The IRS is going after crypto tax avoiders
The point of conversion from digital currency to fiat currency is the primary focus for the tax agency.
The Internal Revenue Service (IRS) will establish a taskforce of investigators to track offenders with undeclared U.S. assets, including tax evaders who utilize cryptocurrencies to avoid making necessary contributions.
The United States’ tax office said that the anonymity associated with virtual currencies is an appealing prospect for many international tax dodgers, according to Bloomberg.
Although the IRS has yet to charge anyone with crypto-related tax fraud, IRS Criminal Investigation Division chief Don Fort said that the agency is in the process of building cases against known lawbreakers.
At this time, the point of conversion from digital currency to fiat currency is the primary focus for the IRS.
“It’s possible to use bitcoin and other cryptocurrencies in the same fashion as foreign bank accounts to facilitate tax evasion,” Fort said. “We know that you want to get your money out at some point.”
The IRS taskforce will also examine unlicensed exchanges located in the United States and abroad.
The Criminal Investigation Division has been following the development of cryptocurrencies since early 2014, when the IRS issued guidance for the evaluation of virtual currencies, considered assets for tax purposes.
Despite instructions, only 802 people actually filed personal cryptocurrency tax gains or losses in 2015.
Earlier this year, the IRS issued a court order requesting access to the records of more than 500,000 users who traded cryptocurrencies on California-based digital exchange Coinbase. However, their attempts were blocked during legal proceedings and reduced to just 14,000 users that engaged in trading activity over $20,000.
The South Korean government will reportedly begin enforcing corporate tax legislation on local cryptocurrency exchanges from the end of March 2018, according to a spokesperson for the Ministry of Strategy and Finance.
Coinbase has headquarters in San Francisco, operates in most US states, as well as Canada, the United Kingdom and Europe, and is estimated to provide trading services for around 13.3 million users worldwide.
Earlier this month, Coinbase warned customers that, due to recent changes to the Merchant Category Code (MCC), credit card companies are now able to charge additional “cash advance” fees on crypto purchases.
The digital exchange also distributed end of year tax documents via email to a number of its customers in the U.S. to assist with voluntary taxation compliance. This includes traders that have engaged in 200+ virtual currency sale transactions whose total value is equal to or greater than $20,000 in a calendar year.
You would have received a form on or before January 31 if your exchange account is operated for business use or your GDAX sale volumes exceed the applicable thresholds. GDAX is Coinbase’s digital exchange. For these users, a single “sale transaction” is effected each time you execute a virtual currency sale order on GDAX.
It’s important to understand your income tax bracket in order to file your tax return online quickly and easily.