A current look at cryptocurrency and tax evasion

On Behalf of | Feb 26, 2018 | Firm News, Tax Evasion

Inconsistencies in tax reporting could result in extended periods of investigation from the Internal Revenue Service, and worse, actual charges for tax evasion. Despite the severity of these charges, incidents such as these are rarely black and white. Lack of straightforward paperwork does not necessarily point toward this crime, but details involving recent modifications to taxation and other information can help Californians clarify an otherwise uncertain predicament.

According to Accounting Today, the rise of Bitcoin and other cryptocurrencies has driven the IRS to take a closer look into tax evasion cases. These forms of currency — some of which have seen an explosive market — can facilitate tax evasion. As a result, The Securities and Exchange Commission has taken action to prevent fraud, focusing heavily on companies that have thrived by illicitly selling digital currency. Blockchains (ledgers which can come in both private and public forms) are a particular target for the Commission, as they are known to serve as private bankers. Much like an investigation that can begin years before a charge, the IRS has made efforts to halt the use of digital currencies to avoid taxes since 2013.

An article from Business Insider also speculates on the recent cryptocurrency population boom and attempts to evade taxes. Countless bitcoin users have sought to benefit from its growth without suffering the tax damages. With the IRS’ ability to charge taxes on any gain made through bitcoin sales, cryptocurrency owners have turned to bitcoin loans. Depending on the length of time someone holds a bitcoin amount, they could face either ordinary tax rates or long-term capital gains rates. Loans have allowed bitcoin owners to spend money immediately while simultaneously avoiding these additional expenses. In addition to the aforementioned steps taken by the IRS, Business Insider notes that increased competition and lax standards from lenders could make the process risky.







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