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Comment by thesausageking | Hacker News Reader

It's very unlikely there are US citizens in the US who are Bitcoin billionaires and have not reported it and paid taxes to the government. Unless you're planning to flee the country, at some point the IRS will catch up with you. Remember that Bitcoin is an open, public ledger of every transaction. If someone is a billionaire, paying capital gains taxes is worth their freedom without a doubt.

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There is currently absolutely no requirement in the US to report crypto holdings, only crypto sales.

So it is very likely there are such people, especially since it is common to divide large holdings between many separate addresses, making it impossible to infer holdings from sales income.

Good point. By "Bitcoin Billionaire" I mean people who had cashed out. If you haven't ever sold, you don't owe taxes.

But the IRS needs a mechanism to understand and interpret these ledgers, right? And the IRS enforcement is only as good as the people who are doing the enforcing.

I'm an engineer and I barely understand crypto, what hope does an IRS auditor have?

The IRS has teams of crypto experts and they use tools like Chainalysis that do much of the low level analysis for them. Also, they get data from crypto exchanges so when someone sells Bitcoin for dollars to cash out, Coinbase will (in most cases) send the IRS the 1099.

Like the rest of the US tax system, it's based on the tax payer being required to submit what she owes. If she lies about her income, the enforcement comes from the risk of IRS doing an audit and asking you to show where you got your funds from. It's no different than if you own a restaurant or other private business. You can misreport your earnings, but the risk is the IRS will audit you and you will get fined or possibly go to jail.

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