IRS Coming For Your Crypto, Specific Crypto Question Added To 2019 Tax Forms
The IRS wants to know whether you traded cryptocurrency in 2019, a question it had never overtly asked taxpayers in the past.
In a new report on Monday covering fiscal 2019, the agency listed cryptocurrency and the gig economy as two key “emerging compliance areas that require attention” by the IRS. For crypto, that attention is taking the form of a new question on the 2019 Form 1040 (for additional income).
The question is at the very top of the form, and reads: “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”
watch out crypto tax evaders – the IRS is coming for you with a mean new checkbox pic.twitter.com/Fi9qrAy5bv
— 𝘽𝙄𝙇𝙇 𝙎𝙒𝙀𝙀𝙏 (@billsweet) January 3, 2020
The IRS already had official guidance on cryptocurrency, first posted back in 2014: the agency classifies cryptocurrency as property, rather than as currency, and thus taxpayers would treat crypto selling as capital gains (or losses) and disclose it on Form 8949—if you choose.
In the past, the common attitude in crypto land toward disclosing crypto gains on your taxes was that there was little to gain from doing so—you’d risk an audit if you did, and would likely fly under the radar if you didn’t.
Now the IRS is getting more serious.
The phrasing of the question is also creating some confusion, since it mentions not just selling and receiving crypto, but also sending or exchanging it. That prompted some crypto folks on Twitter to wonder whether simply sending bitcoin from one digital wallet to another requires disclosure on your taxes. That answer is no. In an extensive FAQ about virtual currency transactions on its website, the IRS specifies, “If you transfer virtual currency from a wallet, address, or account belonging to you, to another wallet, address, or account that also belongs to you, then the transfer is a non-taxable event.”
The IRS, in its report this week, also disclosed that in 2019 it sent “educational letters” to more than 10,000 taxpayers “who may have failed to properly report virtual currency transactions.” And the IRS cautions: “Virtual currency, also called crypto currency, will remain an important focal point for the IRS in 2020.”
This article originally featured in Yahoo Finance.
SEC May Put A Stop To Binance’s Plans To Acquire Voyager
The U.S. Securities and Exchange Commission (SEC) has filed an objection to Binance.US’s plans to acquire Voyager Digital, a publicly traded cryptocurrency brokerage. The SEC has raised concerns about the potential impact on investors, stating that the acquisition could result in “a concentration of voting power” in the hands of Binance.US and its parent company, Binance.
The SEC’s objection comes as a surprise to many in the crypto industry, as Binance has been a major player in the space for years and is known for its strict compliance with regulations. However, the acquisition of Voyager Digital, which is a publicly traded company, has raised concerns about potential conflicts of interest and the potential for insider trading.
The SEC’s objection has sparked a heated debate among industry experts and investors, with some arguing that the acquisition would be a positive development for the crypto market and others expressing concerns about the potential impact on investors.
On one hand, some argue that the acquisition would give Binance.US more access to mainstream investors and help to increase the adoption of cryptocurrencies. Binance has a strong reputation in the industry and is known for its commitment to compliance, which could help to increase confidence in the market.
On the other hand, others are concerned that the acquisition could lead to a concentration of power in the hands of a single company, which could negatively impact competition and potentially harm investors. There are also concerns about the potential for insider trading and conflicts of interest, as Binance would be acquiring a publicly traded company.
It’s worth noting that the SEC’s objection is not a final decision on the acquisition, and Binance.US and Voyager Digital have the opportunity to respond and present their case. However, the fact that the SEC has raised concerns about the acquisition is a significant development that could have significant implications for the future of the crypto market.
Overall, the SEC’s objection to Binance.US’s plans to acquire Voyager Digital has sparked a lively debate among industry experts and investors. While some see the acquisition as a positive development that could increase the adoption of cryptocurrencies, others are concerned about the potential impact on competition and investors. The final outcome of the acquisition is still unclear, but it’s certain that it will be closely watched by those in the crypto industry
U.S. Takes Crypto Crime Seriously with Anti-Money Laundering Reforms
The United States passed into law its Anti-Money Laundering Act of 2020, which takes effect on January 1, 2021. This brings digital currency exchange companies and other digital-asset-related businesses under the scope of regulations of the Bank Secrecy Act (BSA), which requires financial institutions “to actively detect, monitor and report potential money laundering activity.”
“I’m pleased that our anti-money laundering legislation was included as a part of this year’s [National Defense Authorization Act]. This bipartisan legislation protects Americans by depriving criminals and terrorists of the tools they use to finance illicit activity. It is the first serious overhaul of our anti-money laundering system in decades, and it makes sense to include it in the biggest, most important national defense legislation Congress passes each year,” South Dakota Sen. Mike Rounds said in a press release.
The massive anti-money laundering reforms are targeting businesses dealing with digital currencies and assets by clearly specifying the definition of a “financial institution” to “‘a business engaged in the exchange of currency, funds, or value that substitutes for currency or funds” and “a licensed sender of money or any other person who engages as a business in the transmission of funds or value that substitutes for currency.”
The reforms further define a “money transmitting business” to include those who deal with “currency, funds, or value that substitutes for currency.” Now, there are no longer loopholes that digital asset companies can use when dealing with the Financial Crimes Enforcement Network (FinCEN), the agency that enforces the BSA.
Stricter Penalties Enforced
Aside from updating definitions to ensure that digital currency exchange firms and others dealing in digital assets are clearly within the scope of the AML Act of 2020 and the BSA, stricter penalties are now being enforced for crypto criminals.
Now, those who have been found guilty of violating the AML Act of 2020 and/or BSA are faced with fines amounting to profits earned while committing the violation and possible jail time. Those guilty of an “egregious” breach are also going to be banned from taking a board member position of any financial institution in the country for 10 years. Furthermore, employees of financial institutions who commit these crimes will be obligated to return to their employer all bonuses received during the time the act was committed.
FinCEN is being given additional resources, like increasing its manpower, to ensure the enforcement of these reforms. This will further safeguard investors against crypto crimes and nail down digital currency exchange firms and other digital-asset-related businesses that do not comply with BSA regulations.
Encouraging Signs For a Bitcoin ETF
It is several years in the making, but the Winklevoss Bitcoin Trust could be, emphasis on “could,” getting closer to becoming a reality.
Cameron and Tyler Winklevoss were ahead of the bitcoin exchange traded fund (ETF) curve, ranking as the first group to initiate plans for bitcoin-based ETF. As has been the case with all subsequent filings for related products, the Securities and Exchange Commission (SEC) has, to date, not approved any filings for ETFs related to bitcoin or any other digital currency for that matter. However, there is some good news for investors waiting on the Winklevoss Bitcoin Trust.
“Records show that Winklevoss IP applied for a patent on December 19, 2017, to facilitate a system for operating exchange-traded products holding digital currencies,” reports BTCManager.com. “The product explained in the patent application as ETP is similar to an ETF. An Exchange Traded Fund is a tradable security that tracks the price movement of a particular index or industry. ETFs are commonly used by investors to reduce risk and improve probable returns. The ETP as described by the patent will track the price movements of constituent cryptocurrencies.”
Many ETF issuers expected the launch of bitcoin futures, which debuted on two U.S. exchanges in December, would help facilitate the debut of ETFs related to the cryptocurrency. Following the launch of bitcoin futures on Cboe and CME, a slew of ETF sponsors reapplied to launch bitcoin funds, but were still rebuffed by the SEC.
The Winklevoss Bitcoin Trust, which would trade under the ticker “COIN,” is designed to follow a basket of shares tied to bitcoin, the largest digital currency.
“Shares based on digital math-based assets may be redeemed using one or more computers by determining share price information based upon quantities of digital math-based assets held by a trust, electronically receiving a request from an authorized participant user device to redeem a quantity of shares, electronically transmitting a quantity of digital math-based assets from one or more origin digital asset accounts to one or more destination digital asset accounts associated with the authorized participant, and canceling the quantity of shares from the authorized participant,” according to the patent application.
In March 2017, the SEC rejected what was at the time the most recent application for the Winklevoss Bitcoin Trust. At the time, the SEC questioned the trust’s ability to adequately value bitcoin while also raising concerns about the lack of regulation surrounding the digital currency market.