Official IRS treatment of cryptocurrency assets has changed dramatically over the years. The agency first cracked down in 2019. This intensified in 2020, with new traps set to catch alleged crypto tax cheats.
Further enforcement is expected in 2021, especially as the IRS addresses concerns over the widening tax gap, which some believe is partially driven by crypto investors.
Worried about the problems your recent crypto success might cause with the IRS? Keep reading to learn what to expect — and how the revised IRS approach might impact your taxes this year:
Swapping Education for Enforcement
While cryptocurrency issues have long been on the radar at the IRS, the agency previously took a relatively laid-back approach, making an effort to educate taxpayers rather than get tough. All that is about to end, however. Instead of treating suspected tax cheats with kid gloves, the IRS will come down hard on those who fail to properly report crypto earnings or pay accordingly.
A Warning for Coinbase Users
While it’s impossible to know exactly how the IRS will behave just yet, early speculation suggests that the agency will target crypto enthusiasts who rely on the popular digital currency broker Coinbase. Already, the company has handed over information on 13,000 of its users. This occurred nearly three years ago, and, since then, many of these individuals have received dreaded correspondence from the IRS.
Coinbase has since implemented features designed to help users file tax returns correctly and on time. Still, that might be little solace for those who have previously made mistakes and could still be at risk of trouble with the IRS.
As you deal with the tax implications of your crypto assets, feel free to get help from the team at the Highland Tax Group. We’re proud to remain at the cutting-edge of the evolving cryptocurrency situation, so we can provide strategic insight. Reach out today to get started.