IRS cryptocurrency taxation laws are tightening
IRS cryptocurrency taxation to see third party contractors?
The statement of work was issued recently to famous cryptocurrency tax software firms like CyrptoTrader.Tax. In order to give IRS the industry expertise that is necessary for the identification and pursuance of cases in which taxpayers either do not report about their digital assets or are inconsistent in reporting the actual transactions of cryptocurrency.
This means that the IRS would be hiring outside contractors who would be experts in the cryptocurrency. In order to tighten the IRS cryptocurrency taxation law, these third party contractors would identify crypto investors whose tax returns either are omitted or contain false data related to cryptocurrency transactions. The only reason for hiring cryptocurrency experts as outside contractors are to drastically increase the scrutiny and volume of audits for cryptocurrency.
As per IRS, the virtual currency can be defined as the digital representation of value that functions as a unit of account, a value store, and a medium of exchange. Thereby, any asset with such characteristics would be treated as virtual currency for federal income tax purposes.
Moreover, some of the virtual currencies are convertible, meaning that they have the corresponding values in one or more than one traditional currencies (fiat). While the widely-known virtual currencies like Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) are called cryptocurrencies as they employ cryptography for securing transactions that are recorded digitally on a Distributed Ledger Technology (DLT) like blockchain.
In the past, IRS had sent letters to the cryptocurrency holders pushing them to file tax returns, and the latest measures are to ensure IRS cryptocurrency taxation laws are implemented properly.