We have previously reported (here and here) on the refund lawsuit that a couple, the Jarretts, brought against the U.S. Internal Revenue Service. Mr. Jarrett produced Tezos tokens, a form of cryptocurrency, through a process known as “staking” — a system being used by more and more blockchains. As Jarrett saw things, staking uses existing Tezos tokens and computing power to produce new tokens. Thus, he argued, he would owe taxes on the tokens only…
About two years ago, we wrote a post about actions being taken by the U.S. Internal Revenue Service (“IRS”) in connection with its concern that cryptocurrency owners were underreporting or failing to report gains. One such action was the use of John Doe summonses. The IRS issues a John Doe summons when it wants to obtain information about a group of unidentified taxpayers where it suspects many are non-compliant. If successful, a John Doe summons…
Washington based think tank Coin Center has brought a lawsuit against, among others, the United Sates Treasury Department and Internal Revenue Service regarding a reporting requirement included in last year’s major infrastructure legislation. We wrote at that time about the criticism of the bill with respect to the reporting burdens that were going to be placed on “brokers” of “digital asset” transfers. The Coin Center lawsuit focuses on the so-called Section 6050I reporting requirement, which…
We previously reported about a case in which a Tennessee couple, the Jarretts, sued the U.S. Internal Revenue Service seeking a refund for taxes they paid on Tezos tokens that they earned through staking. On February 14, 2022, the IRS delivered the requested refund with interest, thinking that would end the lawsuit. But the Jarretts “rejected” the refund and argued that their lawsuit should continue. The IRS has now moved to dismiss the case. One…
According to the Coinbase website, “staking” is “the process of actively participating in transaction validation (similar to mining) on a proof-of-stake (PoS) blockchain. On these blockchains, anyone with a minimum-required balance of a specific cryptocurrency can validate transactions and earn Staking rewards.” On May 26, 2021, a Tennessee couple sued the IRS seeking a refund for taxes they paid on Tezos tokens that they earned through staking. As explained in their complaint: The Tezos public…
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…