fbpx
Connect with us

CryptoSpace

IRS Crypto tax AUDIT notice probes deep – Key Takeaways & next steps

Published

on

IRS TAX Form

What you can expect in this article?

  • Deeper look at the IRS Crypto Tax Audit notice letter
  • Key takeaways from this audit notice you need to know
  • Why this notice shows lack of IRS’s awareness about crypto space
  • Next steps if you have received the IRS Crypto Tax Audit notice
  • Will you need representation if you received this IRS Crypto Tax Audit notice?
  • Is using Crypto tax software catch all strategy?

An IRS Crypto tax audit notice has been circulating on Reddit. Originally posted by user Ubuntaire titled “Anyone wants to see what an IRS audit notice looks like?” has been making waves on social media.

If this is a genuine tax audit notice, the kind of detail that IRS seeks is pretty far reaching. Some of the Redditors have commented on this audit to be a ‘colonoscopy’ and ‘probe’.  

The crypto tax audit notice page posted on Reddit has been replicated below.

_________________________________________________________________________

Below is the text format of the IRS Notice, find the original here.

To make Examination as brief as possible, please have the following information available: 

  • A copy of your 2017 tax return

Provide the following for all virtual currency transactions during the time period 01/01/2017-12/31/2017

  • Detailed records for the acquisition and disposition of any virtual currency (domestic or international), including but not limited to:

o   Emails, screen prints, hardcopy prints, and transaction receipts maintained by the taxpayer or provided by any third-party such as an exchange, broker, or peer-to-peer facilitator (e.g. Paxful, Localbitcoins.com)

o   Wire transfer or direct deposit records, including automated clearing house (ACH) and electronic funds transfer (EFT) records.

o   List of all virtual currency kiosk (i.e., BTM or cryptocurrency kiosk or ATM) locations used along with copies of any transaction receipts or acknowledgements whether provided electronically or in paper.

o   A detailed list of cryptocurrency transactions involving cash including dates, input/output counterparties involved in the transaction, and the cryptocurrency involved

o   All correspondence (I.e., emails, texts, tweets, etc.) with all counterparties to any virtual currency transactions

o   List of all virtual currency received from hard forks, faucets, tipping, or any other method where a sale, buy, or exchange was not initiated by the receiver of cryptocurrency (commonly called airdrops), including date, type, and amount of virtual currency received with the date of sale, or other disposition, including amounts and description of what was received

o   Explanation of the method used to compute basis relating to the sale or other disposition of virtual currency

o   Records reflecting the valuation of any sale or other disposition of virtual currency at the time of acquisition and disposition

  • Records relating to any expenses paid or items purchased (whether domestic or international) using virtual currency
  • List of all blockchain addresses owned or controlled by taxpayer
  • Records of all transactions relating to lending of virtual currency or use of virtual currency as collateral for loan, including, but not limited to, loan agreements, promissory notes, ledgers, transaction receipts, pledge, security, or collateralization agreements
  • List of all digital currency exchanges (DCE) and peer-to-peer (P2P) facilitators (e.g., Coinbase, Paxful or Localbitcoins.com) (foreign and domestic) with associated user Ids, email addresses, IP addresses, and account numbers relating to those platforms
  • List of all counterparties for any P2P virtual currency transactions (identifying the on-chain and off-chain transactions), email address, user IDs transactions.

This is not an all-inclusive list. Requests for additional information may be made if considered necessary. 

_______________________________________________________________________

Key takeaways from the IRS Crypto Tax Audit notice

IRS seems to be coming hard and mighty at the folks who have either ignored to report their cryptocurrency taxes or have not reported everything. This particular IRS Crypto Tax Audit notice pertains to 2017 tax year. Let’s look at some of the key takeaways from this notice.

Emails and correspondence requested

  • IRS is asking for emails, hard copy prints, transaction receipts to substantiate the information provided by you on your tax returns. If you have knowingly ignored to disclose your crypto transactions – then IRS seems to know exactly how to get your information.

Best Crypto tax software

Airdrops, Hardforks, faucets and tipping

  • Probably one of the trickiest and most difficult of all the requests on this notice is the information about Airdrops, Hardforks, faucets and tipping information. Forget about the users keeping track of this information, it is unclear as to how IRS is going to track this information since most of the airdrops and faucet drops are probably worth nothing and they may have been long forgotten because they were worth nothing.

Even if they were worth something, it is quite difficult (or even impossible) for individuals to keep track of the number of places one would have given their wallet address to receive something.

List of blockchain addresses owned

  • Creating wallet addresses is free and happens in seconds.  As such, many people would have created numerous addresses on various wallets and may have never used them. As such, it is unclear why the IRS would simply ask for ALL blockchain addresses ‘controlled’ by taxpayers, instead of saying ‘blockchain addresses controlled by taxpayer with any crypto transactions’.

All in all, the language is designed to be all inclusive and being a relatively new technology – IRS covered all the known basis where a transaction history might live.

Why this notice shows lack of IRS’s awareness about crypto space?

The request shows the shortage of understanding on the IRS’s side as to how the airdrops and other rewards work.  We think a think tank and revisit on certain aspects of Crypto space is required from the IRS side to develop a practical framework:

  • Set de minimis to report airdrops and rewards
  • For the projects that go bust or out of business should be exempt from reporting 
  • Proposal to Assume ‘0’ as cost basis and have reporting mandated on “sale” rather than receipt
  • Open up a public access to track wallet address based transactions so that people can reconcile what they have/remember with IRS records, this will help honest taxpayers who may otherwise inadvertently miss certain transactions

Those are our thoughts on what needs to change to make these reporting requirements more sensible for an average taxpayer with average technical sophistication.

best Crypto Tax Software

Next steps if you have received the IRS Crypto Tax Audit notice

Here are few things you should do, in our opinion:

  • Put together the documents substantiating what has been reported on the tax returns
  • Scour through all of your wallets and check the transactions in the relevant tax year
  • Create a checklist (ideally in a spreadsheet) to track all of your wallets and related transactions
  • Print out any emails, correspondence and other transaction details, and arrange them in order of occurrence (date) 
  • Check to see if you can hire a Crypto Tax Advisor.  Here are the key things you need to look in a crypto tax advisor
  • In some cases, depending on the seriousness, you might need a tax attorney to represent you to avoid complications

Is representation required if you receive this IRS Crypto Tax Audit Notice?

It is unclear as to what happens if you are unable to track down your emails or just don’t have the information about your airdrops, hard forks, faucets and tipping details.  What if you have long forgotten or do not have access to those wallets anymore?  

Will the IRS subpoena your emails and electronic communication?

Will the IRS subpoena your bank accounts and credit card accounts?

How long will this IRS Crypto Tax Audit take to resolve?

What implications will it have on your future taxes?

Given these and other questions that we have not yet thought of to ask, in our opinion, we think it would help to have proper legal representation when dealing with this IRS Crypto Tax Audit notice.

Is using Crypto tax software ‘catch all’ strategy?

If you have used crypto tax software, it might help you document your ‘best efforts’ in reporting the crypto transactions for taxes, however, it is not a panacea to your tax woes.  

For starters, crypto tax software only picks up the transactions that you link through an API.  Most crypto tax software do not pick transactions that happen from wallet to wallet outside the exchange.

If you have used the Best Crypto Tax Software and connected all of your exchanges and do not have transactions outside of these exchanges, chances are, you may not get the IRS Crypto tax notice at all.

The fact that one has received the IRS Audit notice might indicate that you have either ignored to report certain transactions or have not reported them at all.

Either way, go back and check all of your crypto transactions, keep the documentation ready.

Best Crypto tax Software

Do NOT underestimate IRS’s ability or outreach

Even when we were mocked for suggesting to report All of your crypto transactions on your tax returns, we continued to maintain our stand.  

All those social media trolls are not going to come to your rescue when IRS knocks on your door.  

If you are among those who received this IRS Crypto Tax Audit Notice, do not ignore it thinking that IRS will not have the know-how or outreach, because, both of those assumptions could lead to your peril.  

We don’t mean to sound apocalyptic about these affairs and our genuine hope is to encourage you to take the right action as per the law.  Whether that is using a representation or doing it on your own is your choice as long as you do not simply throw this IRS Crypto Tax Audit Notice in the dustbin. 

Immediate tax article references that might be of interest to you:

Thank you for reading and sharing this article.  You can highlight any text on this page to share on social media.

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

Subscribe-top5-long-term-cryptocurrencies



CryptoSpace

Crypto Roundup: All Your YouTube Influencers in One Place

Published

on

Crypto Roundup

Visit our Crypto Roundup section daily for a dose of all your favorite Crypto YouTube influencers in one place.    

Worried about missing updates from your favorite YouTube crypto influencers?  

Welcome to the Crypto Roundup.  

On this page, we will post a quick summary of the videos from some of the most popular YouTube crypto influencers.

Ivan on Tech  Altcoin Daily

Crypto Zombie Box Mining

Ellio Trades Lark Davis

Data Dash Bitboy Crypto

MMCrypto Chico Crypto

Altcoin Daily

Video title: Bitcoin Will Be OVER $20,000 By Christmas 2020! BIGGEST WEALTH SHIFT OF OUR LIFETIME! Cryptocurrency

Date: 19-Nov-20

  • World’s biggest wealth shift of our lifetime is happening right now and no mainstream media is talking about it, except CNBC.

  • Preston Pysh predicted on August 26th that: “Bitcoin should be reaching its all time high by Christmas.”

  • If you are looking to buy a dip, there may not be one.
  • Ricardo Salinas Pliego, a mexican billionaire, has just revealed that 10% of his liquid assets are into bitcoin.

Lark Davis

Video Title: STOCKS HIT NEW HIGHS! WILL COVID VACCINES LEAD TO MEGA PUMP IN 2021? [Are You Ready?]

Date: 19-Nov-2020

  • Stock markets and bitcoin pumps higher on the news of the second successful covid vaccine.
  • There could be more chances for the new stimulus. Means more inflation, more debt and simultaneously pumps stocks, gold and bitcoin.

Crypto Zombie

Video Title: BITCOIN $18.5k TOP!!?! DON’T BE FOOLED!! HODL FOMO BEGINS!!! $TRILLIONS FLOOD!!

Date: 18-Nov-2020

  • Overall sentiment of Bitcoin has changed drastically from ICO craze in 2017 to a time where people are FOMOing to own more bitcoin.

Ivan on tech 

Video Title: BIG WARNING TO ALL HODLERS!!!!!!!!! DO NOT GET REKT!!! BITCOIN $18,500 REJECTED – NOW WHAT?

Date: 18-Nov-2020

  • Ivan expects bitcoin to shoot past $20K resistance before end of this year, giving it 85% probability

Chico Crypto

Video Title: World’s Most Powerful Turn BULLISH on BITCOIN

Date: 19-Nov-2020

  • All those who hold big bags of Bitcoin will come out of the shadows to talk up the Bitcoin rally, a $20K bitcoin could be on the cards before the end of this year
  • Ethereum mining could act as a big catalyst for Ethereum’s price
  • Big companies like google could play a bigger role in mass adoption of crypto

Let the FOMO begin…

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

Continue Reading

CryptoSpace

Lessons from the Veteran HODLERS to the Newbies!

Published

on

Lessons in Crypto

For all those who entered the crypto market after the 2017 bull run – here are few lessons from the HODLERS from the last bull run(s).

This is our attempt at making all you newbies aware of the mistakes veteran cryptoers did.

Let’s get started…

Don’t FOMO in to all the hype

FomoIt’s hard not to FOMO in crypto.  The trick is to make sure you don’t lose your shirt in crazy bets.  Always limit your bets to what you are comfortable losing.

The common ways you can become victim of FOMO are:

  • Following your favorite YouTuber without actually doing your own research on the project.
  • Investing into projects at the top.
  • Believing in promises of 100x or 1000x without any substance behind those claims.

HODLing far too long

Remember why you are into crypto – to make the money.

Never fall in love with your crypto, and HODL the tokens even when they are 10x and more.

Have a strategy to take your capital out before you become a HODLer.  

If you believe the project really has what it takes to go beyond 100x and more, just sell in instalments so as to not miss the ride.

One of the best ways to HODL is to take your capital in full and profit in tranches.

This rekt story will give you a right perspective of what it looks like, it’s one of many:

Don’t put all your eggs in one basket

Never go all in on one project. No matter how strong the project may look, even the projects with strong fundamentals don’t do well sometimes. 

And, you will be kicking yourself watching other projects go up and your portfolio just doesn’t seem to make a move.

And don’t over do it and have a portfolio with over 100 projects either. It is very difficult not to have invested in more than 15 projects but anything less than 20 is a good way to go, in our opinion. 

Put aside the share of Profits for Taxes.

One way you can get a good night’s sleep is by paying taxes. 

Always keep a habit of putting aside a % of your profits in USDT or other stable coins, as a reserve to take advantage of market volatility and also to meet your tax obligations. 

Exchanges are more evil during bull run

Foreign ExchangesDon’t trust exchanges. Yes we already know that, but they play more games during bullrun, some intentional and some technical. 

Many exchanges tend to go under maintenance when the prices shoot up too high too soon (Coinbase?), and you can’t sell. 

And the shady exchanges scam out before you know.

Regulators seem interested when the market cap of these projects goes through the roof, which then adds FUD around the project crashing the prices.  

Exchange may freeze funds pending investigations when such issues arise.

Take for example OKEx. Users are unable to withdraw their assets from the exchange for almost a month now, not certain if they ever will, and all that started with the legal dispute.

Never fall for Arbitrage gains

Arbitrage is when you buy in one exchange at a lower rate and sell on the other for a higher rate to take some profits. 

Some shady exchanges show a lot higher prices than the other genuine exchanges and when you deposit your assets to sell at those prices there won’t be actual volume to execute the trade. You may be stuck with either a high fee for withdrawal or other funky rules to take your own money out. 

Remember, there is no free Giveaway

Free CryptoScammers rise with the rising market.  

When the crypto market buzzes with all time highs – scammers cash in big time on newbies.

The most lucrative scam in crypto is ‘Free Giveaway’. Whether it be through YouYube ads or discussion groups and wherever they can get your attention.  Read this article on various sophisticated scams that are being deployed.

We hope these lessons help you through your trades and crypto life.  Stay safe and always DYOR.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

Continue Reading

CryptoSpace

Crypto Roundup: All Your YouTube Influencers in One Place

Published

on

crypto news

Visit our Crypto Roundup section daily for a dose of all your favorite Crypto YouTube influencers in one place.    

Worried about missing updates from your favorite YouTube crypto influencers?  

Welcome to the Crypto Roundup.  

On this page, we will post a quick summary of the videos from some of the most popular YouTube crypto influencers.

Ivan on Tech  Altcoin Daily

Crypto Zombie Box Mining

Ellio Trades Lark Davis

Data Dash Bitboy Crypto

MMCrypto Chico Crypto

Altcoin Daily

Video title: The United States Just Brought Bitcoin into the National Conversation!! | Cryptocurrency in 2021

Date: 16-Nov-20

  • Former National Treasurer and the new US Senator Elected, Cynthia Lummis, said Bitcoin fits the bill as a good store of value as it is finite and limited, unlike the inflationary fiat currency.

  • Grayscale adds over 7000 more bitcoin in just the last 24 hours.
  • Just over 16% ETH staked for ETH 2.0 launch on Dec 2 2020.
  • Bitcoin Cash hard fork takes place tomorrow.

Crypto Zombie

Video Title: WARNING!!! BITCOIN 2017 BEAR FRACTAL RETURNS!!! BTC WORST CASE SCENARIO…

Date: 14-Nov-2020

  • Institutional money starts flowing into bitcoin.

  • Paypal goes live with its crypto trading platform for eligible customers. They have also raised the buying limits from the initially set $10,000 to $20,000 per week.
  • DIA, an DeFI Oracle provider, integrates with Polkadot.

Ivan on tech 

Video Title: BITCOIN WILL DO SOMETHING INSANE THIS WEEK!!!! -30% DUMP AHEAD vs $20,000 PARTY – Programmer

Date: 16-Nov-2020

  • Bitcoin could make a big move this week, either hit 20K or we may see a 20% to 30% drop
  • Chainlink partners with Etherisc to deliver agricultural insurance in Kenya.

Ellio Trades

Video Title: UNLOCKING $100 TRILLION? This low cap gem seeks to bridge CeFi and DeFi

Date: 15-Nov-2020

  • DeFI could be similar to the ICO craze in 2017
  • Low cap gem: AllianceBlock
  • AllianceBlock is bridging the gap between DeFi and CeFi
  • AllianceBlock Partnership with Orion Protocol and Chainlink.

Chico Crypto

Video Title: WARNING! An “EVIL” Entity Wants Control of BITCOIN…

Date: 15-Nov-2020

https://www.youtube.com/watch?v=45Ac-5y2ofg

  • 90% of Bitcoin’s mining pools are controlled by China based mining pools
  • As the value of bitcoin goes up – there is a threat of push to ‘control’ the network from China
  • Binance is looking to push through the 50% mining share and Chico believes this could be dangerous

Visit our Crypto Roundup section daily for a dose of all your favorite Crypto YouTube influencers in one place. 

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

Continue Reading

Trending