Crypto Crackdown: Why The IRS Isn’t Messing Around This Year:
The IRS collects cryptocurrencies this year and does so with notices. What were the warning signs? What should you expect? And why is it good?
If you plan to pay taxes, you will see a big change this year. For the first time, the IRS has introduced cryptocurrency.
I mean literally front and center, just above the good old 1040 shape.
They want to learn more about trading cryptocurrencies even before their dependency status, which is the favorite question of the IRS.
So why the renewed attention? Will there be repression this year? How much is your income taxed in your currency? What exactly do you have to report and what happens if you don’t?
Let’s take a look at the Great Crackdown Encryption.
Why did the IRS finally shut down cryptocurrencies this year?
The IRS action is not intended to be a sudden surprise attack, such as forbidding police officers to blow up a clandestine bar. Instead, the IRS is like a tired campus guard interrupting a difficult party after seven warnings.
In fact, cryptocurrencies have been taxable since 2014. In the eyes of the IRS, there’s just no excuse to keep playing bass at 3:15 p.m. They walk through the front door and someone still at home gets a subpoena.
Let’s see why the IRS has finally lost its temper this year and why you shouldn’t mess with them.
The IRS made cryptocurrencies taxable in 2014
In 2008, Satoshi Nakamoto created Bitcoin as a simple and secure way to trade online currencies without the involvement of third parties. It wasn’t much of an investment vehicle and the IRS didn’t pay much attention to it.
However, in 2013, it became clear that people were making money with Bitcoin and would continue to make money. Currency traders bought low, sold high, and made profits, sometimes in the millions.
In the eyes of the IRS, this company qualifies cryptocurrencies as stocks, not coins. And if you make money buying, selling, and trading capital goods, your Uncle Sam always owes you a share. Whether it is stocks, flats, or cryptocurrencies, you must pay capital gains tax on the sale price to the IRS.
Therefore, the IRS issued a 2014-21 notice in 2014. It is very short and easy to read and shows the IRS’s clear understanding of cryptocurrencies and even how ‘mining’ works. the TL; The DR of the condition is that the cryptocurrency is now taxable, with instructions on how to report it.
After the IRS posts the 2014-21 message, the IRS will likely relax in its seats and wait for the new money to start flowing. Some people will surely miss the memo, but at least we have the court.
But they were probably also surprised at what happened next.
… But no one cared or paid attention to it
In the following fiscal year, Coinbase peaked at six million users buying, selling, and trading cryptocurrencies.
According to Forbes, only a few hundred of the six million users reported their cryptocurrency earnings.
Obviously, not all Coinbase merchants had a taxable event that year, such as paying in cryptocurrencies or selling cash. But the IRS still struggled to believe that 99.99992% of US cryptocurrency traders were in control and holding their cryptocurrencies for long-term profit.
In 2016, the IRS followed Coinbase
After the IRS received virtually no tax revenue from tagging users, they turned to Coinbase, the de facto host of the tumultuous house party.
So it gets complicated. Here is a description of the key events in November 2016:
1.The IRS sends a “John Doe” call to Coinbase, requiring all records related to Bitcoin transactions on the platform between 2013 and 2015. The goal, of course, is to keep an eye out for tax evaders.
2.Attorney Jeffrey Berns steps in to stop them.
3. The IRS says, “Are you kidding?” You’re a Coinbase customer, you can’t really talk. ‘
4. Children agree and support.
5. The IRS introduces a new motion to remind Coinbase to protect tax evaders. Don’t test us, let’s fire Al Capone.
6.Coinbase is committed to providing taxpayer IDs, names, dates of birth, addresses, and transaction details to all users who traded more than $20,000 between 2013 and 2015.
7.Coinbase has publicly informed 14,000 users that the IRS will do the same.
8. The IRS issues letter 6173 advising traders to pay or pay attorneys because there is an audit.
If you think you’re too small a fish to be roasted by the IRS, think again. Because what happened in 2020 should shake anyone who evades the cryptocurrency tax.
In 2020, the IRS gave him one last chance and threatened traders
In August 2020, after the 2019 book season, the IRS released another set of 10,000 warning letters to cryptocurrency traders.
These were cards 6174 and 6174-A, and this time there were two notable changes from card 6173.
First, the new maps were much more menacing. They reminded cryptocurrency traders less than subtly:
Second, in contrast to the obscure language of Brief 6173, these letters made it clear that cryptocurrencies owe taxes on all the years in which they failed to declare their capital gains and that they would disappear as early as 2014.
Finally, and especially for those who withhold taxes on cryptocurrencies, no one really knows where the IRS list comes from. “We are not sure where the IRS got the user list,” Cointracker co-founder Chandan Lodha told Bitcoin.com.
It is still believed that the new list could come back from Coinbase, but the IRS likely rebuilt its list using new tracking technology from sources such as Chainalysis, Coinbase analysis, and Palantir.
The IRS Is Now Using Blockchain Technology To Track Crypto Assets
Let’s go back to 2008. The father of Bitcoin, Satoshi Nakamoto, designed his creation to be safe, convenient and transparent.
What happens if I report my coding earnings incorrectly or not?
If you fail to report your cryptocurrency earnings on your tax return, you can expect direct repercussions from the IRS. The agency has clearly developed a system to track cryptocurrency trading without charging large swaps and has shown that it is willing to use it.
It’s safe to assume that the letters 6173, 6174, and 6174-A were the IRS’s last warning shots. Going back to the original Coinbase quote in 2016, the IRS expressed frustration that billions of dollars in taxes have not been reported in the crypto community. Since then, they’ve had five years to develop tools and trackers to get them back. It is best not to put it in the crosshairs of the IRS and pay only 15%.