a month, you are consuming 100% of your income whereas I am only consuming 50% of mine and hence have money over to save and invest.
This is why consumption taxes like VAT are neither moral nor productive, but are, instead, regressive and unfair because everyone gets taxed at the same rate, but the poorest have to pay a bigger proportion of their income and are thus left with less left over.
@ Graham Marsden
When you describe it like that, consumption taxes really do look bad. I'd never thought of it like that.
On the other hand, should the goods and services that a company produces not be taxable? This is what it would require to remove consumption taxes and in order to keep the same "tax income" for a government, income would have to be taxed at an extremely high rate.
Of course, we get taxed on our income, taxed when we spend, pay additional taxes for services, taxed when we save and finally taxed when we die.
And you are confusing "social justice" with real justice. Real justice is each person working for his just wages. Not stealing from the rich to assuage your own guilt.
It's a strawman argument. Nobody has the same fixed expenses its all variable. You can live on $1000 a month and you can go bankrupt on $10,000 a month. Regardless of how much you make, you are responsible for balancing your income and expenses.
There's a very good reason we have so many "poor people" these days. The market is an amoral bastage. He sells whatever you are buying. The more poverty he buys, the more he sells you. And jackalopes like the poster above are buying poverty with their self righteous hypocracy at unprecedented levels.
I wonder if there is any correlation between wealth of nations, distribution of income and income to Treasury/Chancery/Chancellery via direct or indirect taxation? And that nations decline into dependency on paper currency?
Perhaps this should be modelled and the model made available to citizens/subjects of the nation?
Ah, the classic "I'm alright Jack" argument...
Let me put it another way. Imagine we all had to move a pile of bricks from one place to another by hand. Now imagine that I am six feet tall, well muscled, regularly go to the gym, am well fed etc whereas you are 5 feet tall, not in the best of health and poorly nourished.
Which is better: For the stronger person to carry more bricks or for him to say "No, since you can only carry two bricks, it's fair and just for me to only carry two bricks as well"? Should the burden be placed on those best capable of carrying it or distributed equally so that the stronger and the weaker carry the same amount?
(There's a certain irony that many on the Right Wing of politics are fundamentally opposed to equality, apart from when it benefits them...)
PS And I think you need to look up what a Straw Man argument is, because that other post was certainly not one.
> should the goods and services that a company produces not be taxable?
Originally the idea of VAT was that it would be a "luxury" tax. Unfortunately it's now become a tax added to virtually everything and which affects everyone, rich or poor. However, as with my example above, the poor end up paying a bigger proportion of their income on VAT.
True. VAT is not on food yet, but it is creeping that way.
> VAT is not on food yet
ITYM "Not on *all* food yet" :-(
More philosophical hocum. Income isn't fixed, expenses aren't fixed, and enslaving someone to move bricks is a violation of human rights. But then you social justice types don't actually give a damn about real human rights, only that some mythical distribution fits your political world view. When the government buys more poverty, the market obliges by providing it. It really is just that simple.
You hire whoever the hell you want to if all they're going to do is pointlessly move bricks from one place to another. I'm going to go do what I do best and make some money at it.
That may have been the lie used to sell it, but it was never about luxuries. It was always about the best way to extract the most money to support the socialist welfare state and blame somebody other than the politicians for the problems that ensued. The direct sales tax has a natural limit of about 12%. The Progressive income tax has a natural limit of about 23% of GDP. Welfare states can't exist on that little income. The VAT tax doesn't seem to have a natural limit because it just gets priced into everything and hidden from view.
Of course, being bitcoin and practically untraceable, there isn't much chance of anyone ever accounting to the IRS regarding a bitcoin transaction. Unless your actually a bitcoin business, then its a little hard to avoid.
When you buy bitcoin from a reputable exchange, it will be subject to Know Your Customer and Anti-Money Laundering laws, so the coins are known to belong to you. Every transaction afterwards is published in the block-chain, which anyone can access. So bitcoin is actually very traceable, at least compared to cash. Whether anyone will bother is another matter, but if you get audited the data trail exists and can be used, either for you or against you.
Yes, but if I wanted to avoid the IRS I would just not use such an exchange and deffinitely not one based in the US, that way its going to be mighty difficult for the IRS to get any data they need to form a prosecution. It is much easier to avoid having to inform any tax collecting authority than a bank account which has be in your country to get paid by your employer.
You would have to explain to the IRS where that $$$ you spent in an overseas transaction obtaining the bitcoins went to, and I suspect an audit of some sort would be possible tying your IP address to your wallet address. Of course, if you were to mine the coins yourself, there would be no such audit, but then there would be the $$$ you spent on that ASIC miner, plus import taxes, and they'd quite happily be taxing you on the electricity supply used to run it too.
$$$ you spent on that ASIC miner, plus import taxes, and they'd quite happily be taxing you on the electricity supply used to run it too.
But wouldn't those be expenses incurred while earning the bitcoins, and therefore allowable against tax?
Only if you file for the whole kit and caboodle. Which is the rub. You can skirt the tax laws with bartering at the periphery, but for something approaching real income you have to declare it.
And the last thing you want to do is become bitcoin billionaire with the commensurate real property in the US without a tax trail. As earlier posters noted, that IS how they nailed Al Capone. Tax evasion: only crime in the US where you are legally guilty until proven innocent and the burden of proof is on you.
Too bad for the IRS. We don't recognize their claim, and we are not going along with it.
For the most part, the Bitcoin community seems to regard this as good news, just because it's clarity, and it's not bad news. The main aspect that seems to come as a surprise to some is that mining is taxed immediately, rather than when you sell or trade away the Bitcoins you mined.
There's one oddity though. It sounds like if you buy Bitcoins and later use some fraction of them to buy a cup of coffee, you're theoretically supposed to keep track of the capital gain or loss resulting from price you paid for your BTC originally, vs. the "fair market value" of the coffee.... I can't imagine that will be enforced to stringently but it would have been nice if they provided some kind of aggregate reporting option so people who want to handle it in a 100% legit way can do so without a silly amount of paperwork.
They use quantum effects to have a very low value when being observed by the taxman, but high value otherwise.