The IRS Sets a Trap for Cryptocurrency Tax Cheats

Re:The IRS Sets a Trap for Cryptocurrency Tax Cheats by Moto7451 on Saturday September 26, 2020 @07:50PM (#24603071)

The cost of sending the letters is a lot less than bringing a lawyer into court. Low income individuals just pay up. If it costs pennies to send and you make $100, you’re going to keep optimizing that. If you lack the funding to take down a hedge fund manager, you’re not going to bother trying.

The IRS also sends the letters to people that they owe money. This year my accountant didn’t realize I was owed a credit. The IRS mailed me a check and a letter explaining why they adjusted my return and issued the credit.

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Re:The IRS Sets a Trap for Cryptocurrency Tax Cheats by zxcmx on Saturday September 26, 2020 @08:59PM (#24603374)

Systemically, threatening letters, while practically free for the government to send - cause a lot of stress for people. Both those who owe tax and those who have to prove they don't.

It's hard to know where to draw the line but you could reasonably argue that chasing low income people for small amounts is net negative societal utility, even when you get them to pay up.

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Re:The IRS Sets a Trap for Cryptocurrency Tax Cheats by Moto7451 on Sunday September 27, 2020 @12:49AM (#24604298)

I completely agree. I was pretty terrified until I opened the letter and saw a check. I assumed it was an audit.

The thing that is often ignored, unknown, or forgotten, is that it doesn’t have to work this way. Some countries send you an end of year report on how much they collected from you and you can audit them as well. It’s less laborious than our system. I am blissfully unaware of the complications of such a system but I’d like to think that it works better. I’d like to think the people of the IRS would prefer that too.

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Re:The IRS Sets a Trap for Cryptocurrency Tax Cheats by LorenPechtel on Sunday September 27, 2020 @05:02PM (#24610112)

The problem with this approach is that if you actually have income they don't see they've basically told you they don't know about it and aren't likely to catch you if you don't tell them.

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Re:The IRS Sets a Trap for Cryptocurrency Tax Cheats by f2000 on Sunday September 27, 2020 @02:40AM (#24604694)

I hate to get any sort of "thin" envelope from the IRS..

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Re:The IRS Sets a Trap for Cryptocurrency Tax Cheats by m-p-3 on Saturday September 26, 2020 @11:48PM (#24604096)

No wonder there is an increasing income inequality of the middle-class and below when they can't catch a break while the rich are mostly left unimpeded with tax evasion.

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Re:The IRS Sets a Trap for Cryptocurrency Tax Cheats by naniwaduni on Saturday September 26, 2020 @11:38PM (#24604049)

Humans are notoriously good at ignoring externalities when they're not held to account for them.

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