Tuesday, April 12, 2022

IRS Is Focused on Crypto Currency Compliance!

The federal government and several other states have increased their focus on the regulation and taxation of cryptocurrency and other digital assets. 

On March 9, 2022, President Biden issued an executive order calling for evolution and alignment of the federal government’s approach to digital assets with key priorities to include: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation. This call to action reflects the government’s desire to take more focused and coordinated steps to address the risks and cultivate the benefits of digital assets and their related technology.

From a federal tax perspective, the IRS began its focus on the taxation of “virtual” currency nearly a decade ago. Over the years, the IRS disseminated guidance in this area including IRS Notice 2014-21, IRB 2014-16 (and related FAQs), Rev. Rul. 2019-24, IRS Chief Counsel Memorandum 202114040, and others. These authorities generally provide that virtual currencies are treated as property (not fiat currency) for federal income tax purposes, and they describe how existing tax principals apply to various virtual currency transactions.

Furthermore, the IRS Priority Guidance Plan for 2021-2022, which outlines the IRS’s priorities for allocating resources to matters most important to taxpayers and tax administration, includes as its focus: (i) general guidance concerning virtual currency; and (ii) regulations regarding information reporting on virtual currency under Sec. 6045 of the Internal Revenue Code.

We have previously posted:

Both New York and New Jersey have joined a handful of states in addressing the tax treatment of virtual currencies from an income, sale/exchange and sales tax perspective. California Attorney General Rob Bonta recently acknowledged that crypto is an “area of concern.” 

The current tone of the rhetoric from our legislative and executive branches suggests that tax authorities will continue to focus more on providing detailed rules applicable to taxation, reporting, and compliance with respect to digital assets.

Taxpayers should check whether it is still possible to correct the tax return or file a Voluntary Disclosure in order to avoid any criminal proceedings and penalties, as well as administrative costs.

Have a Virtual Currency Tax Problem?

Value Your Freedom?

Contact the Tax Lawyers at
Marini & Associates, P.A. 
 for a FREE Tax Consultation Contact us at
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243). 

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