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IRS Bitcoin Hunt ramps up, but the tax amnesty could follow: Expert Blog

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Do not be excited or fearful at the moment. The IRS has not yet announced a tax amnesty for people who failed to report their earnings and earnings from Bitcoin and other virtual currencies. But it has long been thought that this could happen. And given the recent developments, we can now be a little closer.

It is well known that the IRS looks hard at Bitcoin and other cryptocurrency transactions, hoping to pick up a few dollars in taxes. Scary, a lot of the attention of the IRS now seems to be focusing on the criminal end of the spectrum. IRS criminal investigation officers are obviously trained in the field.

The Criminal Investigation Division of the IRS not only ordered the training of its agents. He also entered into a contract with Chainanalysis for follow-up. We can expect this field to take place materially in the coming years and not in a happy way.

A Justice Department attorney recently noted that the IRS could impose new procedures on users. Mark F. Daly, Senior Litigation Counsel in the Taxation Division of the Department of Justice, made the remarks at a symposium held on November 3, 2017 by the Tax Section of the Texas State Bar Association. . It was webcast on November 9th.

Daly also noted the highly publicized statistic that only 807 people reported Bitcoin to the IRS between 2013 and 2015. By contrast, there are hundreds of thousands of Coinbase account holders and are climbing All the time. The sheer volume of transactions of all these real estate transactions is frankly staggering. The IRS is not blind to that.

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Then there is the case of assignment of Coinbase, mentioned below. There have been more than a few comparisons raised with Switzerland and other offshore banking controversies. For models on special programs of amnesty, the IRS has good examples. The Swiss bank controversies of a decade back have spurred two programs, and they are both still existing.

If you have undisclosed offshore accounts or earnings, you can enter the IRS program called Offshore Voluntary Disclosure Program, or OVDP. It is to produce up to eight years of amended income tax returns, other reporting forms and to pay taxes, interest and penalties. But it is better to get out of jail free card. In addition, you can also settle your other tax problems even if they have nothing to do with offshore revenues or accounts.

For less serious offshore tax problems, the second IRS program calls the streamlined program. It includes only three amended tax returns, up to six years of FBAR foreign accounts reporting, and the payment of taxes and interest you owe. The penalties are much lower than the OVDP. Moreover, if you live outside the United States, you do not even pay penalties in the Rationalized program

. In 2013, the Government Accounting Office (GAO) said that the IRS needed to accelerate for digital currencies. The IRS began looking at these issues in 2007. In 2009, the IRS published information on its website on the tax consequences of virtual economy transactions.

However, apart from the 2014 opinion, the IRS has not provided taxpayers with more information. A kind of amnesty seems almost inevitable, finally. After all, the IRS 'efforts to find offshore funds not taxed hidden in offshore accounts have been hugely successful. Some of them were clearly hard. The IRS sued the big foreign banks for helping Americans store money and goods abroad. The IRS has collected beautiful and in some cases punitive regulations.

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The IRS also sued high-level people for hiding their money in offshore accounts. The IRS used foreign whistleblowers and bankers who had to take business or go down with the ship. The IRS also has heavily armed foreign governments, as well as foreign banks to give them more data on US taxpayers holding overseas accounts.

But the biggest blow in the IRS strategy was a kind of limited amnesty. The IRS won big. He has raised more than $ 10 billion in these efforts. The money train is not done yet either. Remember, it all started with John Doe's invitations to UBS, the Swiss bank. It was also a John Doe Summons against Coinbase.

The IRS and Coinbase both reported partial victories in this dispute. But some discs will start to flow like a river. Jacqueline Scott Corley, Magistrate of the United States, ruled that the exchange must provide the tax administration with the identity of all users in the United States who have made at least one Bitcoin transaction in the United States. 39, at least $ 20,000 between 2012 and 2015. gave the IRS a legitimate reason for requiring information.

Magistrate Corley wrote in his judgment:

"That only 800 to 900 taxpayers reported Bitcoin-related earnings in each of the relevant years and that more than 14,000 users of Coinbase have purchased, sold, sent or received at least $ 20,000 of Bitcoin in a given year, many users of Coinbase might not report their Bitcoin earnings. "

With In order, Coinbase will be required to deliver the names, addresses and tax identification numbers on 14,355 account holders on its nearly six million customers. The UBS version that triggered the Swiss avalanche had only 4,250 names. The Court ordered Coinbase to produce the following client information: (a) taxpayer identification number, (b) name, (c) date of birth, (d) address, (e) register of activities the account, including the date, amount and type of transaction (buy / sell / exchange), the balance after transaction and the names of the counterparties to the transaction and f) all account statements or periodic invoices (or the 39; equivalent).

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This must be at least annoying for the taxpayers affected. At least this information is limited to accounts with at least $ 20,000 in a transaction type (buy, sell, send or receive) in any year from 2013 to 2015. No other records should be produced now. Still, it seems highly unlikely that this is the end of history, with Coinbase or more generally.

Bitcoin values ​​have become meteoric. It seems likely that the IRS will start formulating some way to offer carrots to taxpayers who have not reported their Bitcoin earnings and other digital currencies. So stay tuned. Meanwhile, the last episode of the saga Coinbase can be read here:

Bio: Robert W. Wood is a tax lawyer with a national practice in the United States United. . The author of more than 30 books, including "Taxation of Damage Awards & Settlement Payments". Rob Wood, one of America's top tax lawyers, has extensive experience in corporate, partnerships and personal taxation