How the IRS Is Cracking Down on Crypto Tax Cheats
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Here's your Money Briefing for Thursday, March 31st. I'm J.R. Whelan for The Wall Street Journal. We're continuing our week-long look at important tax issues that you should have on your radar as you pull together all your forms and paperwork ahead of the April 18th filing deadline. Today, we're talking about cryptocurrency and the IRS's stepped-up efforts to crack down on crypto tax cheats.
And so what they have ruled is that it is investment property like a stock. So that when you buy crypto, that's a little bit like buying shares in Exxon or IBM or Apple.
So what does that mean for taxpayers? And what happens if you try to skirt the rules? Our reporter Laura Saunders has those answers and more after the break.
This podcast is brought to you by ReliaQuest. Cyber criminals are constantly attacking. They want your data. They want your identity. They want your innovation. ReliaQuest fortifies your business with agentic defense, AI that detects, contains, and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliaQuest, agentic defense for the enterprise. Learn more at ReliaQuest.com. That's R-E-L-I-A-Q-U-E-S-T.com.
If you own Bitcoin or other cryptocurrencies, the IRS has a message for you. No more excuses. The agency is focusing more attention on people who aren't complying with cryptocurrency tax rules, either inadvertently or on purpose. So what exactly are those rules? What does all this mean when you go to prepare your taxes? WSJ tax reporter Laura Saunders has written about this extensively, and she joins us with more. Hey, Laura, thanks for being here.
Well, thanks for having me.
Now, Laura, you've been with us on a few occasions talking about how cryptocurrency has been gradually showing up on the IRS's radar. But why is the agency taking such a hard stance on cryptocurrency now?
Well, I think they would say they've always taken a hard stance on it from the beginning when they first put out the rules. But the IRS is visually suspicious of crypto. They feel it and see it as a vector for criminal activity, you know, and people evading taxes, money laundering, things like that.
All right. So where does crypto show up in the tax filing process?
This is a good example of how seriously the IRS takes crypto. The agency put a question on the front page of your tax return right below your name and address saying at any point during the past year, did you buy or sell or trade crypto? And you have to answer yes or no. There's a box to check. And if you don't, your return is not complete. And if you lie and they ever catch you, it will be a lot easier for them to make a case against you because there is the evidence right in front of you.
Yeah, it seems like doesn't leave a lot of room for someone to claim, you know, ignorance of the rules.
That would be right. And they had a lot of success with this on offshore accounts. That's the model.
What is the IRS's new stance on cryptocurrency and why does it matter?
You know, there was a question at the bottom of Schedule B that said, at any point during the year, did you have more than $10,000 in a foreign account, an offshore account? And of course, people were hiding money in places like Switzerland and the Cayman Islands. And if you check the box, no. And then when they did a campaign and found these accounts, you really didn't have much recourse. It showed that you were lying. So this is the model for crypto as well.
And just to be clear, a lot of people have Bitcoin.
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