Clinton Donnelly

CEO @CryptoTaxAudit | Expert in crypto capital gain calculation, tax return prep & IRS audit defense | Call for a consultation

[Clinton Donnelly @CryptoTaxFixer]

@NWOutlier I agree. That is exactly why trust in tax policy is so low.

Families and businesses are expected to absorb higher costs, higher taxes, and tighter budgets. But government programs often get funded without the same clear accountability for results.

[Clinton Donnelly @CryptoTaxFixer]

If someone renounces U.S. citizenship to avoid taxes, should they get a clean break or a final tax bill?

[Clinton Donnelly @CryptoTaxFixer]

I agree with the core point. Before asking taxpayers for more, government should have to show basic accountability: clean audits, fraud controls, transparent spending, and clear responsibility for where the money goes.

Tax policy should not just be about how much can be collected. It should also be about whether the system is being run competently and fairly. That is where a lot of taxpayer frustration comes from.

[Clinton Donnelly @CryptoTaxFixer]

@DavidBindelTX I agree with that.

[Clinton Donnelly @CryptoTaxFixer]

That is a legitimate concern. Exit tax is not a standalone tax rate, it borrows from the capital gains regime. So if Congress raises capital gains rates, NIIT, or changes how unrealized gains are treated, the exit tax can become much more painful without needing to “rename” it.

Could it be used as part of a broader financial repression strategy? Possibly.

The practical risk is that policymakers raise the cost of leaving at the same time they raise the cost of staying. That is why anyone near covered expatriate status should plan early, not after Congress decides the door needs a toll booth.

[Clinton Donnelly @CryptoTaxFixer]

@Birddog267701 Good day.

[Clinton Donnelly @CryptoTaxFixer]

Yes, 26 USC 7701 defines many of the terms used in the tax code. But citing 7701 does not change the basic point. For federal tax purposes, the question is how the code classifies the person and the transaction: U.S. person, citizen, resident, nonresident alien, covered expatriate, property, sale, exchange, etc.

Those definitions matter. But they do not create a simple escape from filing duties, exit tax rules, or IRS enforcement. That is the practical tax issue I am addressing here.

[Clinton Donnelly @CryptoTaxFixer]

I understand what you are getting at, but I am speaking from the tax law side. For federal tax purposes, the IRS generally looks at whether someone is a U.S. person, citizen, resident, or covered expatriate under the tax code. That is the framework that drives filing duties, exit tax exposure, and enforcement.

The constitutional argument is a different debate. My point here is narrower: under current U.S. tax law, renouncing citizenship does not automatically erase tax obligations.

[Clinton Donnelly @CryptoTaxFixer]

That is a real concern. The U.S. tax system can create what feels like two classes of citizens: people who can afford expert planning before renouncing, and people who cannot.

If the law is going to impose a final tax bill, it should also be clear, predictable, and not punish ordinary compliant taxpayers who simply want to leave. That is where fairness has to be part of the discussion.

[Clinton Donnelly @CryptoTaxFixer]

I understand the point. Bitcoin is not issued by the U.S., China, or any government. But U.S. tax law does not tax Bitcoin because Bitcoin belongs to a country. It taxes the U.S. person who owns, sells, exchanges, or leaves with the asset.

That is the distinction. The debate is whether that reach goes too far, especially when someone is trying to give up citizenship and walk away clean.

[Clinton Donnelly @CryptoTaxFixer]

I understand the sentiment. Bitcoiner's and tax people rarely agree, which shocks absolutely no one.

But under U.S. tax law, Bitcoin is still treated as property. Unfortunately, that means gains, losses, sales, exchanges, transfers, and ownership records can all matter.

The fairness question is separate from the legal one. And with exit tax, that gap is exactly where the fight is.

[Clinton Donnelly @CryptoTaxFixer]

That is a fair way to frame it. For many people, citizenship feels like a contract. If they are leaving, current on filings, and no longer want the benefits or obligations, they see it like closing the account and settling up.

The hard question is whether “settling up” should include unrealized gains, especially when there has been no sale and no cash received.

[Clinton Donnelly @CryptoTaxFixer]

That is the core objection. Normally, tax is triggered when you sell or dispose of an asset. Exit tax is different because it can treat certain assets as if they were sold when someone gives up U.S. citizenship.

Whether that is fair, especially for Bitcoin holders with no cash event, is exactly the problem.

[Clinton Donnelly @CryptoTaxFixer]

Do you mean reimbursement for taxes already paid?

If so, that is a fair question. If someone has paid into the system for years and leaves fully compliant, many would argue they should not face an extra penalty on the way out.

That is why this debate is really about fairness, not just collection.

[Clinton Donnelly @CryptoTaxFixer]

@imgislost That is the hard part with Bitcoin. If the asset is not sold, the gain is still unrealized. So the question becomes whether the government should be able to tax value that exists on paper but has not been converted into cash.

That is exactly why exit tax debates get so heated.

[Clinton Donnelly @CryptoTaxFixer]

That is the strongest argument for a clean break. If someone is truly leaving, has stayed compliant, and will no longer receive U.S. benefits or protections, it is fair to ask why the tax obligation should continue.

The counterargument is whether gains built up while they were a U.S. citizen should be taxed before they leave. That is where the real debate is.

[Clinton Donnelly @CryptoTaxFixer]

That is exactly what I am trying to do. The truth is that renouncing U.S. citizenship does not automatically erase tax obligations. The IRS can still look at prior filings, unpaid taxes, and in some cases an exit tax may apply.

The key question is whether the system is fair, especially for people who have stayed compliant.

[Clinton Donnelly @CryptoTaxFixer]

Yes, exactly, the exit tax. I understand why people see it as unfair, especially if they are fully current. But the policy argument is that unrealized gains built up while someone was a U.S. citizen should not simply disappear from the U.S. tax system on the way out.

The real debate is where the line should be drawn, not whether the IRS wants one last look. Because naturally, taxes follow you right to the door.

[CryptoTaxAudit @CryptoTaxAudit]

CryptoTaxAudit was the only crypto-related firm left at the IRS CERCA meeting.

That should concern every crypto taxpayer.

The 1099-DA rollout is already confusing, messy, and creating serious reporting problems.

If the crypto industry stops engaging with the IRS, taxpayers are the ones who pay for it.

[Clinton Donnelly @CryptoTaxFixer]

@JoelKatz @ksw54548 This is the right comparison. When tax rules make normal use too expensive or too complicated, innovation slows down.

Crypto needs the same kind of policy clarity the internet needed early on. Not special treatment. Rules that do not kill the use case before it matures.

[Clinton Donnelly @CryptoTaxFixer]

This is the crypto tax fight hiding inside ripple:native staking.

@JoelKatz argues newly created staking rewards should not be taxed until sold.

The IRS currently says rewards are taxable when you control them.

That gap matters, and taxpayers should not ignore it.

https://t.co/dfhMR2z6mH