As confusing as the American cryptocurrency tax law might be, the Internal Revenue Service (IRS) is not cutting crypto holders any slack. Besides enlisting Chainanalysis, to track Bitcoin traders, the IRS is now casting its net even wider. The IRS is now going to use sources such as social media and open source searches to unearth crypto trading data.
The revenue arm of the US government will also intercept data from electronic surveillance, interviews, and Grand Jury subpoenas to apprehend tax evaders. On Twitter, Crypto Tax Girl expounds on the matter saying:
“You would think that these subpoenas would be served to crypto exchanges, but the IRS plans on serving them to Apple, Google, and Microsoft in order to search through taxpayers’ download history to see if they have ever downloaded cryptocurrency application.”
This new information is part of the IRS’s presentation for its special agents in the Criminal Investigation Division. The matters discussed in the presentation detail on how to investigate taxpayers holding crypto reserves.
Linking Bitcoin and Crypto Ownership with Social Activity
In a similar fashion, the IRS will also serve subpoenas to collect PayPal, credit card, and bank for anyone they have as a target. The records will be analyzed for digital assets payments and transactions. CryptoTaxGirl also adds that they will additionally, review “Facebook, Twitter, and other social media platforms to find publicly available BTC and ETH addresses.”
The agents are also under no obligation to notify any taxpayer whose Bitcoin records are under investigation. This, the IRS presentation says, is in a bid not to impede on the investigation. Bitcoin holders have been at the cross-hairs of the IRS since its Notice 2014-21. The notice declared that digital currencies were property and not a currency and were therefore taxable as such.
For years, some Bitcoin fans have wrongly assumed that BTC trades were safe. A crypto trader’s private details may indeed remain obscured from public scrutiny. However, digital currencies run on a blockchain, which is a public record of all transactions. Through Chainalysis, for instance, the IRS has in the past, unmasked BTC users with unreported profits.
The IRS Hunting For Unreported Capital Gains
Uncle Sam wants those Bitcoin Bull Run profits so bad, that he will do whatever means it takes to get them. Case in point is the Coinbase IRS order to hand over data of its 14,000 digital assets trading clients. The IRS did not have the power to go after every small fish on the exchange.
The revenue body instead set limits to BTC holders with $20,000 and above worth of tokens. By February 2018, the exchange had informed its nabbed 13,000 customers that they had a summons from the IRS.
With the vigorous updates on the revenue body’s investigations on crypto holders, it is evident that the IRS will now leave no stone unturned. A bipartisan 21-member House of Representatives group is nevertheless asking the US IRS to explain its confusing crypto tax policy.
In a strongly worded letter, Tom Emmer, one of the legislators, has asked the body to guide the taxpayer and eliminate the ambiguity surrounding the laws. The group, for instance, has the government agency to address the confusion on taxation of crypto capital gains.