Cryptocurrency once seemed like a safe haven from the complications of the IRS, but all that has changed. While miners and traders have technically always been responsible for reporting gains on their taxes, the IRS has only recently started cracking down.
Worried about your future as a crypto trader? By keeping in the know, you can reduce the risk of audits and penalties. Read on to learn more:
The Role of Document Matching
Many instances of cryptocurrency tax evasion have been identified via an IRS document matching program, which detects taxpayers who underreport or fail to report their income whatsoever. IRS Small Business/Self-Employed (SB/SE) Division Commissioner Mary Beth Murphy explains that the agency is currently preparing to send notices to taxpayers identified through this system.
Coinbase And the Bank Secrecy Act
Many of the SB/SE’s current crypto efforts involve the Bank Secrecy Act, which requires financial institutions to cooperate with the federal government in cases involving suspected fraud or money laundering. Specifically, the Bank Secrecy Act has been invoked by a recent IRS summons involving crypto exchange Coinbase, which was forced to release information on tens of thousands of crypto traders.
Additional Guidance to Follow
The IRS has already released a handful of notices regarding cryptocurrency and taxation. Soon, however, more specific information will be provided to assist a rapidly growing group of crypto traders and miners. IRS Commissioner Charles P. Rettig said as much when responding to a request from Minnesota Rep. Tom Emmer. Rettig explained, “I share your belief that taxpayers deserve clarity on basic issues related to the taxation of virtual currency transactions and have made it a priority of the IRS to issue guidance.”
If you have been targeted by the IRS based on alleged tax evasion, it is absolutely imperative that you seek support. Contact the Highland Tax Group at your earliest convenience to learn more about your options.