TL; DR
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There’s a new tax law in the US that says anyone in a trade or business who receives more than $10,000 in cash (or digital currency) must report that income, along with the name/social security number of who sent it. within 15 days.
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These new tax codes seem flawed when applied to many digital currency transactions, because these exchanges of value are conducted on decentralized networks, where the identity of the sender is often unknown – and sometimes nonexistent.
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It’s not clear if the IRS plans to use this tax code to go after crypto investors and ask them to provide impossible-to-obtain sender information, or if it’s just a byproduct of an updated tax code that won’t get much attention to get. as far as enforcement is concerned.
Full story
Today we are talking about tax law.
That’s boring at best and scary at worst…
So to keep things interesting, we will go through exciting facts with crypto-related information in this article.
Tax law: there’s a new tax law in the US that says anyone who trades or does business and receives more than $10,000 in cash (or digital currency) must report that income, along with the name/social security number of who sent it, within 15 days.
…and hey, those who don’t comply could be guilty of a crime.
Fun fact: As we write this, Bitcoin has just reached $46,000 – a level not seen since late 2021!
Tax law: Okay, so these new tax codes seem flawed when applied to many digital currency transactions, because these exchanges of value are conducted on decentralized networks, where the identity of the sender is often unknown – and sometimes nonexistent.
For example, if you mine a group of Bitcoin transactions, you will currently earn ~$290k worth of BTC.
…but that Bitcoin reward is not sent to you by a person, but by a computer protocol (aka a piece of software that only exists in cyberspace).
There is no need to provide a name or social security number.
Fun fact: Okay, wow. This thing is really on the run. Bitcoin is now hovering around $46.8k and is in danger of breaking through $47k.
Tax law: This is what we showed from people smarter than us…
These laws are intended to protect against money laundering through large cash purchases.
For example, if you buy a BMW with cash, the IRS wants the dealer to be legally obligated (under threat of crime) to report this income as quickly as possible.
This piece of tax law has been around for a while, but it was only intended for cash until January 1, 2024, when digital currencies were added.
The point is that this isn’t so much a new piece of crypto-focused tax law, but rather an older anti-money laundering code that has now been updated to include crypto.
Long story longer…
It’s not clear if the IRS plans to use this tax code to go after crypto investors and ask them to provide impossible-to-obtain sender information, or if it’s just a byproduct of an updated tax code that won’t get much attention to get. as far as enforcement is concerned.
¯\_(ツ)_/¯
Fun fact: Holy moly, Bitcoin just cracked $47,000!