The Internal Revenue Agency (IRS) of the United States releases a statement of its preparation to confiscate the crypto holdings of all tax debtors. Through this threat, the agency is showing its intolerance to any form of tax defaulting. This implies that it handles digital assets just like every other property.
While in a virtual conference organized by the American Bar Association. The deputy chief counsel for IRS, Robert Wearing, disclosed that the classification of digital assets is the same as property by the government. Thus, the government has the right to seize the assets for cases of tax debt that are yet to be paid.
In his explanation, Wearing said the once those digital assets are confiscated; the agency will apply its usual processes of selling them to recover the tax debt. Wearing made this public through Bloomberg.
Recall that IRS makes a publication in 2014 concerning digital assets. The publication states that IRS considers cryptocurrencies such as Bitcoin and others as property.
As such, cryptocurrencies must pass through all the general tax principles that apply to property and their transactions.
Tracking of Crypto Ownership by IRS
Before now, IRS has access to every data concerning users of cryptocurrency. This accessibility is through some exchanges such as Kraken and Coinbase.
However, with the emergence of hardware wallets for storing these digital assets, it’s now more difficult to prove ownership of cryptocurrencies.
Bitcoin is having some challenges in taking off as a large medium of exchange. Some of the contributing factors are issues of scalability and course tax implications linked to cryptocurrencies.
The challenges on the fact that every conversion of BTC to cash comes as an opportunity for taxing by both the IRS and some other tax agencies in the world.
To work around these issues of taxing using a legal approach, most crypto investors resort to borrowing against their holding. This is a good strategy that Michael Saylor, the CEO of MicroStrategy, preaches.
Also, users can get some loans using the crypto holdings as collateral from some platforms such as Celsius, BlockFl, etc.