Sorry: Avoid tax bitcoin
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Bitcoin Holders Can’t Escape the IRS
Bitcoin is the currency that no government controls. But the government still collects taxes on it, and the Internal Revenue Service has just told taxpayers that it’s about to increase its scrutiny of their crypto gains. The news comes as Bitcoin has been in a relative slump, falling to $9,500 on Monday after briefly rising above $13,000 last month.
The IRS has begun sending letters to more than 10,000 taxpayers asking them to assert that they’ve paid all the taxes on their cryptocurrency gains, or to contact the IRS about making it right. In a release about the letters, the IRS warned that “[t]axpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties.”
Bitcoin technically allows its holders to be anonymous and thus avoid taxes if they wish. But most people have bought Bitcoin through exchanges, which generally ask users for identifying information and documents before allowing them to open accounts. For instance, the IRS won a court case to access account data from Coinbase, a large U.S. exchange that makes customers verify their identities. The IRS did not respond to a question about whether that’s how it got the addresses of the people it is contacting about taxes.
Paying taxes on Bitcoin and similar digital coins is not so straightforward. The IRS has classified them as property, but the people who hold them often treat them like investments or currencies.
Paying taxes on property can mean paying capital gains taxes. But while it may be straightforward to buy a Van Gogh painting and sell it two years later for a 20% gain, buying and selling crypto can land taxpayers in murky situations. A Bitcoin holder who uses Bitcoin to buy another cryptocurrency, converts some of that new coin back into Bitcoin, and then uses it to buy a car, is treating the coins as investments and currencies—and will invariably have to do trickier math.
Crypto enthusiasts have long complained about the lack of IRS guidance on this issue. Coin Center, an organization that advocates for cryptocurrency holders and entrepreneurs, criticized the agency earlier this month for delays in issuing more specific guidance for taxpayers. IRS Commissioner Charles P. Rettig had said on May 30 that guidance would be forthcoming in the next 30 days. But the agency still hasn’t issued it, and only says in its latest release that “[t]he IRS anticipates issuing additional legal guidance in this area in the near future.”
Write to Avi Salzman at avi.salzman@barrons.com
Источник: https://www.barrons.com/articles/bitcoin-holders-irs-taxes-51564412068
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