After raking in some profits on bitcoin (if they were lucky enough to find a greater fool) investors are now being targeted by the IRS.
Apparently few bitcoin investors seem to be paying taxes on their gains. Most of them probably thought the anonymous currency wouldn’t be on the radar of the IRS. Turns out however, that the IRS has forced Coinbase, one of the largest “digital-currency wallets” to give the government its customers’ information.
Laura Saunders reports in The Wall Street Journal:
By March 16, the IRS will have data on about 13,000 Coinbase account holders who bought, sold, sent or received digital currency worth $20,000 or more between 2013 and 2015. The data include the customer’s name, taxpayer identification number, birth date and address, plus account statements and the names of counterparties.
Criminal tax lawyers expect the IRS will act on the information and high-profile cases will follow.
Some cryptocurrency holders are now disclosing past tax lapses to avoid potential criminal prosecution.
Bryan Skarlatos, a lawyer with Kostelanetz & Fink with several such cases, reminds cryptocurrency investors of the IRS’s success in piercing the veil of Swiss bank secrecy. Since 2009, more than 56,000 Americans who hid money in offshore accounts have paid more than $11 billion to resolve tax issues.
“Digital currency holders shouldn’t think they can hide from the IRS,” he says.
Smaller investors are also feeling heat. Many traded during last year’s price spike, and tax preparers are now asking clients routinely about cryptocurrency sales. They aren’t supposed to sign returns with unreported income.
To be sure, the IRS hasn’t clarified important issues on digital currencies, and these gaps leave room for favorable interpretations.
But the gaps don’t leave room for hiding income. With the April tax date approaching, here is important information.
Read more here.
Jeremy Jones, CFA
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