The Internal Revenue Service (IRS) is always on the hunt for new tax revenue sources. This time, the tax regulation agency has turned its attention on taxpayers who under-report their crypto-related transactions. It has been a difficult time for cryptocurrency lately. While larger investors wait anxiously, some smaller players have even lost their life savings. Amid all these financial concerns, the IRS is quietly pursuing Operation Hidden Treasure. If you have been investing in crypto, it is important to regularize your affairs and seek IRS debt relief, if required. Hiring an experienced Dallas tax attorney is the best way to pay your taxes or seek IRS debt forgiveness. In this blog, we are going to look at everything you need to know about the IRS Operation Hidden Treasure.
What is the IRS Operation Hidden Treasure
The IRS Operation Hidden Treasure program investigates taxpayers and organizations that fail to record specific cryptocurrency transactions. The program, which was started last year, is a collaboration between the European Agency for Law Enforcement Cooperation (Europol) and the IRS Fraud Enforcement office. The IRS is specifically looking at structured transactions, which are less likely to raise suspicions of tax fraud and are under $10,000. The agency is attempting to find “signatures”—traces of potentially fraudulent conduct like the use of shell corporations or money laundering—through the blockchain in collaboration with private experts.
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What does it mean for Cryptocurrency Holders?
Modern software is available that allows the IRS to find, track, and identify assets associated with cryptocurrencies. Additionally, the technologies allow tracking cross-chain activities rather than just one blockchain at a time, which enables the IRS to examine these transactions more quickly and completely. As per the new guidelines, cryptocurrency exchanges must provide information regarding taxpayers who made transactions that exceeded a specific level. The IRS uses the data it gathers to identify and get in touch with taxpayers who are most likely to have undisclosed income. Reportedly, 10,000 letters were sent to taxpayers in response to summonses issued to Coinbase Inc., reminding them of their obligation to file taxes. According to IRS estimates, as a result of these letters, 577 income tax returns were revised and an additional $15 million in assessed obligations were generated.
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Crypto Capital Gains Rule
The IRS treats cryptocurrency in the same way it treats stocks and other assets, in terms of “long-term” and “short-term” capital gains laws. According to these regulations, any asset you own for more than a year (long term), will only be subject to a 23.8% tax; however, any asset you hold for less than a year may be subject to a 37% tax. The “specific Identification” procedure comes next, which applies to situations when you have collected coins over time but only sell a portion of them. For instance, if you had purchased your collection of Bitcoin gradually over five separate years, you may use one or more of those purchases as the relevant price to determine your gains.
Although a lot of people have invested in this emerging asset class, the government is still trying hard to ensure all crypto holders pay their taxes on time, despite the fact that it is a decentralized asset. If you are a crypto “HODLR” and don’t know how to seek tax relief for your holdings, an experienced IRS debt attorney can help you explore the different IRS debt help options to find one that suits you the best. In case you are running behind on your taxes, there are multiple IRS penalty abatement options available at your fingertips, such as OIC (offer in compromise) and IRS tax installment agreement. When looking for a reliable Fort Worth tax lawyer or attorney that can assist you with IRS debt relief, look no further than the Law Offices of Nick Nemeth. Our team of experienced IRS tax lawyer in Dallas, TX, can help resolve all your IRS tax-related problems. Contact us today for a confidential no-obligation consultation at (972) 426-2553 or fill out our contact form, and we’ll get back to you as soon as possible.