Might you soon find yourself under the gun of the IRS over undisclosed earning through Bitcoin and other cryptocurrencies? Signs point to yes, but, you might be off the hook. In an effort to transition to a place more smoothly where people accept the IRS taxing your digital currency earnings (that is, coming up with an arbitrary percentage of the earnings from your investment that they can somehow magically claim as theirs), the IRS is LIKELY to produce a tax amnesty for people.
Of course, the other reason for a tax amnesty would be their knowledge that they most likely couldn’t possibly come close to tracking the amount of people that may have benefited from cryptocurrency gains without reporting them to Theft Central (that’s the actual non-gov-speak name of the IRS). It is disappointing that the site I am excerpting from, Coin Telegraph, seems to be making every effort to play along with the ‘legitimization of crypto through gov compliance’ game, which kind of undermines, I think, the original purpose for the creation of Bitcoin in the first place. to disentangle yourself from the all-encompassing mass of tentacles of the state.
To be sure, the power behind Bitcoin, be it the Chinese Miners or the ones managing the blockchain, have long left that vision. Still, Coin Telegraph, why?
It is well-known that the IRS is looking hard at Bitcoin and other cryptocurrency transactions, hoping to scoop up some tax dollars. Frighteningly, much of the IRS attention now appears to be focused on the criminal end of the spectrum. IRS Criminal Investigation Agents evidently are being trained in the field.
The IRS Criminal Investigation Division not only ordered training for its agents. It also entered into a contract with Chainanalysis for tracking. We may expect this area to unfold materially in the coming years and not in a happy way.
A Justice Department attorney recently noted that IRS scrutiny on tax reporting could prompt new procedures for users to get right with the IRS. Mark F. Daly, senior litigation counsel in the Justice Department Tax Division, made the remarks in a Nov. 3, 2017 symposium held by the State Bar of Texas Tax Section. It was released by webcast on Nov. 9.
Mr. Daly also noted the widely publicized statistic that only 807 people reported Bitcoin to the IRS between 2013 and 2015. In contrast, there are hundreds of thousands of Coinbase account holders and climbing all the time. The sheer transaction volume of all those property transactions is frankly staggering. The IRS is not blind to this.
Then there is the Coinbase summons case, mentioned below. There have been more than a few comparisons raised with the Swiss and other offshore bank controversies. For models on special amnesty programs, the IRS has good examples. The Swiss bank controversies of a decade back prompted two programs, and they are both still in existence.
If you have undisclosed offshore accounts or income, you can enter the IRS program called the Offshore Voluntary Disclosure Program, or OVDP. It involves filing up to eight years of amended tax returns, other disclosure forms, and paying taxes, interest and penalties. But it is formulaic get out of jail free card. What’s more, you can fix your other tax problems too, even if they have nothing to do with offshore income or accounts.
Read more at Coin Telegraph