Tags: irs | crackdown | cryptocurrency | complexity

IRS Crackdown Adds to Cryptocurrency Complexity

IRS Crackdown Adds to Cryptocurrency Complexity
(Boonrit-Panyaphinitnugoon/Dreamstime)

By    |   Tuesday, 20 February 2018 03:55 PM

The IRS announced that it is forming a special group to track down cryptocurrency tax evaders.

The IRS gathered vast amounts of experience in investigating identity theft and attacking offshore tax havens which it wants to employ on its latest target.

It is more likely than not that the IRS is correct in asserting there is some amount of evasion of federal income tax by U.S. cryptocurrency investors.

Seems a reasonable assumption because one reason investors like dealing in cyberspace is that transactions are not reported to the IRS.

How successful has the IRS been in cracking down on identity theft and offshore tax haven tax evasion?

It seems fair to say that identity theft is still a major problem.

And I think it is safe to say that the Foreign Account Tax Compliance Act (FATCA) dumped on the IRS by Congress created havoc for the global financial industry.

It generated some amount of penalties and interest but little in the way of tax.

Digital currencies represent a new and novel problem for governmental regulation and tax enforcement. Unlike fiat currencies controlled and manipulated by central banks, digital currencies are decentralized existing somewhere in cyberspace created and maintained by a vast network of private computers.

Digital investors believe the system based on using so-called blockchain technology is reliable.

Unlike fiat currency, the digital format is not susceptible to unlimited printing by bureaucrats.   

In that regard, cryptocurrency may be safer than U.S. dollars issued by the Federal Reserve which by the simple push of a computer button prints money to buy computer-generated bills and notes from the Treasury.  

Are digital currencies money?

The IRS says they are not.

For anti-money laundering purposes and bank secrecy, FinCEN sees these as “convertible” virtual currency.

The Commodity Futures Trading Commission is studying whether they should regulate the trading of cyber money as a commodity.

The SEC is very much in the fray seeing cryptocurrency as a major fraud threat for investors and markets.

Threats involving the validity, safety, or illegal use by bad actors of digital currencies are real.

But there is a major danger to the free-market capitalist system where the government uses the enforcement of the federal income tax in vastly increasing the surveillance state.

Already private financial confidentiality is severely undermined by the intrusion of the tax enforcement which some have said, results in “persistent, continuous, and indiscriminate monitoring of our daily lives.”

Not considered in the ever-increasing quest for the tax is whether the marginal benefit of a few extra tax dollars for the government to misspend is worth the ongoing loss of individual privacy, and the deleterious impact on creativity and innovation.

The debate on whether the federal income tax is worth the destruction of our personal freedoms, expansion of the surveillance state, and the destabilization of the free-market economy will continue.

Not debatable is that the IRS crackdown on potential cryptocurrency federal income tax evaders will add complexity to the investing and use of digital currencies.

Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher.

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
Kleinfeld
Unlike fiat currencies controlled and manipulated by central banks, digital currencies are decentralized existing somewhere in cyberspace created and maintained by a vast network of private computers.
irs, crackdown, cryptocurrency, complexity
516
2018-55-20
Tuesday, 20 February 2018 03:55 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved