The U.S. Internal Revenue Service (IRS) revealed that it would seize citizens’ crypto assets in order to settle unpaid taxes.
Agency official Robert Wearing made the announcement on May 12 while addressing a virtual conference;
“Bottom line—the IRS will seize that property and will attempt to follow its usual procedures to sell it and use it to satisfy collection.”
This is in line with IRS guidelines that treat crypto holdings as property rather than currency. The IRS made this disclosure in 2014.
IRS coming after crypto
The announcement follows a slew of IRS initiatives aimed at clamping down on tax avoidance by citizens trading cryptocurrencies.
At the beginning of May, a U.S. federal court in California authorized the IRS to serve a John Doe summons to Kraken’s parent company, Payward Ventures Inc. This summons granted the IRS permission to demand the personal information of any U.S. taxpayer that traded at least $20,000 in cryptocurrency transactions between 2016-2020.
Following that judgment, the IRS then announced plans to work with TaxBit to audit crypto transactions. The sentiment surrounding this partnership was largely positive, with many holding the view that the company would help the IRS to understand the data. TaxBit CEO Austin Woodward welcomed the move as an indication of the regulators embracing the asset class.
A global trend
The IRS is not alone in trying to ensure efficiency in crypto tax payments. Globally, governments are scrambling to understand the cryptocurrency economy and how to best regulate it.
Many governments have taken different approaches thus far, with little consistency across regions. Just this week the Hungarian government announced that it intends to slash crypto tax rates to 15%. Conversely, the Turkish government moved to outlaw crypto payments last month.
So, while the IRS’ partnership with TaxBit shows an encouraging embrace of the crypto asset class, the John Doe summons served to Kraken was less welcoming. Especially considering a similar order caused huge losses for UBS when it was served with the same summons nearly 10 years ago.