Crypto is treated by the IRS as property for US tax purposes and can be seized in the same way, an official said.
May 13, 2021, | AtoZ Markets – The Deputy Assistant General Counsel of the US Internal Revenue Service (IRS) said that the agency will confiscate digital assets from their owners for tax evasion from cryptocurrency activities.
At a conference hosted by the American Bar Association, IRS Deputy Assistant General Counsel Robert Wearing said the tax authorities would be forced to resort to such harsh measures if American traders did not comply with their tax obligations.
IRS will sell seized cryptos to cover taxes
In terms of federal tax law, the US government treats bitcoin and other digital assets as property, so they can be seized to pay off tax arrears. In accordance with the established procedures, after the confiscation, the IRS will sell the seized cryptocurrencies, and the proceeds will be used to cover taxes.
“Virtual currencies are considered property and should be subject to the same taxation principles as any other type of property,” Wearing said.
Although the IRS was able to obtain data on users of cryptocurrency exchanges Coinbase and Kraken, it is much more difficult to prove ownership if digital assets are stored in hardware wallets. And yet, the tax implications of cryptocurrency transactions may be one of the reasons why bitcoin is still not widely used as a means of settlement.
Tax authorities around the world believe that every transaction to convert cryptoassets into ordinary money should be taxed. However, this will only lead to a heavy load on information systems and will not simplify the tax accounting process.
As a reminder, the IRS recently began partnering with Taxbit to analyze cryptocurrency transactions and audit traders’ tax returns.
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