IRS sheds light on reporting requirements for fiat-purchased crypto (www.blockcast.cc)

The United States Internal Revenue Authority (IRS) has updated the FAQ section on cryptocurrencies. A report unveiled this news on March 3, noting that the update exempts individuals that purchased crypto using fiat currencies and had no other crypto transactions in 2020 from reporting such transactions under the virtual currency question. Reportedly, this news comes after the agency updated the first page of the US citizen’s Individual Income Tax Return form (Form 1040), asking taxpayers whether they had engaged in crypto last year.

According to the report, Form 1040 asks whether the taxpayer received, sold, sent, exchanged, or got any financial interest in any virtual currency in 2020. To this end, the respondents that got crypto assets in whatsoever means need to answer “yes” to this question. However, the fifth question on the updated FAQ form asks if a respondent that purchased cryptocurrencies with real money and had no other crypto transactions until the end of the year must report such activities in Form 1040.

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Responding to this question, the IRS said,

If your only transactions involving virtual currency during 2020 were purchases of virtual currency with real currency, you are not required to answer yes to the Form 1040 question.

Authorities still lag regarding crypto regulation

This news comes as the IRS continues striving to provide more clarity on how crypto investors should report their tax obligations to prevent going against the law. However, the crypto sector’s rapid rate of innovation has seen the taxman among other regulators fall behind. To this end, the IRS has been constantly updating Form 1040, with the previous version asking all US taxpayers if they had at any time during 2020, received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency.

This change left many taxpayers perplexed and concerned because the question was not well defined. As a result, many US taxpayers took to Twitter, hoping to find answers.

If you answer the virtual currency question falsely, you could be charged with perjury.

Lawyers call this a “perjury trap.”

Most feel the IRS has not provided adequate guidance for taxpayers to know how to report their crypto income, especially in light of DeFi innovations. pic.twitter.com/djzzfRUJUb

— Clinton Donnelly (@CryptoTaxFixer) December 16, 2020

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IRS: Tax filers must check ‘yes’ on the crypto question (www.blockcast.cc)

• US IRS recently published a draft with instructions on how crypto users should file their tax reports.
• The agency insists that anyone who bought crypto in 2020 needs to report it in their form.
• But, since crypto purchases are not taxable events, coin buyers do not have anything else to report.

The US IRS (Internal Revenue Service) recently released revised draft instruction for the country’s tax filers. The tax agency used the opportunity to remind the country’s citizens that crypto users need to admit their dealings with digital currencies when filling up the IRS tax forms.

The IRS insists: Anyone who bought crypto needs to admit it

The IRS started a new campaign of reminding the US tax filers in 2021 that they are obligated to disclose and clarify their crypto purchases. The agency insists that any crypto purchase counts as a virtual currency transaction, and as such, it must be listed in the tax report.

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The instructions are rather clear — anyone who bought digital coins in 2020 needs to answer “yes” to a Form 1040 crypto question. The question, for those who may have missed it, is “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

Now, not any dealing with digital coins need to be reported, according to the IRS. Users who only held coins in their possession, or transferred them between different wallets that they own do not have to disclose such cases of crypto management.

The IRS issued another version of draft instructions (dated 12/31/20).

A couple of new items in this version 👇

– Further clarifies what’s virtual currency is (very broad definiton)
– Requires you to check “yes” if you just purchased crypto in 2020 https://t.co/cP6Iam1ZVh— Shehan 🧗‍♀️|🇱🇷|🇱🇰 (@TheCryptoCPA) January 4, 2021

The IRS updated their October 2020 draft

One interesting thing that some crypto users have noticed is that the previous instructions page — the one released in October 2020 — did not include purchases. Crypto users were only obligated to report transfers of coins such as airdrops, hard forks, as well as sales, trades, and alike.

However, it did not specifically say that users must report purchases. The new draft, published on the last day of 2020 — December 31st — was the first iteration that had it included.

According to CoinTracker’s Head of Tax Strategy, Shehan Chandraskera, this clarification is very important. Before, the draft only mentioned “financial interest,” which is a very broad category. Specifying what the IRS wanted is a good way for crypto users to accurately fill out their taxes without having to interpret the law themselves.

One last thing to note is that, despite the fact that crypto users need to select “yes” on their forms — buying crypto is not a taxable event in the US. As a result, there is nothing to report apart from admitting that the tax filer is a crypto buyer. This leads to the question of why the IRS wants to know this? So far, there is no clear answer.

IRS to transition from ‘education to enforcement,’ says former division chief (www.blockcast.cc)

A former top investigator is warning that “a high-stakes game of chicken” between the Internal Revenue Service (IRS) and cryptocurrency holders who fail to properly report their earnings will be entering a new phase in 2021 as the tax collection agency begins to focus on pursuing “civil and, potentially, criminal penalties.”

In an article co-authored by Don Fort today, the former chief of the Internal Revenue Service’s (IRS) criminal investigation division said that while the agency until now has focused its resources on informing the public of proper reporting guidelines, it will now be turning to more stringent “enforcement.”

“The IRS has been not-so-quietly positioning itself for a smooth transition from education to enforcement in 2021 and beyond.”

The article notes that the trail starts with Coinbase, who answered a “John Doe” summons in 2018 and handed over account information on nearly 13,000 users — information which could soon lead to crackdowns. For instance, the article mentions the request the IRS made to Luxembourg-based exchange Bitstamp for information on one American user.

The focus on crypto holders is in part due to a widening “tax gap” — the rift between the total income from taxes that should be paid to the Treasury verses what it actually receives — a disconnect in which Fort and his co-author Lawrence Sannicandro believe crypto holders could be playing a major part.

“As of Dec. 10, with Bitcoin fresh off new record highs, the market capitalization of cryptocurrencies was $524 billion,” the article reads. “Assuming cryptocurrency-related tax liabilities of $25 billion and a 50% compliance rate, unreported cryptocurrency tax liabilities again account for around 3.2% of the $381 billion tax gap. Thus, it is likely that unreported taxable cryptocurrency transactions are contributing significantly to the tax gap.”

Ultimately, the article concludes that major trends — such as the addition of a question about cryptocurrency now prominently placed at the top of form 1040 — indicate that the IRS is gearing up for widespread efforts to root out underpayment.

“Even though the IRS has not yet announced many mainstream tax evasion or money laundering cases involving virtual currency, that trend should change in 2021.”

Moreover, crypto holders shouldn’t try to get cute when the tax man comes calling.

“History has shown that underestimating the government is a fool’s game.”

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Author: Refer to Source Cointelegraph By Andrew Thurman

Latest IRS draft shows how to file taxes on your cryptocurrency transactions (www.blockcast.cc)

• The latest draft shows users how they can file tax using their digital assets, it clears all the doubts.
• The latest draft also shows IRS doesn’t care much about the cryptocurrencies as compared to transactions.
• The draft further suggests hard forks are taxable while transactions within personal wallets aren’t.

IRS Tax forms have a new filing method for cryptocurrency transactions, and they announced it a few days ago. The internal revenue service tax forms are used by organizations, individuals, and other taxpayers to report their financial information’s in the traditional finance systems.

It is also used by tax-exempt organizations to report all their financial transactions in the US. The report captures total income, calculates total tax, and discloses every other financial information required by the IRS. Currently, in 2020 there are more than 800 types of schedules and forms with the IRS.

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Controversy with cryptocurrency

There have been major controversies around how cryptocurrency holders are to pay tax. Although, there is a new guideline that addresses how cryptocurrency holders would carry out tax payments. This new rule does not affect cryptocurrency holders who did not actively trade in the last year.

According to the new tax forms, they are mandated to tick the “No Box” on the IRS tax forms. The “no Box” form implies that the crypto holder did not carry out any form of trading on their platform.  Here is a breakdown of what the new internal revenue form specifies

• The new Internal revenue form cares more about transactions, whether cryptocurrency or traditional finance.
• Airdrops are taxable, but personal transfers from wallet to a wallet do not need to be disclosed and are not taxable.
• The new IRS form does not adopt an ambiguous process. Every transaction that passes through “pass-through entities” would have to check the yes box.

Latest IRS draft

In the latest IRS US draft for personal income tax in the USA. The IRS has clarified its stance about transactions and cryptocurrencies. The information is in form 1040, which was released by the internal revenue service on Friday. It does not mandate cryptocurrency holders to trade; rather, it requires any trader to pay tax. The IRS form contains a key question which is: Did you exchange, receive, or sell digital assets through any virtual system? You would have to Tick the No check box if you did not carry out any of the above.

This means you do not have to pay any tax if all you did was to transfer your cryptocurrency between your wallets or you carried out no action.  However, you must pay tax if you carried out a digital asset transfer from your wallet to a third parties wallet. It also states that airdrops from platforms such as Uniswap are also taxable, including stable coins and other tokens.

What about cryptocurrency frauds?

You would have to prove that your account was hack if a transfer occurred from your cryptocurrency wallet to another by a scammer. You would be liable to pay tax if you can’t prove it. Cryptocurrency holders must report their income correctly to the IRS, and you would also report to the IRS if you lost your Keys.

Amid IRS bounty and competitor progress, Monero developers ship a major update (www.blockcast.cc)

First announced in September, Monero developers today went live with a network update featuring a new version of its node software, codenamed ‘Oxygen Orion.’ The product of 30 contributors, the update promises significant improvement across nearly all aspects of the privacy-focused cryptocurrency’s performance. 

The highlight of the new update is the compact linkable spontaneous anonymous group (CLSAG) feature. According to the Monero blog, CLSAG will reduce transaction sizes by 25% and improve transaction times by 10% while maintaining transactional privacy.

The developers wrote: 

“CLSAG enables smaller and faster transactions with rigorous security.” 

In addition to CLSAG, the new update brings security improvements to the network especially with regard to Dandelion ++, which is responsible for hiding user IP addresses.

Technically speaking, Monero updates are hard forks so it is imperative that network participants make sure that their software is up to date. Users who store their XMR in a hardware wallet will need to stay updated with the latest firmware, the blog noted. 

This latest update comes amidst an uncertain outlook for the cryptocurrency due to pressures on multiple fronts. 

In September the U.S Internal Revenue Service (IRS) offer a bounty of up to $ 625,000 to anyone who can crack Monero’s privacy. Additionally, the Department of Homeland Security claimed to have acquired software that can track Monero transactions, though some researchers question the veracity of those claims. 

Meanwhile, rival privacy cryptocurrency Zcash is heading into a halving event sometime this November, which some analysts believe will lead to bullish price action for the competing asset. 

In spite of these headwinds, positive social media sentiment for XMR is up roughly 4% in the past week, according to analytics provided by TheTIE. 

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Author: Refer to Source Cointelegraph By Husayn Hashim

Despite Daily Transactions Peaking IRS Scare Tactics Have Monero Investors Spooked (www.blockcast.cc)

Privacy coin Monero presses on full steam ahead as its daily transaction count reaches all-time highs. Data from bitinfocharts.com shows the daily number of XMR transactions peaked at 20.136k on October 12, 2020.

This smashes the previous all-time high of 16.689k daily transactions, achieved less than a month and a half ago.

Source: bitinfocharts.com

Since July last year, Monero’s daily transaction count has formed an ascending broadening pattern, characterized by two diverging trend lines.

Typically, this pattern indicates random disagreement between investors.

With that, it’s possible that some investors feel uncertainty as a result of the IRS’s campaign to “break” Monero and other privacy coins.

The IRS is Gunning For Monero

The IRS has, in recent times, ramped up its focus on privacy coins. Last month, blockchain analytics firm CipherTrace announced it had developed a Monero tracking tool in conjunction with law enforcement and government agencies.

“Our research and development team worked for a year on developing techniques for providing financial investigators with analysis tools. There is much work still to be done, but CipherTrace is proud to announce the world’s first Monero tracing capability.”

However, in an interview with Compliance Analyst at DV Trading, Justin Ehrenhofer, and Monero Labs Researcher, Dr. Sarang Noether, Dave Jevans, the CEO of CipherTrace, admitted the technology is limited to statistical likelihoods.

As such, despite the bravado, at present, there remains no way to directly trace ring signers on Monero.

At around the same time, the IRS also launched a bounty program recruiting help in tracking cryptocurrency transactions.

Up for grabs was a cash reward of up to $625,000 for parties who provided solutions in cracking privacy technology.

“IRS-CI is seeking a solution with one or more Contractors to provide innovative solutions for tracing and attribution of privacy coins and Layer 2 off-chain transactions, such as expert tools, data, source code, algorithms, and software development services to assist their Cyber Crimes agents in carrying out their mission as it relates to cryptocurrency privacy technologies.”

The proposal expired on September 16, 2020, and there have been no further updates regarding the success of the program.

XMR is on a Tear Despite Continuing Doubts Over Privacy Coins

Regardless of the uncertain future for privacy coins, both the dollar and BTC price of Monero has been on a tear lately.

Sunday saw the price of XMR stop short of $150, another all-time high, before quickly retracing. Currently, XMR is up 2.5% on the day to $129.51.

Source: XMRUSDT on TradingView.com

By the same token, while most other altcoins are down against Bitcoin, Monero managed to reach an all-time high against BTC on Sunday, peaking at ₿0.011822.

As such, despite the threat from the IRS, many Monero investors remain confident in the protocol. And considering the recent price moves, this is a sentiment that is spreading.

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Author: Refer to Source Samuel Wan

The IRS to enforce stricter rules for crypto exchanges (www.blockcast.cc)

• TIGTA’s audit discovered that the IRS struggles to identify crypto users, which reduced tax compliance to 45%.
• The IRS was requested by TIGTA to introduce stricter compliance rules for crypto exchanges.
• The nature of crypto leads to additional challenges, however, which makes crypto taxation extremely difficult.

The US IRS has been struggling to convince US crypto users to report their crypto dealings and pay on the profits they made from trading for years now. However, it appears that its efforts did not have too much effect. The number of crypto tax non-reporting cases are growing, which might force the US tax authority to introduce stricter rules on crypto exchanges.

The IRS needs to do more to identify crypto users

Recently, the Treasury Inspector General for Tax Administration (TIGTA) conducted an audit that discovered that the IRS is having trouble with identifying crypto-users among taxpayers. The main issue, according to the audit report, appears to be poor third-party information reporting.

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As a result of these findings, the administration has requested that the IRS take extra steps to reduce the information gap. The Agency was instructed to enforce stricter rules on digital currency exchanges in order to ensure more accurate data sharing.

The so-called third-party information reporting that seems to be the core of the problem is a smart mechanism that the IRS is using to ensure tax compliance.

This is actually the very reason why taxpayers have to fill out tax forms. Form issuers send these forms to the taxpayer and IRS alike, and when taxpayers file their tax returns, the tax agency’s systems match reports by issuers with reports filed by taxpayers.

The system quickly notices if the reports don’t match, and the IRS then makes a move to inquire further about the mismatch.

3rd-party information reporting doesn’t work on crypto

So far, this system proved to be rather effective, with compliance from the taxpayers being at around 95%. However, it would seem that compliance saw a 50% drop when it comes to cryptocurrencies.

The real issue here is crypto exchanges. With crypto regulations still being mostly non-existent, exchanges are expected, but not actually forced to comply, which is why they interpret the current rules in different ways from one another, and more importantly — from the IRS.

As a result, the IRS will be forced to modify the information reporting system, so that it will have accurate information regarding cryptocurrency. However, there are too many issues tied to crypto transactions, which makes the future of digital currency taxation unclear.

The US IRS agency adds crypto questions to tax forms (www.blockcast.cc)

• US tax agency, the IRS, is taking the next step in an attempt to get people to report their crypto earnings.
• The IRS released a preview of the next year’s tax report, revealing that it contains a crypto question.
• Americans will have to disclose their involvement with crypto, or lie on their tax report and break the law.

The US tax authority has been getting serious about cryptocurrency for quite some time. However, the US crypto users have tried their best to ignore the IRS’ warnings to carefully calculate their crypto income and include it in their reports.

Now, the agency is taking the next step by adding the crypto question to its tax form 1040.

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Tax form 1040 gets a crypto-related question in 2021

Unfortunately for the US crypto users, the strategy to play ignorant about not including cryptocurrencies in their tax reports is getting riskier and riskier. With the IRS’ plan to include cryptocurrencies in its tax forms, that strategy will soon become obsolete.

As most likely know, Form 1040 is one that every American citizen has to file in order to report their federal income taxes. In a recently published a preview of the next year’s tax form, it is clear that the IRS now plans to take the next step and include a yes or no question that asks if the filler has earned interest by trading digital currency.

The question is just below the address line, so no one can miss it and play ignorant anymore. The tax agency’s new strategy may be seen as a bit of an aggressive one by some, but the IRS deems it necessary as it continues to ramp up scrutiny of the crypto sector.

Millions of Americans use crypto, but only a handful reports it

Most of the time, the agency has been focusing on criminal activities involving cryptocurrencies. However, it has been known to seek out and identify crypto users who failed to report their taxes.

These days, millions of American citizens own digital currencies, while only a small portion of them is including crypto while filing taxes. Even crypto exchanges like Coinbase have been trying to make calculating crypto taxes easier by offering special tools for tax reporting.

However, none of this helped with raising the percentage of users who actually do it, as most still believe that they can ignore the warnings and get away with it. Now, Americans have a choice to disclose their crypto earnings, or openly lie on their tax report, which would put them in much greater trouble if they get caught.

Monero (XMR) workgroup urges the IRS to study XMR (www.blockcast.cc)

• Per XMR’s spokesperson, the IRS should focus on building XMR instead of trying to destroy it.
• According to XMR’s workgroup, the US Dollar is also used in criminal activities.
• Before XMR’s retaliation, the IRS had offered up to £482,180 to anyone that can break XMR.

A Monero working group has claimed that the US Internal Revenue has better ways to spend taxpayer dollars than offering bounties to breach Monero’s (XMR) privacy. A report unveiled this news on September 17, noting that the workgroup made this statement after the IRS announced that it would offer up to £482,180 to anyone who can break Monero. Speaking on behalf of Monero, a spokesperson asserted that the IRS should learn how XMR works instead of trying to breach its privacy.

In the report, Monero’s outreach representative noted that XMR provides its users with a certain degree of transparency.

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The representative added that,

“$625,000 would be better spent by the IRS to hire a few consultants to teach their staff how Monero works and how its features allow users to opt-in to transparency.”

Per the representative, XMR is designed to function just like cash, adding that the US Dollar also has a certain level of privacy.

The representative added that,

“The U.S. dollar is used for a majority of the world’s nefarious activities and yet, it is what denominates the IRS’ balance sheet. […] The IRS doesn’t know how much cash you earned unless you report it, but you don’t see them trying to break the U.S. dollar.”

Government agencies continue battling XMR

This news comes after the US IRS announced its bounty program to track XMR and BTC Lightning Network transactions on September 11. Per the IRS, the current system lacks investigative resources for tracing transactions regarding transactions involving privacy coins that bad actors use in illicit affairs.

However, the IRS is the only agency that seeks to break Monero’s privacy. Prior to this, CipherTrace, a leading crypto intelligence firm, alleged that its crypto-tracking tool can track Monero transactions. Before this, Russia’s Federal Financial Monitoring service declared that its crypto tracking tool can help minimize anonymity in Monero transactions.

Monero (XMR) workgroup urges the IRS to study XMR (www.blockcast.cc)

• Per XMR’s spokesperson, the IRS should focus on building XMR instead of trying to destroy it.
• According to XMR’s workgroup, the US Dollar is also used in criminal activities.
• Before XMR’s retaliation, the IRS had offered up to £482,180 to anyone that can break XMR.

A Monero working group has claimed that the US Internal Revenue has better ways to spend taxpayer dollars than offering bounties to breach Monero’s (XMR) privacy. A report unveiled this news on September 17, noting that the workgroup made this statement after the IRS announced that it would offer up to £482,180 to anyone who can break Monero. Speaking on behalf of Monero, a spokesperson asserted that the IRS should learn how XMR works instead of trying to breach its privacy.

In the report, Monero’s outreach representative noted that XMR provides its users with a certain degree of transparency.

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The representative added that,

“$625,000 would be better spent by the IRS to hire a few consultants to teach their staff how Monero works and how its features allow users to opt-in to transparency.”

Per the representative, XMR is designed to function just like cash, adding that the US Dollar also has a certain level of privacy.

The representative added that,

“The U.S. dollar is used for a majority of the world’s nefarious activities and yet, it is what denominates the IRS’ balance sheet. […] The IRS doesn’t know how much cash you earned unless you report it, but you don’t see them trying to break the U.S. dollar.”

Government agencies continue battling XMR

This news comes after the US IRS announced its bounty program to track XMR and BTC Lightning Network transactions on September 11. Per the IRS, the current system lacks investigative resources for tracing transactions regarding transactions involving privacy coins that bad actors use in illicit affairs.

However, the IRS is the only agency that seeks to break Monero’s privacy. Prior to this, CipherTrace, a leading crypto intelligence firm, alleged that its crypto-tracking tool can track Monero transactions. Before this, Russia’s Federal Financial Monitoring service declared that its crypto tracking tool can help minimize anonymity in Monero transactions.