It will be almost 15 years since Bitcoin was launched. Along with Bitcoin, all digital currencies attract a lot of attention around the world. One of the countries with the largest share in this billion-dollar market is the USA. There are also giant crypto exchanges such as Coinbase, Binance US and Kraken in the country where approximately 44 million people own cryptocurrencies. However, the US government has been trying hard to tax crypto trading for years. The recently passed law on taxing the sale of crypto has divided the US into two.
The US has been making long efforts to collect taxes from Bitcoin sellers.In the US, the federal government is gradually increasing its efforts to ensure that cryptocurrency investors comply with tax laws. In the United States, every taxpayer must file a statement of income from the U.S. Tax Administration to the IRS.However, this is causing confusion in the crypto world.
The names of the coin holders are not directly added to the wallets. When people trade crypto, only the addresses of the wallets containing the coins are seen. This is due to the decentralized nature of the crypto and blockchain world. For some, this nature of the blockchain has been part of crypto’s appeal. But for institutions like the IRS, it’s a nightmare to keep track of cryptocurrencies purchased on various platforms and moved between different wallets. In addition, this situation puts some citizens who want to declare income tax in a difficult situation.
Crypto exchanges will report transactions to the US Tax Administration
The U.S. Treasury Department recently submitted a new crypto-related bill. The IRS plans to make it harder for crypto investors to evade income taxes when selling digital assets. It aims to simplify the complex bureaucracy for people who want to pay their taxes. Under the law, crypto exchanges will send documents showing gross income from transactions to the IRS and taxpayers. Thus, the IRS will be able to see who has earned how much thanks to crypto exchanges. The law will be effective from the 2026 tax year. The US treasury will get $28 billion in 10 years thanks to brokers reporting their crypto sales to the IRS.
Some exchanges are already reporting transactions to the IRS. However, if the exact amount a person earned from a coin sale is not reported, sometimes the IRS may see the entire amount in their account as profit.Taxpayers can pay much more tax than they should.
For example, Reid Tobey, a New York crypto trader, says that one of his clients received a letter from the IRS that required him to pay $150,000 even though he hadn’t made any transactions in 2022. Tobey states that the problem can be solved in 4 months. He also adds that his client filled out a tax form after long phone calls. In addition, some experts such as Tobey agree that the new tax regulation will prevent such confusion.
Crypto tax calculation companies appeared
This arrangement also creates a new job opportunity. Third-party service providers have emerged to help crypto investors track their transactions and prepare their taxes . However, Clinton Donnelly, an official at a firm that helps crypto investors solve their tax problems, says that these types of firms are currently unable to provide reliable data on their customers.
There are also those who oppose the regulation.
In addition, some are against this new regulation. Blockchain Association CEO Kristin Smith points out the differences between the crypto ecosystem and traditional finance and opposes this new regulation. Moreover, Miller Whitehouse-Levine, CEO of the DeFi Education Fund, describes the rules as “confusing” and says they are self-defeating.
Tax rates in the USA vary by state. Sellers pay tax of up to 37 percent on short-term crypto income and 0 percent to 20 percent on long-term capital gains. In addition to the USA, countries such as Canada and Switzerland draw attention with their high rates. Countries like Bulgaria and Hong Kong have rates lower than 19 percent, while El Salvador and the Bahamas do not charge taxes on crypto income.
Sources: WSJ, Cointelegraph, Decrypt
