Do The IRS And US Government Over Step Their Boundaries When It Comes To Cryptocurrencies?
Since the rise of Bitcoin and cryptocurrencies in general toward the end of 2017 the IRS has begun to try and crack down on investors. In 2013-2014 only about 900 people came forward and payed their income tax, but the IRS didn't do much further cracking down since it was relatively small thing then. In 2017 not that many more people came forward to pay their taxes, so the IRS made coinbase(one of the largest fiat to crypto exchanges) release 14,000 accounts that needed to pay taxes.
Cryptocurrency is considered property by law. This means that when you buy something with Bitcoin for example you exchange it for dollar amount (requiring a tax) then you buy that product (requiring a tax). Holding Bitcoin for one year then selling would be considered income, meaning you pay income tax on your "property". Holding on to it for more than one year is considered capital gains, meaning you have to pay 20% tax.
Without a doubt, 2018 will be a landmark year for Internal Revenue Service enforcement of cryptocurrency gains.
Here is a list of cryptocurrency things that can and probably will be taxed.
Trading cryptocurrencies produces capital gains or losses, with the latter being able to offset gains and reduce tax.
Exchanging one token for another — for example, using Ethereum to purchase an altcoin — creates a taxable event. The token is treated as being sold, thus generating capital gains or losses.
Receiving payments in crypto in exchange for products or services or as salary is treated as ordinary income at the fair market value of the coin at the time of receipt.
Spending crypto is a tax event and may generate capital gains or losses, which can be short-term or long-term. For example, say you bought one coin for $100. If that coin was then worth $200 and you bought a $200 gift card, there is a $100 taxable gain. Depending on the holding period, it could be a short- or long-term capital gain subject to different rates.
Converting a cryptocurrency to U.S. dollars or another currency at a gain is a taxable event, as it is treated as being sold, thus generating capital gains.
Air drops are considered ordinary income on the day of the air drop. That value will become the basis of the coin. When it's sold, exchanged, etc., there will be a capital gain.
Mining coins is considered ordinary income equal to the fair market value of the coin the day it was successfully mined.
Initial coin offerings do not fall under the IRS's tax-free treatment for raising capital. Thus, they produce ordinary income to individuals and businesses alike.
Do you think that the US government will become more or less accepting of cryptocurrencies?
Do you think that this is an overstep by the US government?