[OldBill]

Tax expert: New IRS funding will target the rich, crypto, and tech





WASHINGTON, DC - APRIL 07: Commissioner of the Internal Revenue Service (IRS) Charles Rettig testifies before the Senate Finance Committee on Capitol Hill, April 07, 2022 in Washington, DC. Rettig testified on the 2022 filing season and the President's proposed fiscal year 2023 budget request for the IRS. (Photo by Kevin Dietsch/Getty Images)




The IRS has been expanding its expertise in the asset class for virtual currency even though its crypto guidelines are still sparse. However, experts believe the new funding will heavily focus on this growing realm, too.
The agency’s focused intention should not come as a surprise to anyone. The IRS started asking taxpayers in 2020 about their virtual currency activity on the first page of Form 1040, the U.S. Individual tax return. This question comes right after name, address, and Social Security number; and before eligible dependents or income.
Cryptocurrency "is going to be a hot item,” Pon said.
IRS still uses 60-year-old technology

However, there is a considerable discrepancy between what the IRS wants and what it can have. The system that the IRS still uses today is nowhere near blockchain technology.



“I worked for the IRS in 1984 and I am sure they are still using the same antiquated computer system,” Pon said, “It was old even then."
In fact, the systems the agency uses to hold the records of individual and business taxpayer accounts "are the oldest major technology systems in the federal government," according to the 2021 report to Congress from the National Taxpayer Advocate (NTA).


Today, the IRS still uses the same technology from 60 years ago — a system called Individual Master File (IMF) that was mostly written in COBOL, a programming language created by IBM in the 1960s. The agency's approximately 60 case management systems generally are not interconnected, according to the NTA report, so employees must transcribe or input information from one system and mail or fax it to others.



Janet Yellen, U.S. Secretary of Treasury, has asked the IRS to create a modernization plan in six months, while Erin Collins, the National Taxpayer Advocate (NTA), has repeatedly pushed for technology upgrades. About $4.75 billion from the IRA is earmarked for tech modernization.



"Obsolete IT systems limit the functionality of online taxpayer accounts, prevent taxpayers from obtaining full details about the status of their cases, and prevent the IRS from selecting the best cases for compliance actions," according to the NTA report. "Although the IRS is making strides with its case management system, it still has a long way to go."


YES they have old systems but they are updating to new improved systems as i speak

[pavyracer]

Crypto is down 75% this year. No one has to worry about taxing earnings as everyone is under water. A lot of people lost everything due to crypto companies declaring bankruptcy. And the worst is yet to come.

[Tanko]

Crypto is down 75% this year. No one has to worry about taxing earnings as everyone is under water. A lot of people lost everything due to crypto companies declaring bankruptcy. And the worst is yet to come.

Many will be reporting the losses to reduce tax burden.

[Optional]

Nothing wrong with COBOL. Pretty sure lots of banking systems still use it.

[Arky]

IRS/Government sending out the fear to scare everyone into paying their crypto taxes. It will be a while before they get their act together.

First they need to finish making the rules for crypto. So much is still open-ended. For example, there was a couple who increased their portfolio through staking and interest. The IRS wants you to pay taxes on this. The couple took the IRS to court and successfully didn't have to pay taxes. The ruling was that the case was likened to the corn farmer that hasn't taken his crop to market yet. Yet, the IRS doesn't update their rules nor do they send out bulletins to clarify all this. They just hope they will scare everyone into paying and not question them.

And that question on the 1040 - sneaky, so sneaky.

Still, the solution, my solution - if you make sizable gains - is to get a good crypto tax guy and pay him whatever he wants. I paid my guy $675 to do my taxes this year. I thought I was going to owe in the neighborhood of 10K. He got me a 2K refund. He will be there in my corner if I am ever audited.

If you're small potatoes, I wouldn't worry too much about this. Just make sure there are no obvious red flags on your return. The IRS wants to see that an honest effort was made in the tax preparation. If they suspect you were trying to put one over on them, that's when they go heavy with the penalties....

[OldBill]

Crypto is down 75% this year. No one has to worry about taxing earnings as everyone is under water. A lot of people lost everything due to crypto companies declaring bankruptcy. And the worst is yet to come.

as billonaire warren buffet said i would not buy all of BTC if it was only $39 or something like that

u only make money when someone pays more for it than you did ....

[OldBill]

yes as arky said if you lost money you owe zilch in taxes

[wombat]

This is old news. All crypto US exchanges report to the IRS for the past 2 years now.... nothing new

[PD77]

This is old news. All crypto US exchanges report to the IRS for the past 2 years now.... nothing new

Exactly, it’s yahoo news FUD. Right there with the 10 new strains of Covid 19 and the 15 hurricanes headed towards the gulf coast.

[TheMoneyShot]

I'm just curious with these new tax laws in regards to moving BTC funding books.... and then winning.... receiving a PO with BTC and then you selling the BTC for USD?

1. How does the crypto exchange know exactly how you received it? Like for example... what happens if you have purchased BTC in February 2022.... funded a book. Lost your bankroll from February. But then you somehow went on a winning streak from a FREE PLAY... then cashed out winnings BTC. Went to the same exchange you purchased from in February.... but sold BTC in August 2022... from book winnings. How does that know which form to give you???

By law... they are supposed to tax you as high as 38% for short term gains. And also... you must report that income as "winnings" too.

Do you guys get what I'm saying??? With these new stricter Crypto laws... how is everyone filing taxes?? Like every exchange will shoot you a 1099-MISC and claim that was a short term capital gain. But really... you're just using crypto to move funds so you get PAID. How is everyone getting around this??? I don't know of anyone who would care to wager offshore..... and get taxed nearly 38% on their winnings. Then end up possibly losing those gains gambling again...

So point being... you AREN'T TRADING BTC OR CRYPTO.... you are just using an exchange to SELL what a book gave you in BTC... so you get CASH... then forward it to your bank. How do you explain to the crypto exchange like Gemini or Coinbase... that you weren't trading... you were just exchanging it for cash?? Seems like you are at the mercy of the exchange company.... and computer system.

[statguy]

Yup. There are more legacy IBM servers out there then people realize. My dad basically named his own price the last five years of his working career because computer youngsters thought COBOL was a rare element in Elon's battery's.

[Sdotbold]

I'm just curious with these new tax laws in regards to moving BTC funding books.... and then winning.... receiving a PO with BTC and then you selling the BTC for USD?

1. How does the crypto exchange know exactly how you received it? Like for example... what happens if you have purchased BTC in February 2022.... funded a book. Lost your bankroll from February. But then you somehow went on a winning streak from a FREE PLAY... then cashed out winnings BTC. Went to the same exchange you purchased from in February.... but sold BTC in August 2022... from book winnings. How does that know which form to give you???

By law... they are supposed to tax you as high as 38% for short term gains. And also... you must report that income as "winnings" too.

Do you guys get what I'm saying??? With these new stricter Crypto laws... how is everyone filing taxes?? Like every exchange will shoot you a 1099-MISC and claim that was a short term capital gain. But really... you're just using crypto to move funds so you get PAID. How is everyone getting around this??? I don't know of anyone who would care to wager offshore..... and get taxed nearly 38% on their winnings. Then end up possibly losing those gains gambling again...

So point being... you AREN'T TRADING BTC OR CRYPTO.... you are just using an exchange to SELL what a book gave you in BTC... so you get CASH... then forward it to your bank. How do you explain to the crypto exchange like Gemini or Coinbase... that you weren't trading... you were just exchanging it for cash?? Seems like you are at the mercy of the exchange company.... and computer system.

Id love to talk to someone who knows something about this situation. It sounds like it is an issue for any of us who gamble with btc/offshore books

[Shifty]

If you only use crypto for sportsbook transactions your gain or loss should be small. Say you take a $1000 payout from a book. You sell the crypto for $980 after fees. Your cost basis is $1000. The $20 difference is a short term capital loss that gets reported on Schedule D. Sending crypto to books, whatever you pay is your cost basis. Whatever the book gives you in dollars is your sales price. Be sure to file Schedule D. Not reporting it could get you an IRS notice.

[Crusherrr]

Coinbase being weird with their cost basis stuff. I used to buy btc, send to Blockchain, then never use Coinbase again until I'm ready to sell btc. But then I started using USDC because my crypto buys weren't instant. So things got weird for me. A lot more work trying to figure it all out.

Last year I used cointracker and it seemed to help me pretty well to determine my cost basis and "profits or gains".