Atlanta, GA Cryptocurrency tax lawyer
Attorneys Cal Bomar and Charlie Shah lead our team that specializes in IRS audits, US Tax Court cases and coming into compliance for matters involving cryptocurrency. Our lawyers represent clients in IRS audit and administrative appeal, and if needed in the U.S. Tax Court, U.S. District Court or Court of Federal Claims. We represent individual and business clients and place a very high priority on getting every client to the best result. In many cases, compliance has been very difficult because few exchanges provide adequate tax forms and software that currently exists does not always do a good job of tracking crypto transactions. Due to this, in some cases transactions must be entered one by one to get to the correct result.
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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, 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 has been training its employees alongside the European Union Agency for Law Enforcement Cooperation (Europol) in the initiative. IRS stated that it looks for indicators such as structuring transactions just below reporting requirements, using shell corporations to hide transactions and “getting on and off the chain.”
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 US 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 US Dollar and China wants to do things to weaken it.”
There are several factors that have caused Cryptocurrency to move to the center of 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”) enabling smart contracts.
- The rise of other coins such as Avalanche and Solana, 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 does 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 that 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);
Bomar Law Firm’s office is located in Atlanta, Georgia. Contact us to speak with an Atlanta, GA cryptocurrency tax lawyer.