So far, the Internal Revenue Service is not very efficient in collecting crypto taxes.
The taxation of income through crypto-currencies remains a grey area, which even at the US IRS causes smoking heads, according to Wendy Walker of the tax consulting firm Sovos.
„The IRS usually uses 1099 reporting for income tax returns,“ Walker says in an interview with Cointelegraph. „The 1099, W2 format tax return is the main method it uses to collect taxes,“ the expert continues. But if people don’t declare their income in crypto legacy -currencies in this format, the IRS has a problem.
In 2019, the IRS tried to address this problem by sending warning letters to 10,000 crypto investors, alerting them that they still had tax debts or even fines to pay. Other investors were simply asked to pay their crypto-proceeds.
Recently, the IRS added a question to its Form 1040 accordingly, aimed at providing information on taxpayers‘ crypto activities.
„As a result, the IRS now has mountains of information to work through,“ as Walker describes the consequences of the authority’s desperate attempt to resolve the issue. In order to evaluate this mountain of data, the US Treasury Department then issued a call for tender in May 2020 to find people who have knowledge of digital assets and can process large amounts of data, Walker adds.
„What I am saying is that she is making it difficult for herself. The question on Form 1040, the tender to process the mountains of information she has received, threatening letters to taxpayers, it seems as if she is just trying out what works on a whim.“
So the old structures of the authority apparently cannot keep up with the speed of technical innovation and thus complicate the situation for all parties involved.