Atlanta, Georgia, Cryptocurrency Tax Lawyer
Attorneys Cal Bomar and Charlie Shah lead our team that specializes in IRS audits, U.S. Tax Court cases and coming into compliance for matters involving Cryptocurrency. Our lawyers represent clients in IRS audits and administrative appeals, and U.S. Tax Court, U.S. District Court or Court of Federal Claims.
At Bomar Law Firm, we represent individual and business clients and place a very high priority on getting every client the results they need. Our clients across Atlanta rely on us to assist their decision-making process with impactful information. We utilize our experience with the changing landscape of tax law to advocate for those we work with.
What Are The Tax Liabilities Of Cryptocurrency?
The truth is that the potential tax liabilities of a host of cryptocurrency exchanges are not quite totally known. It has been an utterly unwatched investment vehicle for a long time, and that means the methods for accounting and taxing it have not been settled.
In many cases, compliance has been very difficult because few exchanges provide adequate tax forms, and software that currently exists does not always do an excellent job of tracking crypto transactions. Due to this, in some cases, transactions must be entered one by one to get the correct result.
A Timeline Of IRS Enforcement Of Cryptocurrency-Related Tax Liability
In 2019, the IRS Commissioner noted at the American Bar Association’s annual Tax meeting that enforcement of unreported cryptocurrency gains was a top IRS priority.
By 2021, the IRS had created “Operation Hidden Treasure,” led by the IRS (Civil) Fraud Enforcement Office’s “Emerging Threats Mitigation Team” in a joint operation with the IRS Criminal Investigation (“CI”) Division. Under that program, agents search blockchains to root out tax evasion among cryptocurrency users. That enforcement initiative will only escalate in 2023.
IRS partners with tech company Palantir to sort through mass quantities of data to uncover suspected tax evasion. Palantir’s Chairman, Peter Thiel, caused concern while speaking at a virtual event alongside a former U.S. Secretary of State and former national security advisor when he commented: “Even though I’m sort of a pro-crypto, pro-bitcoin maximalist person, I do wonder whether at this point bitcoin should also be thought in part as a Chinese financial weapon against the US, where it threatens fiat money. But it especially threatens the U.S. Dollar, and China wants to do things to weaken it.”
There are several factors that have caused Cryptocurrency to move to the center of the IRS’s attention even faster than anticipated:
- Dramatic movements up and down in the valuation of various cryptocurrency coins.
- The move to incorporate cryptocurrency services, investment and/or payment acceptance by traditional financial institutions, as well as companies like Paypal and Square.
- The rise of popular cryptocurrency exchanges like Coinbase (“COIN”) has become a publicly traded company via direct listing.
- Rapid technological advancement for coins such as Ether (“ETH”) and Polygon (“MATIC”) enables smart contracts.
- The rise of other coins, such as Avalanche and Solana, is seeking to challenge the dominance of Ethereum.
- The rise in interest in NFTs.
- The rise of “DeFi” (Decentralized Finance) technology, a category of financial products and services that do not rely on intermediaries like traditional financial companies did. This has the potential to disrupt everything from lending to insurance.
- Virtual Worlds and projects such as Axie (AXS), Decentraland (MANA) and Sandbox (SAND).
- The rise of “oracle platforms” that solve a past problem with smart contracts by ensuring that smart contracts are provided with accurate information. They do this by acting as a bridge between blockchains and the outside World in order to obtain needed outside information. Chainlink (“LINK”) is currently the leading Oracle platform. DocuSign founder Tom Gonser, who is an advisor to the Chainlink team, notes, “I think it’s beyond smart contracts in terms of the value of these oracles. I think it’s going to be much bigger than that.”
- Countless other technological advances are occurring constantly with this disruptive technology.
- Increasing interest in other coins, such as (a) XRP; (b) Tether (USDT); (c) Bitcoin Cash (BCH); (d) Litecoin (LTC); (e) EOS; (f) Binance Coin (BNB); (g) Dogecoin (DOGE); and (h) Cardano (ADA).
While enforcement of these tax law issues has been slow to come about, they are moving now. What’s worse for those we work with is how unclear declaring crypto gains and losses has historically been on taxes. So many people invested but didn’t understand how to state what happened clearly, and they had to move quickly to amend their returns.
We Help Amend – And Defend – Crypto Tax Issues
Our attorneys have the experience and skill to defend you in these difficult areas of the law. We know the complexities of both tax law and cryptocurrencies, and we will be able to help you. We can defend you in Georgia Tax Court, Federal Tax Court or even the Court of Appeals if it gets that far. Reach out to us today to learn more about our work by calling 800-765-2779 or sending an email.