It is a known fact that many of the cryptocurrency traders, as well as investors, are not paying taxes. The reason for this is that there is no proper legal framework to pay taxes. Moreover, the exchanges are not compliant with the tax laws. Owing to this very reason, investors, as well as traders, are able to hide their income and avoid taxes.
Recently, however, IRS in the United States has created a 10 member team which would be looking into the crimes which are done with the help of cryptocurrency. These would also include tax evasion and money laundering cases as well.
According to the Chief of the division, Don Fort, the team would be working in conjunction with the other international agencies in order to find out about the tax evaders who are using cryptocurrencies. Currently, the main focus of the group is on the investors who are converting the Fiat currency into cryptocurrency.
IRS has been issuing notices to cryptocurrency investors
IRS has been issuing notices to cryptocurrency investors as well as traders since 2014. IRS believes that cryptocurrencies can be considered as a security. Owing to this very reason, the tax on cryptocurrencies should be the same as that on securities. According to some of the reports, the bulk of the people still do not pay taxes on cryptocurrency earnings. One more thing which the IRS is facing is that they are not able to easily retrieve information about the users from the cryptocurrency exchanges. They have to go through the codes in order to get the members information as well.
In many of the cases, it was found that exchanges have not gathered significant information about the members. This is the reason why the members could not be tracked down.
Cryptocurrency exchanges with the local rules and regulations is also going up
However, the compliance of the cryptocurrency exchanges with the local rules and regulations is also going up. More and more cryptocurrency exchanges are actually demanding documents as well as ID proofs from the members. Thus, in the coming months with the higher authorities getting stricter and the exchanges also demanding the identity of the traders, you can be sure that most of the cryptocurrency users, as well as traders, would be paying taxes. This is a step in the positive direction as any legal framework surrounding the cryptocurrency space would make it more transparent. This would also increase the attractiveness of the cryptocurrency space is it would seem like even legit traders as well as investors invest money in cryptocurrencies rather than the ones that have something to hide.