By Michael B. Cohen
Vice President of Global Operations
MyChargeBack
Message to Crypto Scams: The Blockchain Is Not a Tax-Free Zone
The blockchain has often been compared to a Wild, Wild, West without a sheriff. Many people are attracted to cryptocurrencies because they feel a sense of freedom from bank fees, government regulation, and even taxes. However, the game is up for crypto scams and even for people who don’t think they are doing anything wrong by not paying taxes on crypto gains.
In an interview with The Wall Street Journal, Thomas Fattoruso, special agent in the IRS-CI New York field office, stated that, because it’s undeniable that cryptocurrency is here to stay, the IRS is adopting new measures to track down crypto users who evade their taxes. This includes both bitcoin scams and people who don’t realize that they are transgressing the law by not paying taxes.
Contrary to popular belief, cryptocurrencies are taxable assets and capital gains from crypto trading are taxable events. Many Americans might have been unaware of this fact because of widespread misinformation on the internet about crypto and because of the ambiguity in tax forms in the past.
Cracking Down on Crypto Tax Evaders
The IRS has reorganized its forms to make it clear that cryptocurrency gains must be reported and taxed. For instance, in 2019 the IRS asked for the first time about cryptocurrency holdings. However, this question was hidden away in the Schedule 1 category designed to list income not typically on 1040, such as funds from alimony, capital gains, and winnings from gambling.
The most recent tax forms will include questions about cryptocurrency holdings on the 1040 form itself so that everyone filing an income tax return will be aware that cryptocurrencies are assets that are subject to taxation.
In addition, the IRS will put pressure on crypto brokers to issue 1099 forms to clients to report capital gains. Every broker is required to issue these forms, but crypto brokers, or in other words crypto scam brokers, usually neglect this important onboarding step.
The Biden Administration has increased IRS funding to track down tax revenue lost in the crypto market. This spending is expected to reap significant rewards because the IRS estimates that about $1 trillion in potential tax revenue is missing, and a large chunk of this comes from the crypto sector.
The IRS Will Subpoena Exchanges to Track Down Crypto Scams
The IRS-CI doesn’t talk very much, but its operations often sound like the stuff of cinema. Also known as “accountants with guns,” IRS-CI agents track down large-scale tax dodgers and sanctions violations. Thomas Fattoruso discussed the IRS-CI’s goals.
Instead of assuming any large bitcoin transaction is a crypto scam, the IRS-CI seeks cooperation from crypto exchanges in tracking down tax violators. The agency will continue to subpoena crypto exchanges for the necessary information to pursue cases against bitcoin scams and ordinary citizens.
Far from assuming they can escape regulations and taxes, the Biden administration announced a proposal to increase capital gains taxes to as much as 43.4% for top earners and pledged that cryptocurrencies would be taxed just like any other asset.
Andrew Tate Thought the Notion Crypto Is Taxable Was “Dumb”
This is a blow to those who felt they could outsmart the system and make money without paying taxes. Among his other alleged crimes, which include human trafficking, the notorious kickboxer, and social influencer Andrew Tate is being investigated for crypto tax evasion.
In addition to having been charged with trafficking human beings, Andrew Tate is being investigated for running a crypto scam and for his failure to report an income of over $50 million. In one of his videos, he boasted of convincing gullible women that they were going to receive 50% of their ill-gotten gains, but he had to take out an extra 25% for taxes, which he claimed, he didn’t really have to pay because his victims “were too dumb to know you don’t pay taxes on crypto.”
Andrew Tate isn’t looking too bright now that crypto tax evasion is being added to his resume of alleged crimes.
Will IRS Investigations Catch Crypto Scams?
Some of the biggest mobsters, like Al Capone, didn’t go to jail for their many murders but were eventually convicted of tax evasion. This may be the fate of many crypto scams. With the IRS involved as well as law enforcement, there is a greater chance of bitcoin scams coming to light. Now that the IRS will subpoena crypto exchanges, there will be greater transparency and leads. That’s great news for crypto recovery efforts.
If You’ve Lost Money to a Crypto Scam, Contact MyChargeBack
It’s important not to give up if you are a victim of online fraud, but to seek recourse immediately. MyChargeBack has developed working relationships with law enforcement agencies worldwide, has extensive knowledge and experience with crypto tracking, and can improve your prospects of getting your funds back.
