TL;DR
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There’s a new tax code in the US that says anyone engaged in a trade or business, who receives more than $10,000 in cash (or digital currency), needs to report that income, along with the name/social security number of who sent it, within 15 days.
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These new tax codes seem flawed when applied to many digital currency transactions, as these exchanges of value are performed on decentralized networks, where the identity of the sender is often unknown – and sometimes non-existent.
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It’s not clear whether the IRS is planning to use this tax code to go after crypto investors and request they provide impossible-to-obtain sender information, or if it’s just a bi-product of updated tax code that won’t be given much attention as far as enforcement goes.
Full Story
Today we’re talking about tax law.
Which is boring at best, and scary at worst…
So to keep things engaging, we’re going to pepper exciting tid-bits of crypto related information throughout this article.
Tax law: there’s a new tax code in the US that says anyone engaged in a trade or business, who receives more than $10,000 in cash (or digital currency), needs to report that income, along with the name/social security number of who sent it, within 15 days.
…and ah, those who fail to comply may be guilty of felony offenses.
Fun tid-bit: As we’ve been writing this, Bitcoin just reached $46k – a level we haven’t seen since late 2021!
Tax law: Ok, so these new tax codes seem flawed when applied to many digital currency transactions, as these exchanges of value are performed on decentralized networks, where the identity of the sender is often unknown – and sometimes non-existent.
E.g. Mining a group of Bitcoin transactions will currently earn you ~$290k worth of BTC.
…but that Bitcoin reward won’t be sent to you by a person, but a computer protocol (aka a piece of software that exists only in cyber space).
There’s no name or social security number to be provided.
Fun tid-bit: Ok, wow. This thing is really on a run. Bitcoin is now hovering around $46.8k, threatening to break $47k.
Tax law: Here’s what we’ve gleamed from people smarter than us…
These laws are intended to protect against money laundering through large cash-only purchases.
E.g. If you buy a BMW in cash, the IRS wants the dealership to be legally required (under threat of felony charges) to report those earnings ASAP.
This piece of tax code has existed for a good while, but only stipulated for cash, until Jan. 01 2024, when digital currencies were added.
Point being that this isn’t so much a new piece of crypto-focused tax code as it is an older anti-money laundering code that has now been updated to include crypto.
Long story longer…
It’s not clear whether the IRS is planning to use this tax code to go after crypto investors and request they provide impossible-to-obtain sender information, or if it’s just a bi-product of updated tax code that won’t be given much attention as far as enforcement goes.
¯\_(ツ)_/¯
Fun tid-bit: Holy moly, Bitcoin just cracked $47k!
