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How does the IRS monitor your Crypto activity?
Posted on 6/16/22 at 8:38 am
Posted on 6/16/22 at 8:38 am
I've always thought it was odd that the "All-Knowing" IRS already has its tentacles in every other aspect of your life yet they have to ask you about your Crypto activities. Why is that?
Posted on 6/16/22 at 8:40 am to tigerpawl
quote:
I've always thought it was odd that the "All-Knowing" IRS already has its tentacles in every other aspect of your life yet they have to ask you about your Crypto activities. Why is that?
They do.
Posted on 6/16/22 at 8:41 am to Mingo Was His NameO
quote:
I've always thought it was odd that the "All-Knowing" IRS already has its tentacles in every other aspect of your life yet they have to ask you about your Crypto activities. Why is that?
quote:Then why the question on the form 1040?
They do.
Posted on 6/16/22 at 8:48 am to tigerpawl
quote:
Then why the question on the form 1040?
Is this your first time doing taxes?
Posted on 6/16/22 at 9:02 am to tigerpawl
it's probably just redundancy, although I can't say what good it really would do. If you mine ETH and weren't reporting it before, does the addition of this question on the Form 1040 persuade you to all of the sudden give Uncle Sam his due?
Posted on 6/16/22 at 9:17 am to tigerpawl
quote:
Then why the question on the form 1040?
so when you lie about it they can tack on additional penalties when you pay the piper
Posted on 6/16/22 at 9:21 am to jmcwhrter
quote:So why does the IRS even bother with returns if they already know? Why don't they just send you a P&L statement on trading? It's a simple question.
so when you lie about it they can tack on additional penalties when you pay the piper
This post was edited on 6/16/22 at 9:27 am
Posted on 6/16/22 at 9:28 am to tigerpawl
quote:
So why does the IRS even bother with returns if they already know? It's a simple question.
Couldn't you say the same for W2s and normal income?
The income tax process in the US is stupid and inefficient, IMO. You owe the government income tax, but they can't tell you how much you owe, you have to figure that out on your own. If you get it wrong though they will charge fees and interest on the underpayment and you could be prosecuted criminally. Most people find it too cumbersome or difficult to do their own taxes and thus end up paying an individual to do their taxes for them thus driving up the impact of income taxes.
This post was edited on 6/16/22 at 10:39 am
Posted on 6/16/22 at 9:39 am to bod312
quote:
Couldn't you say the same for W2s and normal income?
Yeah, that's how I think of it. They aren't outright monitoring every single transaction whether it's crypto or banking transactions under 10k; however, if you get audited, they'll figure it out.
If you're staking in a large exchange like Coinbase and make over $600, you'll get a 1099 for it.
Posted on 6/16/22 at 10:30 am to tigerpawl
quote:
Then why the question on the form 1040?
The IRS is a branch of the federal government.
The federal government LOVES to ask questions of which they already know the answer.
They want to catch you in a trap.
Posted on 6/16/22 at 10:30 am to bod312
You owe the government income tax, but they can't tell you how much you owe, you have to figure that out on your own
They could tell you if taxes were only based on income. They don't know about most of your deductions or credits. That's what the income filing is telling them. Say you adopted a child this year. That's a huge credit, but the IRS has no clue if you did or not. You have to tell them in your filing.
They could tell you if taxes were only based on income. They don't know about most of your deductions or credits. That's what the income filing is telling them. Say you adopted a child this year. That's a huge credit, but the IRS has no clue if you did or not. You have to tell them in your filing.
This post was edited on 6/16/22 at 10:33 am
Posted on 6/16/22 at 10:34 am to bod312
quote:
You owe the government income tax, but they can't tell you how much you owe, you have to figure that out on your own. If you get it wrong though they will charge fees and interest on the underpayment and you could be persecuted criminally. Most people find it too cumbersome or difficult to do their own taxes and thus end up paying an individual to do their taxes for them thus driving up the impact of income taxes.
With a little government spending and investment... we could have a system in which 70 percent of Americans would have no need to file a tax return.
Think about how many people have all of their income and withholding data sent directly to the IRS.
By mid-summer, these people could receive a letter from the IRS with a tax return filled out, that they would just simply need to sign and return. You could do this online as well. Then... you just send in a check, or they send you a check. If you disagree with this assessment, you can file your own tax return to supersede it.
The other 30 percent can file a return as normal.
Now.. some states would be a challenge... as the states don't always get all of the same info from payers. But they could.
Posted on 6/16/22 at 10:35 am to Styxion
quote:
They could tell you if taxes were only based on income. They don't know about most of your deductions or credits. That's what the income filing is telling them. Say you adopted a child this year. That's a huge credit, but the IRS has no clue if you did or not. You have to tell them in your filing.
I understand why our current process requires us to do a tax return. I don't like it and there are other ways (there are countries that do it differently). It is also inconsistent with the rest of our lives. What other bills do you have to pay where you (the payer) has to come up with the amount? Personally I would love to get rid of income tax but that is a whole other topic and mostly for a different board.
This post was edited on 6/16/22 at 10:36 am
Posted on 6/16/22 at 10:37 am to bod312
quote:
If you get it wrong though they will charge fees and interest on the underpayment and you could be persecuted criminally.
We got it "wrong" a couple years ago, about $2k. It was either an IRS or software issue, we reported everything correct. They want about $4k for the mistake...
Posted on 6/16/22 at 10:43 am to LSUFanHouston
quote:
With a little government spending and investment... we could have a system in which 70 percent of Americans would have no need to file a tax return.
I totally agree. My aunt was spending like $250 to get her taxes filed. I looked over her return one day and all she had was W2 and 1099-R income taking standard deduction. I now do her taxes for 50 bucks. 15 of which is the cost of e-filing it.
There are people that are so paranoid about making a mistake and thinking they will be arrested that they believe they need a CPA for basic income. These are the ones that could benefit from a simple process like you describe.
Posted on 6/16/22 at 10:46 am to armsdealer
quote:
We got it "wrong" a couple years ago, about $2k. It was either an IRS or software issue, we reported everything correct. They want about $4k for the mistake...
Yeah the killer in that is they are usually about 3-4 years behind in catching it and they charge interest from day 1.
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