With all that has been happening in the world in 2020, the cryptocurrency compliance world has not slowed down. As we end the Q2 of 2020, let’s look at what happened in the past quarter in the crypto tax compliance world (What Happened In the Cryptocurrency Tax Space In Q1 2020).
IRS Hiring Consultants To Crack Down On Cryptocurrency Tax Evasion
On May 12, 2020, the IRS sent out a statement of work (SOW) requesting help from crypto tax software companies to crack down on cryptocurrency tax non-compliance. Software providers are expected to help the service in calculating gains and losses for the taxpayers in question and help the IRS with cryptocurrency tax audits.
Australian Tax Authority Sends 350,000 Tax Notices
In the beginning of March, Australian Taxation Office (ATO) announced that they were in the process of sending out cryptocurrency tax warning letters to 350,000 Australian taxpayers. In June, we started seeing taxpayers receiving these letters. These letters are similar to the IRS tax notices (Letter 6173, 6174 & 6174-A) sent to 10,000 Americans in 2019.
IRS Asked a Taxpayer to Sell Crypto to Pay 1M+ Tax Liability
In the Strashny v. Commissioner of Internal Revenue tax court case, the IRS denied a tax installment plan for a taxpayer because he had more than $200,000 in annual wages and were drawing $19,000 a month from his $7M cryptocurrency holdings per the form 433-A field. The tax court expected the taxpayer to sell the virtual currency reported on Form 433-A to cover that $1M plus tax liability.
Stimulus Check Money Went Into Crypto
It was evident that a significant number of stimulus check recipients invested that money in bitcoin or other cryptocurrency.
These investors will need to keep good records of their purchases and sales in order to properly file taxes in the next tax season and stay out of the IRS trouble.
IRS Deanonymyzing Privacy Coins Like Monero
The Q2 ended with another attempt by a regulator, Criminal Investigation Division (CID) of the IRS, looking to hire private contractors to get more visibility into privacy coins and their usage in illicit activities.
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This post was originally published on Forbes by Shehan Chandrasekera on July 8, 2020
Disclaimer: this post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.