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In a previous post, we explained how the U.S. Internal Revenue Service had introduced a question on the 2020 tax form that asked, “at any time during 2020 did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency.” Along another path, the IRS’s Operation Hidden Treasure is a partnership between the civil office of fraud enforcement and the criminal investigation unit aimed at rooting out tax evasion from cryptocurrency owners. …

We previously reported that, in July 2019, the U.S. Internal Revenue Service announced that it had begun sending the now infamous letters to taxpayers who, supposedly, may have failed to properly report income and pay taxes associated with cryptocurrency transactions. About 10,000 of these Letter 6173 were sent. And we previously reported that James Harper had sued the IRS claiming the IRS violated his rights under the Fourth and Fifth Amendments of the U.S. Constitution…

In a previous post, we explained how the U.S. Internal Revenue Service had introduced a question on the 2020 tax form that asked whether “at any time during 2020 did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency.”  The purpose of placing this question in a very prominent part of the tax form was to try to collect some of the significant amounts of the unreported taxes surrounding…

Under U.S. tax law, cryptocurrencies are treated like property. As a result, each time someone buys, sells or exchanges a digital asset, it is considered a taxable event and the capital gains tax applies. The Internal Revenue Service is of the view that many reportable transactions go unreported. One method it is adopting to try capture such taxes is that, starting in 2020, the very first question on the standard 1040 Form is whether “at…

Just yesterday, we reported on a lawsuit brought against the U.S. Internal Revenue Service for allegedly obtaining information improperly from Coinbase about its accountholders. Now, the Block is reporting that the IRS has entered into a contract with Coinbase to use its Coinbase Analytics blockchain tracing software. The one-year contract, for $124,950, commences on July 23, 2020. According to the report, the IRS had signaled its intention to buy a software license from Coinbase in…

We previously reported that, in July 2019, the IRS announced that it had begun sending the now infamous letters to taxpayers who, supposedly, may have failed to properly report income and pay taxes associated with cryptocurrency transactions. About 10,000 of these Letter 6173 were sent. On tax day (July 15 this year) the IRS was sued in connection with these letters. The complaint alleges that Plaintiff James Harper opened an account with Coinbase in 2013. …

On October 9, 2019, the U.S. tax authority (the Internal Revenue Service or “IRS”) released Revenue Ruling 2019-24 providing guidance on the U.S. income tax treatment of hard forks and airdrops of cryptocurrency (see our prior post about this guidance).  On December 20, 2019, eight members of the U.S. Congress sent a letter to the Commissioner of the IRS stating that they were “concerned that this recent guidance raises many new questions related to the…

Historically, U.S. tax law has allowed a taxpayer to exchange one investment property for another and defer the income tax consequences of that exchange so long as both the relinquished property and the acquired property are sufficiently similar—along with several other requirements.  This type of tax-deferred exchange is referred to as a Like-Kind or Section 1031 Exchange.  Without this Like-Kind Exchange treatment, a taxpayer would owe income tax on the increase in value of the…

The U.S. Internal Revenue Service (“IRS”) released Revenue Ruling 2019-24 on October 9, 2019 providing guidance on the U.S. income tax treatment of hard forks and airdrops of cryptocurrency.  Revenue Rulings are an official interpretation of the U.S. tax laws by the IRS and intended to guide taxpayers in addressing their income reporting and tax obligations.  This Revenue Ruling supplements the first and only cryptocurrency-related guidance issued by the IRS in 2014. The IRS described…

In July, the IRS announced that it had begun sending letters to taxpayers who may have failed to properly report income and pay any tax associated with cryptocurrency transactions or who did not properly report such transactions. The IRS expects to send more than 10,000 letters before the end of August. Taxpayers who have not properly reported their cryptocurrency transactions are, where appropriate, liable for tax, penalties, and interest, and in certain cases, may be…