All Financial Wisdom
I Have a Million Dollars in Bitcoins, What Will the Treasury Tell Me?
You may be one of those lucky people who invested in Bitcoins when they started talking about them and now you find that your money has grown so much that you do not really know what to do with it.
Converting it back to dollars and enjoying the profits is always an option. But do you have to tell the IRS? And how? What happens if you do not declare it? Can you go to jail for tax evasion? How much money can the IRS suspect that I have made transactions with bitcoins that have turned out to be profitable?
It’s not money or a financial product
Although they may seem like financial products, for the Treasury, Bitcoins are considered intangible assets. That is, the same concept as buying or selling a web domain, the exploitation rights of a farm or the transfer of a bar.
Not being a currency or a financial product, exchange sites such as Coinbase are not subject to the legislation that affects banks. This means that when you operate in these types of activities, you are not obliged to report it. Until now.
A judge has ruled that the request for information from the country’s tax agency about the activities of the users is not excessively intrusive.
You should declare every sale
With these rules, every transaction that we make from one cryptocurrency to another would have to be taxed as a swap of intangible assets.
Each of these purchase-sale operations may involve adding a sheet in your income statement for losses or gains that may be minuscule. When there are very few operations, it is done because there may be a trace. The problem is if you are one of those who conduct thousands of manual and automatic trades.
To avoid a scenario where users have to notify each and every one of the trades they carry out with cryptocurrencies, the possible application of a kind of digital canon to cryptocurrency intermediaries is studied. “When you buy a CD, you pay an equal remuneration to the authors for intellectual property, the idea would be to apply something similar to the cryptocurrency intermediaries, so as not to harm the user,” Rich Harris explains.
The IRS does not really know
Although the Treasury is clear about what should be done, the truth is that it has not yet made it official. Moreover, no one in the Tax Agency or the tax inspectors themselves say they have a clear policy or a concise idea of what to do regarding cryptocurrencies.
The obligation to declare is always from the taxpayer, so you should notify all sales purchases you make
But the reality is that tax advisors and experts in cryptocurrency believe that there is not much time left for the tax authority to dictate and say how, when, where and for what concepts bitcoins should be declared.
The great fortunes are going to precipitate everything
But this time may be coming to an end given that the fortunes that some of these early investors are accumulating and that they want to collect to enjoy them would begin to leave no room for hesitation.
The obligation to declare is from the taxpayer, and taking into account the revaluation experienced by Bitcoin, there are many investors who are considering collecting their profits.
Think of someone who bought $1,000 in bitcoins in 2011 and sells them today. “That person would have to put almost five million dollars in the bank, if you order a transfer of that amount, the director of the bank will ask you where all this money comes from.
In fact, some banks are even going to suspend or close the accounts of some customers, in order to prevent money laundering. “The Treasury makes the rules, but the executing arm is the bank.
As we have seen before, entities that work with cryptocurrencies are not subject to financial laws and, therefore, do not have to monitor operations for possible money laundering and fraud.
Depending on the undeclared amount, you could incur a crime of tax evasion. Stay tuned for more.