Enforcement is Coming: The IRS Is Now Looking at Crypto
At first it was treated like a fad, and now it's a part of daily life for many of us. Though cryptocurrency may still be in the early adopter phase, with an estimated 30 million Americans investing, the IRS has posted specific notices regarding how this virtual currency is to be treated.
This month the IRS announced five major campaigns related to large businesses and international compliance. One of these specific campaigns, lead by John Cardone, is the Virtual Currency campaign. The purpose of this campaign is to handle any and all related issues pertaining to domestic and international individual compliance. In this announcement the IRS stated that "U.S. persons are subject to tax on worldwide income from all sources including transactions involving virtual currency." We know from Notice 2014-21 that virtual currency is to be treated as property as it pertains to U.S. taxpayers. For a more detailed breakdown of this notice, see our post on Cryptocurrency Basics.
This announcement also addressed any potential for leeway at a later date stating "the IRS is not contemplating a voluntary disclosure program specifically to address tax non-compliance involving virtual currency". This is in contrast to the Offshore Voluntary Disclosure Program that was offered for anyone with offshore cryptocurrencies. As we explained in this blog post, the program is coming to an end soon.
It's clear the IRS is taking all actions necessary to show they understand that crypotocurrency is sticking around, and they have every intention of holding tax payers accountable for activities in this market. They even hired Chainalysis to develop special software for them to help scout out anyone trying to get out of reporting their wallets accurately. Read more on this discovery in this article by Jeff John Roberts with fortune.com.
It is critical to your own financial well-being to accurately and legally report your cryptocurrency involvement including any buying, selling and trading. We understand this can feel overwhelming or intimidating, and we are here to help. Archer Tax Group is committed to researching IRS laws and codes thoroughly to make sure you are in compliance, while also keeping up to date on any special considerations, credits or deductions that you can take advantage of to save money. Contact us with any questions or schedule a free consultation.