Quote from: atp1916 on April 05, 2014, 06:49:31 PM

Quote from: amspir on April 05, 2014, 06:33:47 PM

Quote from: atp1916 on April 05, 2014, 06:11:06 PM

I am 99.9% sure the IRS has no system in place for crawling the blockchain, linking addresses to real people, or linking transaction times / amounts to bitcoin prices at that time. Hell i doubt they even have a division formed for this. In fact, given their reticence with virtual currencies as a whole, they are at basement level at best.

It doesn't need to. That's why you need to keep tax records for 7 years. You provide the records if they challenge your claims on the return.

If the IRS has no clue how much bitcoin i am "succesfully mining" and at what market rate that bitcoin was at when it got mined out, how exactly are they going to challenge an income declaration based on evasion claims?

The error in your thoughts about this is that it is immediately a criminal matter, as if you get arrested, thrown in jail, make bail, then let the IRS prove beyond a reasonable doubt that you violated the law. It doesn't work this way, unless you clearly commit a crime that the IRS can prove in this manner.

The IRS begins by sending you a certified letter, claiming your return isn't matching reported amounts. This happened to me, due to not including income from a 1099 for work done on contract. They send you a bill with the corrected tax amount and penalties. At this point, you can just pay it, and be done with it, like I did.

If you want to go to court and challenge the IRS findings, you get a lawyer and go to tax court. This is a civil court, not a criminal court, and it's not "innocent until proven guilty." If you lose, the judge issues an order that you pay. If you don't follow the court order, then the court issues a bench warrant and you go to jail. Proving that you didn't follow the order beyond a reasonable doubt is not a problem for the IRS.

The IRS relies on voluntary reporting, not a massive monitoring system. If you want to cheat the government out of taxes, that's up to you. The IRS currently examines returns at a rate of 0.7% for middle income earners. If you cheat over 20 years, that's about a 25% chance of being caught.