The Internal Revenue Service has figured out that people who bought magic internet money might owe taxes on it. This took roughly thirteen years from bitcoin's creation. Congratulations to everyone involved in this breakthrough.
Crypto investors have been confused about tax liability since the beginning. They bought ethereum at three hundred dollars. Sold it at four thousand. Bought it again at five hundred. Swapped it for a token called SHIBAMOONCUM. Then they wondered why TurboTax crashed.
The IRS now has software that tracks blockchain transactions. They cross-reference wallet addresses with exchange data. They send letters to people who forgot that trades between coins still count as taxable events. Most recipients of these letters react like someone just explained that their Robinhood account isn't a video game.
Here's what this means for investors: absolutely nothing you weren't already supposed to be doing. The tax code didn't change. Your obligation didn't change. The only difference is the IRS hired three people who understand what a wallet address is and gave them computers.
Retail traders spent years convinced they'd discovered a tax-free casino. They traded bitcoin for litecoin for dogecoin for whatever the f*ck Cardano is supposed to do. Never wrote down a single transaction. Now they're getting letters asking about the twelve thousand dollars in gains they forgot to report in 2021. Their defense will be that they didn't know. The IRS will respond that ignorance of the law is not a defense. The traders will pay penalties and interest. Then they'll go directly to Reddit to complain about tyranny.
The article says many investors have a difficult time figuring out how much tax to pay. No they don't. They have a difficult time accepting that they owe any tax at all. Big difference.
Every transaction is recorded on a public ledger forever, but sure, this was definitely the place to hide from the government.
Photo by Art Rachen on Unsplash
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