Tax authorities clamp down on cryptocurrencies

Pedro Gonçalves
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Tax authorities clamp down on cryptocurrencies

The Australian Taxation Office  has begun collecting "bulk records" from local cryptocurrency exchanges to feed into its feared data-matching technology used to track down tax-dodging Bitcoin investors as the IRS issued another reminder that cryptocurrencies should reported.

According to Australian rules, people making a profit on Bitcoin trading or other digital currencies are liable to pay a capital gains tax. The ATO monitors over 600 million transactions each year, but it has historically focused only on transactions passing through major financial institutions.

The authority suggests that it will collect records from designated service providers (DSPs) in the country on an ongoing basis to ensure that people profiting from crypto are paying the right tax as well.

We want to help taxpayers to get it right and ensure they are paying the correct amount of tax"

"We want to help taxpayers to get it right and ensure they are paying the correct amount of tax," ATO deputy commissioner Will Day said in a statement circulated on Tuesday afternoon.

"Where people find that they have made an error or omission in their tax return, they should contact the ATO as soon as possible. Penalties may be significantly reduced in circumstances where we are contacted prior to an audit."

The ATO says it will contact taxpayers after the data-matching exercise to provide them with an opportunity to verify information "before any compliance action is undertaken".

The authority estimated that anywhere between 500,000 to 1 million Australians are cryptocurrency investors. 

"The ATO is also working in a joint international effort as part of the Joint Chiefs of Global Tax Enforcement (J5), aimed at investigating cryptocurrency-related tax evasion and money laundering," Day added.

In the United States, the IRS have long held to a 2014 draft memo stipulating general rules on how to deal with cryptocurrencies, but there have long been basic tax questions that have not been addressed. No  legislation on the issue has been passed since and the IRS is refusing to create a voluntary disclosure program that could allow people to retroactively declare cryptocurrency gains with significantly reduced penalties.

This has led a bipartisan gathering of 21 Members of Congress to demand the IRS clarify its crypto tax rules. Under pressure, the IRS has issued another reminder that cryptocurrencies should reported, and announced different compliance campaigns, showing that it is still as focused as it was when it demanded account information from Coinbase on cryptocurrency holders.

 

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