Quote from: ptd on February 11, 2011, 11:56:57 AM

Quote from: JA37 on February 11, 2011, 10:07:39 AM

I don't have any control about which coins I spend so my best bet would be to put it in some sort of mixing service that I read about in the forum a while ago. Am I correct about this?

It is possible to work out which bitcoins belong to who, but it requires some effort. The IRS (or equivalent) would not be able to cope with the burden.

That's not how auditing works.

If you were to be audited by the IRS, they generally start at a very transparent transaction (like the purchase of a house), then work backwards to determine the source of funds. The onus, of course, is on you to lead them down the trail, and the general case is that your paid taxes don't add up to expended funds, so they extrapolate your purchase history as unreported earnings. Then you're retroactively responsible for those taxes + punitive fees and possible litigation.

It's no different than if you launder money. No matter how complicated and untraceable your laundering practice is, investigation starts at wherever your money rears its head in a transaction and you're going to have to explain it. The government doesn't just "give up" if it's too complicated: They just place the burden on you to uncomplicate it, else they attribute the disparity to negligence (at the very least).

I'm not a lawyer and this is only my observation.