Can BITCOINs Defeat IRS Tax Thieves?

[bobhurt]

See my BITCOIN blog entry for reference. Get the pdf here. I could reprint it here but I figure you'll like the pictures there and I don't have the ambition to restyle it for this forum.

I'd like to see your reflections on the above article that touches on the subject of BITCOINs and encourages people to invest in and use them anonymously.

Usage has tax implications. However, associated near-anonymity might make assessment and collection a challenge for the IRS.

I say it's about time. I don't expect you to agree. So let's have some dialog on the subject.

I fully believe the IRS operates like a Mafia in concert with the DOJ and courts regarding implementation of direct personal income taxation. You have seen my views on this matter here at Quatloos and at my Lawmen Google Group. BAD case law has invalidated perfectly sound legal arguments against such illegal taxation, rendering them frivolous. Ordinary folks haven't the resources to fight against that Mafia or teach its agents a lesson on the subject, so the folks nearly always lose an administrative or legal tug-of-war to retain their privacy and pay only the tax for which they actually have liability.

I believe the impossiblity of administrative and legal relief and remedy for the average tax payer who does not owe tax fully justifies a resort to virtual currency the IRS cannot detect or track.

Another way of generalizing this point: People ought to find and use ways to defeat crime and criminals in government bloodlessly and with fortunes intact. I fully endorse the use of BITCOINs to that end.

As to whether I rightly interpret the Constitution on the subject of the income tax, I offer this:

I have every bit as much right to interpret it to suit me, as Obama did to interpret its natural born citizen clause to suit himself. Some juridical voodoo protects him from summary excision from government for utter lack of US citizenship. I get no such voodoo advantage, so I must find other means to enforce my view of the meaning of the apportionment clauses regarding direct taxation, and the IRS treatment of income tax as a direct tax that they may collect directly.

I see it this way:

ANONYMOUS use of BITCOINs and other virtual currencies that have no government or banking issue authority provide such a means of enforcement. No one will report BITCOIN transactions to the IRS, and the IRS seems unable to detect or track BITCOIN transactions by users who rigorously implement security and anonymity in the effort. Therefore the IRS will have no legal basis for accusing the person who receives BITCOIN virtual money of having earned income. Thus, no one need argue whether receipt of BITCOIN profits constitutes reportable income.

I know Quatloosians will help me find the flaws in my thinking. Thanks in advance. And please, PLEASE make your wisecracks pithy.

Bob Hurt

[wserra]

I say it's about time. I don't expect you to agree. So let's have some dialog on the subject.
...
BAD case law has invalidated perfectly sound legal arguments against such illegal taxation, rendering them frivolous.

And therein lies the rub, bobhurt. The actual reason the courts have denominated those "perfectly sound legal arguments" as frivolous is that they're WRONG, and have been so declared over and over and over. Not only do you disagree with the tax and other professionals that frequent this site, not only do you disagree with every court that has ever ruled on these subjects, but you preach the nonsense to people who don't know better. That makes "dialog" difficult. A flat-earther might as well invite "dialog" with the American Geophysical Union.

Ordinary folks haven't the resources to fight against that Mafia or teach its agents a lesson on the subject, so the folks nearly always lose an administrative or legal tug-of-war to retain their privacy and pay only the tax for which they actually have liability.

Well, that's because they're WRONG. In fact, of course, "ordinary folks" fight and win against the government every day. I've represented lots of 'em. They just don't use the stuff you espouse.

I believe the impossiblity of administrative and legal relief and remedy for the average tax payer who does not owe tax fully justifies a resort to virtual currency the IRS cannot detect or track.

Then you believe that people should commit federal felonies. I doubt you'll find a lot of "dialog" on that point either.

I have every bit as much right to interpret it to suit me, as Obama did to interpret its natural born citizen clause to suit himself. Some juridical voodoo protects him from summary excision from government for utter lack of US citizenship.

Ooh, a birfer. That boosts your credibility.

"Pithy" enough?

[Harvester]

Yes. Bob, bitcoin is great. You're unlikely to find much love for the digital currency here at Quatloos. Currently the quatlosers have their hands full defending America's primary fictional currency - the Federal Reserve Note.

Bitcoin transactions bypass the central banking scam, in fact they bypass banks altogether. They're generally anonymous and involve no reporting. Bitcoins are not securities and as long as your bitcoins were purchased with lawful money, they're not income under the Revenue Acts (whether reported or not). Although the official Quatloser line is something like "they are includible as income" which I interpret as, includible if I so choose to consider them income, if I so choose to consent into the IRS tax scam. No thanks.

No doubt bitcoin is used in illegal activity, but any attempt to outlaw it will just serve to boost its popularity. Not to mention that it wouldn't work short of shutting down the internet; transactions are distributed p2p much like file sharing apps, and they couldn't shut that down. From my view, the primary use of bitcoin is to avoid America's biggest SCAM - the Fed Reserve/IRS scam.

[The Observer]

As others have said, Mr. Hurt, you have started off with the wrong premise and gone downhill from there. No matter what method you think you have come up that will defeat the Internal Revenue Code, the method fails to take into account that (1) the Constitution allows the government to tax, (2) the 16th amendment allows the government to specifically tax income, (3) the courts have upheld the tax laws, procedures and policies that the IRS enforces, and (4) people are sitting in jail for not paying taxes.

Thus looking at Bitcoin as the possible way to evade paying taxes is doomed to fail. If transactions on Bitcoin are deemed to be income-generating, then those transactions will render the person liable for income tax. And as CKB pointed out, if the IRS believes that there is enough income being unreported on Bitcoin, then they will move to make sure that the income is reported and the taxpayers audited to ensure the proper amount of tax was reported for the tax year in question - whether the income was legitimate or was a result of another crime, such as drug trafficking. And that may result in prosecution and conviction for some, depending on the circumstances.

Don't believe me? Some years ago a few people who are smarter than the average sovereign citizen, realized that they could move money offshore to foreign banks and use debit cards to move the money back to the US. They were counting on the fact that these foreign banks had no obligation to reports such deposits to the IRS and that it was the responsibility of the depositor to report these off-shore accounts to the IRS. But how was the IRS to know who was reporting or not reporting? It appeared to a perfect way to evade paying tax and not worry about the IRS finding out. So these "entrepreneurs" started selling their secret to people who were interested in avoiding taxes.

However, the plan forgot one little thing. The IRS loves statistics. They started noticing that their numbers were showing that there was a drop in income among people and small businesses (especially those that were cash-based) for which there was no other plausible explanation. Talking to a few agents in the field turned up the fact that some audits had noticed that there was a trend of these types of taxpayers to use debit cards from offshore banks to pay their customary living expenses or to make luxury purchases. The scheme quickly unraveled. From there it became a simple matter of issuing John Doe summonses to the debit-card issuers, which the courts duly enforced, and then all transactions were laid bare.

So I have no doubts that, if Bitcoin becomes a haven for tax evasion, then the IRS will target it for investigation and to direct Bitcoin to start gathering tax ID numbers from its participants and to report all transactions to the IRS.

[The Observer]

From my view, the primary use of bitcoin is to avoid America's biggest SCAM - the Fed Reserve/IRS scam.

It is exactly those kind of comments that make prosecution for tax evasion so much easier.

[LPC]

BAD case law has invalidated perfectly sound legal arguments against such illegal taxation, rendering them frivolous.

Yeah, like the Hylton decision in 1796. I'm sure you understand the Constitution and what the Founding Fathers intended much better than Justice William Paterson.

I believe the impossiblity of administrative and legal relief and remedy for the average tax payer who does not owe tax fully justifies a resort to virtual currency the IRS cannot detect or track.

Another way of generalizing this point: People ought to find and use ways to defeat crime and criminals in government bloodlessly and with fortunes intact.

And thus perjury and tax evasion are rationalized.

As to whether I rightly interpret the Constitution on the subject of the income tax, I offer this:

I have every bit as much right to interpret it to suit me,

You have the right to your own opinion, but you don't have the right to your own reality.

I must find other means to enforce my view of the meaning of the apportionment clauses regarding direct taxation, and the IRS treatment of income tax as a direct tax that they may collect directly.

A direct tax can't be collected directly?

There are at least two types of idiots in the world: those who believe that a "direct tax" is any tax that is imposed and collected directly, and those who believe that a direct tax can NOT be collected directly, but must be apportioned and collected through the states. It's one of those rare cases in which seemingly opposite views are BOTH wrong.

One would hope that, like matter and anti-matter, they might vanish in a burst of useful energy when brought into contact with each other. Unfortunately, they does not seem to happen.

[Harvester]

Notice how Wes & Dan have totally avoided the topic of BITCOIN & taxation?

[Arthur Rubin]

Notice how Wes & Dan have totally avoided the topic of BITCOIN & taxation?

No.

[nikki2]

1. The IRS/FBI/DoJ/FSB/Interpol/your soon to be ex-wife's attorney can't CURRENTLY track BitCoin transactions.

Positive about that? Although the internal bitcoin transactions MIGHT be a little difficult to trace, the gozintas and gozoutas are really easy.

[Lambkin]

I doubt this will help Bob, but based on recent events, I would not consider bitcoin as a way to store value or conduct any significant transaction. I would not place significantly more trust in bitcoin than I would in paypal.

http://www.theregister.co.uk/2011/08/16 ... e_forcing/

http://www.theregister.co.uk/2011/06/19 ... pse_again/

http://www.theregister.co.uk/2011/06/16 ... ft_claims/

[Duke2Earl]

What I find so touching is the faith that law evaders have in the internet. They think they can trumpet their crimes all over the internet with impunity. Don't you know that the cops are totally ignorant of the internet? It's like people think they can post drunken photos on Facebook and prospective employers will never see them. I am quite confident that all this discussion of Bitcoin has already very successfully brought the attention of the proper authorities in their direction. And when they feel it to be necessary, the hammer will fall.

[Thule]

Unfortunatly for Hurt, the guys behind BitCoin do not wish to see their idea beeing used for criminal purposes. To quote one of the developers;

"We are working with the government to make sure indeed the long arm of the government can reach Bitcoin... the only way bit coins are gonna be successful is working with regulation and with the government"

[ArthurWankspittle]

Surely the thing about any system such as BITCOIN is that, unless there is no US based equipment and no US citizens with any connection to running it, then, the authorities in the US will always have the leverage of finding someone in the US connected to the system and charging them with x,000 mail fraud transfers unless they co-operate with disclosing and investigating the system and its transactions. Further, (almost) any transaction that can be traced to a US citizen needs to match their tax return. If it doesn't, then the audit will cascade through the BITCOIN system leaving a trail that the IRS will follow, resulting in questions for any US citizen involved and the rapid crash in value of BITCOINs as shown in one of those previous links as word gets out that the IRS is interested in BITCOIN transactions.

[Famspear]

What I find so touching is the faith that law evaders have in the internet. They think they can trumpet their crimes all over the internet with impunity. Don't you know that the cops are totally ignorant of the internet? It's like people think they can post drunken photos on Facebook and prospective employers will never see them.....

Last year I went to a two-day continuing education expo in Houston for CPAs in "industry" (although I am in public accounting, not industry, I went just because I needed the credits for my CPA license renewal). There was a segment at the expo on the use of "social media" (I love that term) such as Twitter and Facebook by employees. There were many illustrations of actual situations where employers have found doofus employees doing things such as calling in "sick" and then posting something on a social media web site, saying things like "HA! I called in sick and I'm going to the beach today!" Many (maybe most) of the hundreds of CPAs at the expo are in management positions in companies. It is amazing how some people seem to believe that no one in management is monitoring "social media" web sites.

In the past, we've seen a similar naive mentality among a few at the losthorizons dot com web site (with respect to monitoring by the IRS, etc.).

Above was corrected to read "where employers have found doofus employees...."

[Harvester]

I told you there'd be no love for Bitcoin here at Quatloo, but really, I didn't expect so much ignorance about cryptography to be on display. While the flow of coins around the network can be traced, attaching an identity is quite another matter.
http://anonymity-in-bitcoin.blogspot.co ... ymous.html

Bitcoin is a threat to the international banking cartel.

Most likely, this will be your son's reaction when you tell him about back in the day:
"2011 Dad! You could've bypassed banking altogether & bought a bitcoin for only $12 knowing it was algorithmically limited to 21 million coins? What were you thinking?"

[bobhurt]

Only a few disingenuous cracks so far, and none really pithy enough for me.

Look, naysayers, I don't disagree with your warnings about the potential illegality of unreported BITCOIN transactions. I read that some government prosecutor claimed the typical American commits 5 felonies a day, or was it before lunch? So I have this little question for all of us: Who has a spotless soul, a flawless loyalty to truth, and an impeccable lawfulness? If you're lawyer, forget answering the question because all of us already know the answer for you. So, try not to preach so much against law-breaking because you cannot and will not practice what you preach.

Furthermore, I know well that the law IS only what the COURTS say it is. But, non-unanimous panels don't know what the law is, and we have many non-unanimous rulings that amount to nothng more than bullshouts. Those of you who support and don't fight against them are pragmatic, perhaps, but unethical cowards nonetheless. And many lower court rulings come from judges who ignore precedent, owing to the lackluster performance of attorneys who fail to take exception to or appeal them, maybe because they have so pillaged the client's resources that the client is broke and can't even pay for a transcript, let alone an appeal. So, no preaching from you, either.

I do appreciate the dialog, though. It has shown that one doesn't think straight who believes the IRS cannot ever penetrate the morass of Thor and BITCOIN transactions. For, as the present money debacle has proven, Congress has an endless supply of dough to hand out to the IRS to beat BITCOINers to death. On the other hand, as the Church of Scientology proved with the Kilauea-sized black eye it gave the DOJ, completely depleting its annual IRS litigation budget halfway through the year, you CAN kick the IRS and DOJ's asses if you have enough dough and membership to sue the IRS into submission. So, Fellas, it's not that the IRS/DOJ are right in their estimation of the meaning of the law, nor the judges. It's just a matter of divide and conquer.

Thus the BITCOIN issue boils down to a refusal to kowtow to the thieves of American wealth who operate with relative impunity in government and Big Money. Many of them are evil, scheming criminals who deserve a good hanging for their crimes. And the wee victims in the land have attorneys to thank for it. Owing to the legal services monopoly they enjoy, very few victims can actually afford to hire attorneys to push litigation to its proper conclusion. Owing to the judicial oligarchy that rules the states thanks to integration of the bar into the judiciary, and the concomitant violation of separation of powers doctrine, lawyers run scared from the prospect of standing up to judges and filing criminal complaints against them and government attorneys as they often should because if they fight as they ought, they will get sanctioned or disbarred or both. Few can brook such summary destruction of their careers, so they cave in and cheat the client. Now such cheating of clients has become an American pandemic.

In other words, BITCOIN operates like a Guy Fawkes guerilla activism to increase wealth and engage in buy/sell transactions beyond the scrutiny of government, robbing government of any and all undeserved benefit.

Furthermore, as I have said in the past, supported by the Supreme Court, the income tax is NOT a direct tax, but the IRS treats it like one. It does not tax income but rather some activity for which income merely provides a measure of tax due. And receiving money does not constitute such an activity. A direct tax taxes a person or his property, and revenue is property. So if the income is taxed, as the taxcode implies, it can only be collected by apportionment. The 16th Amendment did not create an income tax, for Congress has always had the power to tax incomes. Not did it remove the requirement to operate a direct income tax by the rule of apportionment, for it did not repeal the apportionment provisions of Article I. Our central problem lies in the fact that the IRS ignores that and courts let them get away with it because of BAD LITIGATORS. The caselaw supporting the IRS in the lower courts would not exist if the DOJ couldn't suborn judges and juries, and if IRS agents and DOJ attorneys couldn't get secret cash awards for hammering IRS victims into submission with crooked judges assistance.

SO, right, all those frivolous arguments are frivolous indeed in our crooked courts. So Americans face the dilemma of finding SOME OTHER WAY to keep their wealth away from the thieves in the IRS/DOJ/Court Mafia, or engage in open rebellion or random assassinations till the powder keg really blows up. But the Quatloosian advocates of the evils of the IRS should not feel so proud and pompous about pointing out the fact that frivolous arguments won't win because they are wrong because some USDC judge or Circuit panel said so. That does not make them wrong. That just makes them losing arguments. The fact that bad or ignorant litigators propounded those arguments originally with ignorant, corrupt, incompetent or no lawyers helping them CAUSED them to become frivolous or losing arguments IN SOME PART. That is, some really are frivolous, and some really are not, even though ruled so.

The clearest recent example I know of is the Lindsey Springer PRA argument. It makes perfect sense to me. Yet circuit panels ruled that the IRS does not have to obey the PRA, EVEN THOUGH the IRS gives a kind of lipservice to the PRS with all the incompolete disclaimers on the instruction book for the 1040.

And he made pretty good points about the statutes requiring District Directors, even though the commissioner got rid of their positions nearly 10 years ago. The fact that the courts let the IRS get away with these and other violations seems clearly to indicate the kangaroo nature of those courts. America's people simply cannot trust them to do an honest job because they follow some kind of public policy that says "let the IRS do whatever the want so long as they keep on stealing the money from the people."

THAT is just one reason I don't buy Famspear's facile views about the direct/indirect tax meanings.

In my final analysis of the issues, I encourage people not to put themselves in harm's way. Even though they don't make frivolous arguments (which are not wrong), if the courts consider them frivolous, people should not propound them as arguments. I tell people to decide how they want to spend their lives, and if they absolutely must do battle regarding income tax, to make themselves judgement proof and go ahead and get divorced and put the kids in foster homes, and quit that cushy job and find some cash-only business to get into because if he makes what the IRS considers income and doesn't file returns, the IRS will either get it or file a criminal complaint and get the court to jail him, and then still hound him for the tax they think he owes.

In spite of this, people still call me complaining about the $5000 penalties for frivolous filings following the Cracking the Code method. One man has a legal team (of non lawyers of course) working on a way to use the CtC method without filing government forms. Nowadays when people call me for tax help, I try to send them to Larry Becraft or Mac MacPherson or Michael Minns. But some of them, with good reason, hate or don't trust lawyers. So what can I tell them except to find some way to get off the IRS's radar?

Why? Because they're wrong? No. Because they'll lose. They are right, of course, not that I expect any of you to agree. I believe most Quatloosians live in denial of the reality that most Americans don't engage in a taxable activity, so they don't owe income tax and don't need to file a tax return at all. Most like to give lip service to income tax nearly everyone owes, not because it's true, but because it's too hard to defend non-tax-owers and win because the IRS, DOJ, and Judges will conspire to make those non-tax-owners lose. I imagine you (the most Quatloosians to whom I refer) as the modern day Pharisees - hypocrites and agents of America's secular equivalent of the Sanhedrin.

Speaking of which, I'd like to take a moment to salute Jesus of Nazareth for his birthday yesterday 21 August (7 B.C.E). See Paper 122 of The Urantia Book for more details. A belated Quatloosian's Happy Birthday, Jesus.

And I bid you all good night. I appreciated your insightful comments and incisive arguments on taxes, BITCOIN, and shady dealings. Thank you for the dialog.

[ProfHenryHiggins]

In other words, BITCOIN operates like a Guy Fawkes guerilla activism to increase wealth and engage in buy/sell transactions beyond the scrutiny of government, robbing government of any and all undeserved benefit.

You don't have the slightest idea of who Guy Fawkes was, do you?
In modern times he'd have been called a terrorist for what he tried to do.

[notorial dissent]

bobhurt, nice to see you finally reverting back to type. Your last post is one long laundry list of baseless contentions, fantasies, and pointless drivel.

[wserra]

Who has a spotless soul, a flawless loyalty to truth, and an impeccable lawfulness?

While I'm sure I don't have all that, I'm equally sure I've never committed a felony. The fact that you think everyone has done so says quite a bit about you. You might try reading up on "projecting" or "projection bias".

If you're lawyer, forget answering the question because all of us already know the answer for you. So, try not to preach so much against law-breaking because you cannot and will not practice what you preach.

What crimes have I committed, Bob? Try not to project.

[bobhurt]

What logic! Without knowing anyone personally, I naturally mean no meanness generally, nor to call all professional practitioners charlatans, thieves, or crooks. So, try not to take a generalization personally, unless of course you feel it personally. And then "the lady doth protest too much" seems to apply. My point boils down to "you sinless cast the first stone, and the rest of you sit on your thumbs." Anyway, YOU might feel certain you never committed a felony. So what? Many felons feel similar certainty. I feel NO such certainty about you.

And then we have the moral issue... HAMMERING a relatively defenseless truth seeker mercilessly, chiding and deriding all along the way, hasn't a tinge of morality to it. I believe the truth bears honest scrutiny. Our judges and attorneys have much scrutiny in their experience, and nearly all of them have been dead wrong many times in their careers, and court rulings have proven them so. To pretend perfection of understanding of the issues at hand, while harboring such a history, seems ignominious to me, if not scurrilous.

As for my dredging up tired old income tax arguments, I have no choice but to accept your carping criticism or stand up to you. I chose to stand, at least a little. I have acknowledged the fact that so-called tax protester arguments lose in our crooked courts, ultra-crooked regarding income tax issues, and without a lot of money and political clout only a fool would argue them. On the other hand, I see as cowards and cheats most attorneys who kowtow to crooked judges rather than banding together to fight them, as ONLY ATTORNEYS CAN.

I don't mean to demean your generosity at cutting clients a break on fees, doing pro bono work, and so on, but you are CHAMPIONS of generally feckless people who stand utterly ignorant of the law, rules, and the minefield of the legal landscape. THEY CANNOT fight the competent battle you could, and they don't know the crookedness of the courts till they stand in them the only time in their lives they will ever face a court battle. YOU, by contrast, stand there often. And because YOU TOLERATE one egregious judicial malfeasance after another without lifting an effective finger to curb it, YOU ARE THE PROBLEM, not the all-wise solution you pretend. ONLY attorneys bear the blame for the corruption of the judiciary. Americans owe you no debt of gratitude, for that, nor should you pretend the corruption does not exist and does not affect court rulings regarding income tax.

Yes, I acknowledge your magnificent brilliance, experience, range and depth of knowledge. You collectively constitute a marvelous work and a wonder to all mankind. And you generously and tirelessly devote yourselves to creaming the Patriot Myth Mongers of America here on Quatloos. Frankly, I appreciate your devotion to truth and justice, but not to the so-called American way, for it is corrupt.

I want to see you anonymous mavens of law and righteousness start telling the truth better by separating what seems right or wrong from what wins or loses. Otherwise you write like broken machinery, robots with wires loose. You should champion the right and defame the wrong, even while you preach what wins and denounce what loses. You ought not smash the personalities and egos of your adversaries with your pithy meanness, but rather catch them doing right when you can and coach them to the separation I mentioned above, and the often diametrically opposed ambitions of winning in court and winning in politics. You ought to remind your prey that their only chance of winning for the "rightness" in court lies in excising criminal minds and enterprises from government, and replacing them with the intelligent, informed, noble ambassadors of the ideals of good government.

So, why don't you do that? Why waste our respective energies browbeating one another over income tax issues? Why not become winnowers of right from wrong and win from lose? Why not explain what wins even while denouncing the evil in it? Why not elevate your ambitions a little higher here by encouraging political action to change what wins into what loses, to the extent what wins has a wrong nature?

Frankly I hate being barbecued here at Quatloos.

But I've come to enjoy the sauce.