IRS set to crackdown on holders of crypto

January 4, 2021

Quick Take

1 minute read

A “high-stakes game of chicken“ has been allegedly going on between internal revenue service and holders of cryptocurrency you are failing to properly report their earnings.

This so-called “game“ will be going into a new phase this year as the government body will start to focus more on pursuing civil and “potentially criminal penalties“.

A “high-stakes game of chicken“ has been allegedly going on between internal revenue service and holders of cryptocurrency you are failing to properly report their earnings. This so-called “game“ will be going into a new phase this year as the government body will start to focus more on pursuing civil and “potentially criminal penalties“.

Even though many people all over the world are wondering where bitcoin will go next, the tax service in the United States is getting ready to crack down on non-reported earnings in digital assets.

The former chief of the internal revenue service criminal investigation division, Don Fort wrote an article recently that said that even though the agency has been focusing its resources on telling the public of the proper reporting guidelines, it will now be turning to more stringent enforcement.

“The IRS has been not-so-quietly positioning itself for a smooth transition from education to enforcement in 2021 and beyond.”

In 2019, the article highlighted that the Coinbase platform answered a “John Doe“ summons and handed over account information to almost 13,000 users. This information has the potential to lead to crackdowns. An example is that the article highlights the request that the IRS made to the Bitstamp platform based in Luxembourg in regards to one particular American user.

Even though the IRS has not yet announced many mainstream tax evasion or money laundering cases involving virtual currency, that trend should change in 2021.

The services focus on holders of cryptocurrency is partly down to the widening tax gap.

The article highlights:

“As of Dec. 10, with Bitcoin fresh off new record highs, the market capitalization of cryptocurrencies was $524 billion… Assuming cryptocurrency-related tax liabilities of $25 billion and a 50% compliance rate, unreported cryptocurrency tax liabilities again account for around 3.2% of the $381 billion tax gap. Thus, it is likely that unreported taxable cryptocurrency transactions are contributing significantly to the tax gap.”

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