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Home Cryptocurrency news

Wealth and Tax Advisor Says IRS May Be Targeting Crypto Traders, Not Investors

Tony Spilotro by Tony Spilotro
2 years ago
in Cryptocurrency news, Bitcoin
Reading Time: 3min read
Wealth and Tax Advisor Says IRS May Be Targeting Crypto Traders, Not Investors
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By now, most crypto investors know that the United States government has begun to crack down on the crypto industry, and has begun targeting those who have used Bitcoin and other crypto-assets for illicit crime.

As part of the efforts, the Internal Revenue Service has also begun targeting crypto-holding American taxpayers, who may not have accurately filed their taxes in relation to the digital asset class. Tax evasion is a crime, and some new information could potentially help crypto holders with understanding how to avoid fines, or even jail time if crypto taxes aren’t properly reported.

Tax Advisor Claims IRS Seeks Separation Between Crypto Traders and Investors, According to Letters Sent

Last month, the IRS issued as many as 10,000 letters to crypto holders – most of which were Coinbase customers – reminding them of their responsibility to properly report taxes related to crypto holdings, dating back as far as 2013. The letters were of three-varying degrees of threat, ranging from, suggesting the taxpayer review their returns, to the most threatening, demanding an immediate response.

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More than 10,000 cryptocurrency investors face a decision as they open letters from the IRS informing them that they may owe taxes on their digital holdings https://t.co/JhwpVUmCIs

— Bloomberg (@business) August 1, 2019

Despite such a small subset of crypto investors targeted by the IRS letters, it sent chills down the spines of crypto holding Americans everywhere, more so due to the complete lack of clarity surrounding crypto tax law. Even Congress has pushed the IRS to provide more clarity for crypto investors, but instead focus on sharing dated slides about how the digital asset class is used for crime.

Related Reading | Congress Slams IRS Over Bitcoin Tax Law; Here’s the Major Loophole for Crypto Investors 

However, according to a New York Post article, the IRS may be specifically targeting holders that make many buy and sell transactions, spilling into the territory of “trading” instead of “investing,” which would put the gains earned into a completely different tax category.

Crypto assets are considered property, and the earnings and losses are subject to capital gain and loss tax rates around 20% for longer-term holdings. Earnings from trading, however, could be considered income and be may be taxed at a higher 37% tax rate, causing a discrepancy in many holders past reporting that may need to be amended to comply with the law – law that frankly isn’t clear.

The comments come from Timothy Speiss, Wealth and Tax Advisor from accounting company EisnerAmper.

“The IRS is going to argue that someone who trades frequently and at high volume will be subject to get the ordinary tax rate at 37 percent,” Speiss claims. “Traders need to be careful.”

Speiss adds that anyone who received the most threatening of IRS letters has been likely been deemed a trader and not an investor, and suggests amending tax returns to reflect the proper tax rates.

Related Reading | Confusing U.S. Tax Laws Lead to $5 Billion In Unrealized Crypto Losses

Going back to 2013 may be a chore for Bitcoin traders who have spent years making transactions, but it’s better than spending years behind bars for tax evasion. The beauty of blockchain makes all these transactions viewable, so rectifying the situation – while daunting – is doable.

Tags: bitcoincryptoirstaxunited states
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a digital media executive and global remote work leader with a decade of content experience and excellent. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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