Tax noncompliance from Cryptocurrency
According to current research, cryptocurrency tax noncompliance is likely costing the IRS billions in revenue.
For 2017 alone, U.S. cryptocurrency holders likely owe $25 billion in capital gains taxes as a result of $92 billion of taxable gains, Tom Lee, the head of research at Fundstrat Global Advisors in New York, wrote in an April note.
Based on Lee's figures, that would mean unreported cryptocurrency tax liabilities potentially account for $12.5 billion of the estimated $458 billion annual tax gap. The tax gap is the difference between total taxes owed to the Internal Revenue Service and taxes paid on time.
There are taxpayers who have disclosure and potential audit issues involving virtual currency - some of this stems from the lack of guidance from the IRS, which has created confusion for taxpayers. The last guidance from the IRS concerning cryptocurrency was Notice 2014-21, which was issued in 2014.
At some point, the IRS plans to issue additional regulations on cryptocurrency, but that will require a lot of “brain power” and collaboration among several divisions of the agency, said Bridget E. Tombul, branch chief in the IRS Office of Associate Chief Counsel (Income Tax & Accounting).
Freeman Tax Law Can Answer Your Virtual Currency Questions
If you have (or have had in the past) any type of cryptocurrency - you may have federal and state tax liabilities. Please contact our office if you would like to discuss getting into compliance with the IRS.