Crypto holders are believed to be a major driving force behind a widening 'tax gap' in the United States.
Bitcoin is entering 2021 in the best place its ever been. With strong movements past $30,000, the whole world is waiting to see how high Bitcoin will go. But while BTC hodlers’ pockets are busting with cash, the United States’ tax arm, also known as the Internal Revenue Service (IRS), is gearing up for a crackdown on unchecked earnings.
Indeed, in an article for Law360, Don Fort (who previously headed the IRS’ criminal investigation division) said that while the tax agency has was previously taking a more “educational” attitude toward cryptocurrency hodlers, school days are over: the time for “enforcement” has come.
“The IRS has been not-so-quietly positioning itself for a smooth transition from education to enforcement in 2021 and beyond,” he wrote. The article was co-authored by Lawrence Sannicandro, a lawyer who has focused his career on federal and state tax controversies. Both men are part of the team at Kostelanetz & Fink, LLP.
“[...] 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,” Fort and Sannicandro wrote.
Indeed, in December 2020, CoinTelegraph reported on the addition of a crypto-related question at the top of form 1040. This seems to indicate that the IRS is preparing to eradicate underpayment.
In 2018, Coinbase was forced to hand over account information for some 13,000 users; in the following years, many of those 13,000 individuals have been the recipients of letters from the tax department. The letters have advised cryptocurrency owners that if they did not accurately report their cryptocurrency holdings on federal income tax returns, they need to “file amended or delinquent returns.”
Since then, Coinbase has also integrated features to help its users file tax returns on their holdings accurately and on time.
However, Coinbase may only be the beginning: the article also specifically mentioned that the IRS went so far as to request information from Luxembourg-based exchange Bitstamp on one of its American users.
Crypto holders could be attributing to a widening “tax gap” in the USA
The IRS’s coming enforcement on crypto hodlers is apparently in part because of a widening “tax gap” in the United States. In other words, the average amount of what individuals and other entities should owe the government is increasingly lower than what they actually pay.
Don Fort and his co-author both believe that crypto hodlers could be playing a big part in the apparent growth of the tax gap. The IRS seems to share a similar belief.
“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.”
Bitcoin is entering 2021 in the best place its ever been. With strong movements past $30,000, the whole world is waiting to see how high Bitcoin will go. But while BTC hodlers’ pockets are busting with cash, the United States’ tax arm, also known as the Internal Revenue Service (IRS), is gearing up for a crackdown on unchecked earnings.
Indeed, in an article for Law360, Don Fort (who previously headed the IRS’ criminal investigation division) said that while the tax agency has was previously taking a more “educational” attitude toward cryptocurrency hodlers, school days are over: the time for “enforcement” has come.
“The IRS has been not-so-quietly positioning itself for a smooth transition from education to enforcement in 2021 and beyond,” he wrote. The article was co-authored by Lawrence Sannicandro, a lawyer who has focused his career on federal and state tax controversies. Both men are part of the team at Kostelanetz & Fink, LLP.
“[...] 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,” Fort and Sannicandro wrote.
Indeed, in December 2020, CoinTelegraph reported on the addition of a crypto-related question at the top of form 1040. This seems to indicate that the IRS is preparing to eradicate underpayment.
In 2018, Coinbase was forced to hand over account information for some 13,000 users; in the following years, many of those 13,000 individuals have been the recipients of letters from the tax department. The letters have advised cryptocurrency owners that if they did not accurately report their cryptocurrency holdings on federal income tax returns, they need to “file amended or delinquent returns.”
Since then, Coinbase has also integrated features to help its users file tax returns on their holdings accurately and on time.
However, Coinbase may only be the beginning: the article also specifically mentioned that the IRS went so far as to request information from Luxembourg-based exchange Bitstamp on one of its American users.
Crypto holders could be attributing to a widening “tax gap” in the USA
The IRS’s coming enforcement on crypto hodlers is apparently in part because of a widening “tax gap” in the United States. In other words, the average amount of what individuals and other entities should owe the government is increasingly lower than what they actually pay.
Don Fort and his co-author both believe that crypto hodlers could be playing a big part in the apparent growth of the tax gap. The IRS seems to share a similar belief.
“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.”
Rachel is a self-taught crypto geek and a passionate writer. She believes in the power that the written word has to educate, connect and empower individuals to make positive and powerful financial choices. She is the Podcast Host and a Cryptocurrency Editor at Finance Magnates.
ASIC Scores Legal Victory: BPS Financial Found Guilty in Qoin Wallet Case
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
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#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
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Looking to expand your network in #Africa?
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Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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