IRS Seeking Data From Tech Firms on User Cryptocurrency ActivityAdam Gardiner
According to a recently leaked presentation, the Internal Revenue Service (IRS) is looking to force big tech firms to provide them with information on user cryptocurrency activity. IRS is allegedly looking into contacting firms such as Google, Apple, and Microsoft and looking for information about user downloads of cryptocurrency applications, particularly with regard to use of Bitcoin. The purpose of the IRS’ actions is to search for instances of potential tax evasion with regard to people concealing the gains they may have made from Bitcoin or cryptocurrency trading.
While there may very well be people who have tried to conceal their gains from trading, the IRS has been dragging its feet with respect to the tax guidance it has given people. Aside from one very brief document issued in 2014, the agency has been all but silent on Bitcoin and cryptocurrency taxation. The agency has promised to provide more detailed guidance in the near future, but that’s a little too late for people who may have already subjected themselves to significant tax consequences without even knowing it. Hopefully the agency will not attempt to apply its guidance in an ex post facto manner, but that’s wishful thinking.
The IRS apparently also plans to subpoena information from Paypal and from banks to discover whether users have been using those services to purchase Bitcoin and conceal their gains from tax authorities. So if you thought you could keep your Bitcoin activity concealed from the government, you’re highly mistaken.
This highlights the importance of investment vehicles such as Bitcoin IRAs, which allow investors to invest in Bitcoin while still enjoying the tax advantages of a traditional IRA. One of those main advantages is deferring taxation until it comes time to take a distribution. Those investors who have invested in Bitcoin through a Bitcoin IRA don’t have to worry about the IRS coming after them because their investments have been by the book and above board. The IRS knows about their IRAs and doesn’t have any desire to tax them because those assets are currently sitting in tax-advantaged accounts.
For investors who may fear the IRS breathing down their necks, investing in a Bitcoin IRA is beneficial not just because of its ability to keep Bitcoin gains growing tax-free into the future but because it protects investors from the potential vagaries of the IRS’ tax treatment of cryptocurrency. Why subject yourself to uncertainty when you can invest through a Bitcoin IRA and rest assured that everything you’re doing is completely legal?