Stock brokers and other financial firms are required to provide information to the IRS relating to customer financial transactions. There are no similar requirements in the world of crypto. Consequently, the IRS believes that this has created an opportunity for a significant level of under reporting. This is changing. The government has won several court battles aimed at requiring cryptocurrency exchanges to supply more customer information.
It should be noted that regulations relating to the taxes due from crypto transactions are not entirely clear and there are differences in the treatment of stocks and cryptocurrencies. This is no excuse and does not relieve investors from reporting income.
Accordingly, investors should be sure to keep their tax advisors in the loop. We have a voluntary tax system and failure to disclose income can have serious consequences.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®