IRS strengthens tax controls on crypto transactions, adds crypto transaction-related issues to tax forms

According to a Bitcoinist report on January 8, as the US 2020 Tax Day approaches, the IRS has taken a very direct action in focusing on crypto transactions, adding a check to its tax bill Box to understand how people are participating in virtual currency activities.

income-tax-491626_960_720.webp

Image source: pixabay

IRS adds crypto transaction related issues to tax forms

The IRS updated its Form 1040 with additional income, adding a new checkbox for cryptocurrency transactions. The newly added issues are as follows:

"Did you receive, sell, send, trade or otherwise acquire any financial interest in any virtual currency throughout 2019?"

By explicitly adding this new checkbox to the top of the form, it appears that U.S. tax authorities are spared no effort in cracking down on tax evasion by cryptocurrencies. This newly added issue may indicate that cryptocurrency traders can no longer use the excuse that they have not been notified.

If a cryptocurrency owner is found guilty of tax evasion, the IRS can now prove he has an intentional criminal intent. As a result, U.S. virtual currency owners and traders must accurately report their cryptocurrency tax obligations or they will face charges of tax fraud.

However, given the complexity of the country's crypto tax situation, the IRS itself will also face certain auditing difficulties. Some commentators predict the U.S. will face high-profile crypto tax evasion case in 2020

As Bitcoinist previously reported, the IRS has been sending warning letters to U.S. cryptocurrency owners and tax refunds to crypto users who correctly report transactions.

The inclusion of "send" and "transaction" cryptocurrencies into tax provisions did raise some confusion as it is uncertain whether these transactions caused taxable events. In response, the IRS updated cryptocurrency tax related content on its website's FAQ page and stated:

"If you transfer virtual currency from your wallet, address, or account to another wallet, address, or account that also belongs to you, the transfer is a non-taxable event."

Comprehensively strengthen encryption monitoring

This latest IRS move echoes a similar move by the Brazilian Revenue Agency, which has created a special punitive clause for crypto tax evaders. The IRS has also recently stepped up efforts to ensure that taxpayers accurately report crypto-related gains and losses.

As early as the end of 2019, the IRS received a court order to view Bitstamp customer information. However, the U.S. federal judge overseeing the matter cautioned against the number of applications made by the IRS.

Other crypto exchanges, such as Kraken, have also emphasized that regulators continue to make new requests for information, leading to a significant increase in their compliance costs. As cryptocurrencies become more popular, regulators in various jurisdictions appear to be developing stricter regulatory policies.