The ambitious large-scale infrastructure spending bill proposed by United States President Joe Biden has a price tag of $1.3 trillion. The funding needed to carry out the numerous infrastructure projects of this legislation will come from various sources, but American taxpayers will be at the forefront of this effort. Cryptocurrency investors will face greater scrutiny and taxation as a result of this bill being enacted into law; let's take a look at what the Internal Revenue Service will be looking for:
Trading & Gambling: The IRS wants to know if a cryptocurrency enthusiast has been involved in gambling activities and/or cryptocurrency exchange transactions. There is no doubt that Bitcoin, Ether and even cryptocurrency exchanges are not considered to be banks, but these companies can be used to purchase cryptocurrency in an exchange transaction. Anytime BTC or other tokens are exchanged for fiat or other tokens, taxes will be levied.
As you can see, not only does the IRS want to know if you’ve purchased cryptocurrency through an exchange, but they also want to know what kinds of cryptocurrency purchases you’ve made. If you are a gambling enthusiast or have made large-scale Bitcoin, Ether, and Litecoin purchases, the IRS will want to know if you’ve done so on an exchange or even on the black market; it does not matter if you are purchasing illicit goods just as long as the transactions are being reported.
If you are found to be engaged in these activities, you will be subject to a tax on cryptocurrency holdings up to 30% in some situations. Furthermore, you will be required to pay the 15% tax on any cryptocurrency capital gains. This is an extreme situation and may be avoided if you properly report your cryptocurrency holdings.
Sale & Distribution: The IRS has a very broad interpretation of “sale.” In fact, the IRS will view “sale” of anything in its broadest context, even as far away as in-person sales. This will include sales in person and online, including through any third-party online and offline cryptocurrency exchange. Any exchange transactions will be subject to the same scrutiny and taxes as if they were on-exchange purchases.
The distribution of cryptocurrency in exchange for another form of money such as USD or ERC20 tokens may also come under scrutiny by the IRS. While exchanges do not usually offer refunds on cryptocurrency purchases, exchanges may offer an option to purchase a different form of currency or cryptocurrency in the future.