June 24, 2013
By: Kelly Diamond, Publisher
If there is a corner of your life that hasn’t been regulated, by golly there are federal agencies who are making it their business to find a way into it! There is a team of agencies who have their sights set on BitCoin.
It now seems that we are doing away with the perfunctory things like, you know, due process or even specifics in defining something as currency or a crime. The private citizen is meant to just wait and see if they are breaking a law.
Predictably, a new report from the Government Accountability Office (GAO) recommends the IRS create “additional guidance to reduce the tax compliance risks” associated with virtual economies and currencies. Guidance is such a soft word… much gentler than “regulations”. I hear “guidance” being used by agencies like the GAO (or any government agency for that matter) and I liken it to when Cass Sunstein employs the word “nudge”, or when Melissa Harris-Perry says “kids belong to whole communities”.
I assume that violation of such “guidance” still amounts to the same consequences as violating a law? If we call it “regulations” or “guidance” then we don’t need the legislature to pass it or be held accountable for it. Only some nebulous government agency is to blame, and the staff is always turning over, so the folks there now are…… you know……. “Just doing their jobs”. Isn’t that a cool way to get around ANY accountability! Man, I wish we serfs had a mechanism to dodge our “responsibilities” to government the way they have to dodge their responsibilities to us! We The People, have names and addresses. “They” only have an agency, and a buck that gets passed around until you get tired of chasing down the answers.
Michael Cohn, of AccountingToday.com writes, “The IRS may be able to develop more timely and less costly informal guidance, which, according to IRS officials, requires less extensive review and can be based on other existing guidance. An example is the information IRS provides to taxpayers on its Web site on the tax consequences of virtual economy transactions. Posting such information would be consistent with IRS’s strategy for preventing and minimizing taxpayers’ noncompliance by helping them understand and meet their tax responsibilities.”
OH! Tell us about the consequences tied to virtual trade taking place in both open and closed economies! And PLEEEEEEASE help the plebes understand and meet their tax RESPONSIBILITIES! Our tax code makes War and Peace look like a damn trifold. There is no “understanding” our tax responsibilities. There is filling out a form and crossing your fingers.
I mentioned once before that, technically, if you pay your friends with a six-pack and pizza for helping you move, that was a taxable event. Both sides would be taxed for the value received in service and/or good. But let’s take this BitCoin analysis they have going a little further, shall we? Anyone who ever ate cereal as a child remembers saving UPC symbols so they could ultimately mail them in for a toy prize. UPC symbols are………. Currency? Because I just traded a certain amount of them in for a real, tangible good! People win gift cards all the time in contests… are we taxing that as well?
These are all technical forms of income that carry value for real tangible goods and services. What happens when people win or earn a “discount”, either by applying for a credit card or collecting coupons or as an employee? Is that dollar amount saved technically income? This sounds far-fetched, but this is the same government whose politicians claim “tax cuts = cost”. No, a reduction in revenue is NOT a cost. A cost is associated with a purchase. Nothing is purchased when taxes are cut. Tax cuts are tantamount to reduced commissions for a salesman: a lower income.
I discussed back in March, how the “War on Virtual Currency” was about to ensue. Neither the FinCEN, the IRS, nor the GAO have gotten any further in their efforts to clarify a damn thing when it comes to virtual currency… other than a really strong desire to regulate that which they can’t quite pinpoint or understand. Thus far, all we’ve seen (and it’s a rather big deal) is the DHS (of all the agencies!) issue a “Seizure Warrant” for the Dwolla account tied to Mt. Gox.
It’s like they are tag-teaming the attacks on BitCoin. FinCEN is offering “guidance” reminding the legitimate businesses, who act as a point of exchange for BitCoin, their obligation to comply with monetary regulations. (What the hell does that entail or mean? They sure as hell don’t know… but it’s enough to issue a warning to people that at some point the agencies will agree on something being wrong here, and they will come and get you for it… whatever that may be.)
Cohn goes on to write, “Given the uncertain extent of noncompliance with virtual currency transactions, formal guidance, such as regulations, may not be warranted, the GAO acknowledged. According to IRS officials, formal guidance requires extensive review, which adds to development time and cost.”
Well, sh!t. They are pulling a “Sweet Brown” on the due diligence to research and develop proper laws and regulations surrounding virtual currency: Ain’t Nobody Got Time Fo’ Dat. The government is so bloated in its ambition to punish everyone for anything, they can’t afford to define the rules of their own game anymore! This is laughable! They can’t be bothered to get warrants to search homes or accounts anymore (c.f. Watertown, MA, “2511 Letters”). They can’t be bothered to define probable cause (c.f. sobriety checkpoints). Forget probable cause, they can’t even be bothered to get a name (c.f. “John Doe Summons”)!
So in addition to the fact that they can’t define the rules, they won’t even follow the rules they have in place, AND everything you do is being monitored or watched. I think it’s safe to assume that a case for some infraction is being mounted upon everyone. Consider it leverage for a future plea bargain because we are all breaking laws and don’t even know it. I prepared a meal in a kitchen with only ONE SINK! The Amish gut pigs in a fashion that is not compliant with the USDA standards. They are also kingpins in the raw milk crime syndicate. I helped friends out, and they’ve paid me in coffee and paper towels. No. This is heavy, heavy criminal activity we are talking about here… There are children who receive an allowance and DON’T DECLARE THEIR INCOMES!!!!!!!!
Oh, the humanity!
I wouldn’t be surprised if the United States stooped to the levels of China, and started a lottery which essentially incentivizes consumers to nark on vendors! Request a “national” receipt, and become eligible to win a couple grand in a drawing each month. By requesting this receipt, the government is alerted to the transaction and can tax it.
Still, I’m encouraged by the fact that the government is a slow, fat slob when it comes to chasing down the free market: especially when it comes to innovation. They will chase BitCoin… and some new optimized virtual currencies will sprawl to take its place… and another and another. They still haven’t decided if it’s money! Although, the way they are approaching this is so circumstantial, perhaps it’s only considered money on certain days of the week.
P.S. On WordPress you can pick categories under which to file the blogs. One of our categories is “banking”. I chose not to file this under that category because who knows!?
Dear Kerry,
Nice text, but where does it go ? Bitcoin seems to be the issue, or the use of it. Let’s talk about it. Bitcoin is a virtual currency used by many individuals and/or compagnies. If you think the IRS is trying to sick out those using it, well, it may be possible. Don’t forget the IRS’ objective: getting as much money from US citizens as it can. That being said, if I were to move and one of my friends helping me was an IRS bureaucrat, I’m pretty sure he’d laugh off the beer and pizza offer. (Just to be sure, I would offer him a double slice of pizza and extra beer…)
When we talk of Bitcoin, we’re talking about a virtual currency that has a virtual value. If the US goverment wanted to kill Bitcoin, it could do it easily and rapidly and there’s nothing you could do about it.
If you want a safe, non-american currency, you should try to find a country that still uses gold or other precious metals to support its money. Another important aspect is that this country can not be bullied by the US goverment on its monetary policies.
Regards,
Michel Leduc
To be honest, the IRS isn’t even being particularly clear with its own objectives on what it wants to do with BTC. My objective, (as well as many others I’m sure) is to find a store of wealth that won’t fall victim to the political whims of the elite. So, whereas the US prints money recklessly with no physical backing to make the politicians look better when they serve in office, BTC is self-regulated by an algorithm, which makes it more stable. Gold/silver backed currencies are regulated by the limited supply of those metals, which makes them stable.
The additional allure to BTC is that it is not manipulated on the open market like metals. (Zerohedge.come has written volumes on government manipulations from China to London.) And of course, it’s almost impossible to track.
I don’t believe it is the IRS’ intention to “kill BTC”. I think it wants its slice from every transaction. It’s the Internal REVENUE Service, after all. While I realize that taxing barter like moving for beer/pizza sounds ridiculous, it is in our tax code and is technically a taxable transaction. Clearly NOT very enforceable considering the lack of any documents and the informal nature of it.