Can the IRS Track Bitcoin? Koinly Explains – Sponsored Bitcoin News

The IRS might not be the best at keeping ahead of the crypto curve, but if you think you can hide your Bitcoin gains – think again. Calculator for crypto tax KoinlyHere’s how the IRS can monitor your crypto.

Are you a crypto investor? Have you earned any income or gained gains from it? Thank you to the IRS for your share.

The IRS ignored crypto markets for a while, leading crypto investors to believe that they can underreport, or even avoid, crypto taxes. But they’re paying attention now and they’ve made it perfectly clear your crypto is subject to Capital Gains Tax or Income Tax.

You need to report your crypto taxes as part of your annual tax return – and the tax deadline is looming. You’ve got until the 18th of April 2022 to file.

Thinking you’ll risk it? It’s possible that the IRS could have access to all of your crypto.

Rethink. Koinly the Crypto Tax Calculator explains how the IRS tracks crypto.

Is the IRS able to track cryptography?

Let’s get the obvious question out the way. Yes, the IRS can track crypto – whether that’s BTC, ETH, DOGE or more.

What is the IRS doing to track cryptography?

There are many ways to do this, but the most common is around increasing personal data surrounding crypto transactions.

Every centralized crypto exchange must now have KYC verification before they can operate in the US. KYC processes vary but in general as a minimum, they’ll include information like:

  • Your name
  • Your address
  • Identification

Some exchanges will even require your social security number. The IRS can identify you using this data, however KYC checks are evolving. A growing number of central exchanges have adopted advanced KYC processes to collect information such:

  • Biometric identification
  • An animated video of you
  • Photographs of yourself with ID

Some exchanges, and even decentralized wallets can collect additional information such as your phone number and bank account details.

Is this where all of that information goes? The IRS could be the destination.

The IRS can request – and legally compel – crypto exchanges to share customer data in order to ensure tax compliance.

Wait! Crypto exchanges must report to IRS

This is confirmed by many cryptocurrency exchanges.

John Doe summons have been sent to Coinbase, Kraken, and Poloniex by the IRS. The IRS will summon a company to provide user data to it in order for them to audit and identify taxpayers.

In compliance with IRS guidance, other crypto exchanges now issue 1099 forms. Binance US and Robinhood are some of the exchanges that provide 1099 forms to their users.

Do you have a 1099 Form? So did the IRS. Two identical copies go out – one to you and one to the IRS.

Okay, but what if I keep it decentralized?

So centralized exchanges and wallets definitely report to the IRS – but surely decentralized exchanges and wallets are safe? They don’t collect KYC data after all.

Not quite so straightforward unfortunately.

For starters, if you’re moving crypto between centralized exchanges and decentralized wallets – that exchange has your wallet address and that information is up for grabs for the IRS.

You might be surprised at how decentralized your wallet is. Binance owns Trust Wallet, and they’re already embroiled in a legal battle with the IRS over operations in the US.

This is not all. Some wallets may also request data such as your telephone number and bank account. Though these wallets haven’t had the IRS chasing after them yet – if and when they do, that’s enough information to identify you with.

Operation Hidden Treasure began in March 2021. It’s an operation led by the IRS and the civil office of fraud enforcement, starring a specialized team trained in tracking digital assets with one goal – to root out tax evasion and fraud.

How do you report the IRS about your business?

So there’s nowhere to hide. You can have your crypto tracked by the IRS. You can avoid an unpleasant audit by reporting your crypto correctly to the IRS.

Which information do you need? Quite a lot, including:

  • The cost basis, or fair market value of crypto currency in USD at the time you acquire it.
  • You can calculate the fair market value for your crypto currency in USD on the date you dispose it.
  • Each transaction’s capital gain or loss.
  • The transaction and all parties.
  • Receipts for purchase or sale
  • Keep track of all transactions and transfers from your cryptocurrency wallets.

It’s a lot of information to get hold of if you’re an active investor, but Koinly can make this simple. Here’s how:

    1. Koinly allows you to connect all of your exchanges, wallets and blockchains.It is possible to do so via API and by import CSV files containing your transaction history. Do this for all wallets and exchanges you use. Koinly has more than 600 supported!).
    2. Koinly can do its job while you have a cup of joe. Koinly will collate your entire crypto transaction history and identify which transactions are taxable and which aren’t. Then it’ll calculate your cost basis, capital gains or losses and the fair market value of any crypto income on the day you received it.
  • Get your Crypto Tax Report. You can download the tax reports you require, whenever you want them. Koinly is able to generate many reports, including Schedule D and Form 8949, TurboTax online reports, and our Complete Tax Report with all the information you need about crypto taxes.
  • Your crypto tax report can be used to file in your preferred manner. Send your documents to your accountant.

Now relax – you’re done. If you’d like to learn more about crypto tax – check out the ultimate US crypto tax guide.

You want to join Koinly? Bitcoin.com members get a discount on all Koinly Plans

 

 

 


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