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IRS Enlists Binance.US Chiefs to Fortify Crypto Tax Reporting Framework

Last Updated February 28, 2024 12:17 PM
Teuta Franjkovic
Last Updated February 28, 2024 12:17 PM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • The IRS hires crypto experts Sulolit Mukherjee and Seth Wilks as advisors.
  • There will be a focus on understanding and overseeing crypto transactions.
  • Crypto brokers and exchanges must report client details to the US government.

America’s Internal Revenue Service (IRS) is bringing  two seasoned professionals from the digital asset industry on board in a bid to expand its crypto understanding

This includes a notable hire from Binance’s US division.

IRS Bolsters Crypto Compliance Team with Industry Experts

The Internal Revenue Service has announced the addition of Sulolit “Raj” Mukherjee, formerly the global head of tax at ConsenSys and a past team member at Binance.US, as an adviser to the agency.

Alongside him, Seth Wilks , previously vice president of government relations and success at crypto tax software company TaxBit will assume a similar role.

Their appointments are part of the IRS’s strategic move to strengthen its cryptocurrency compliance and enforcement initiatives.

New Reporting Standards

The IRS is in the process of finalizing regulations mandating crypto brokers and exchanges to provide comprehensive transaction details of their clients to the US government.

This comes at a time when the agency’s financial crimes unit experiences an uptick in investigations into crypto-related tax evasion.

Property Classification and Bitcoin ETF Implications

  • Cryptocurrency Classification by the IRS

The Internal Revenue Service (IRS) explicitly categorizes cryptocurrencies not as currency or legal tender. Instead, the taxman sees them as property for tax purposes. This distinction is crucial for taxpayers dealing in Bitcoin and other cryptocurrencies. This is because it means any gains or losses from transactions are treated similarly to those from property sales.

Specifically, selling cryptocurrencies at a higher value than the purchase price results in a capital gain. On the other hand, selling them at a loss leads to a capital deduction.

  • Tax Rules for Bitcoin ETFs

For those interested in Bitcoin but hesitant about direct ownership, Bitcoin ETFs offer an alternative investment route, similar to how one might invest in gold ETFs without holding physical gold.

The IRS treats transactions involving Bitcoin ETFs like any other property transaction, applying capital gains tax to profits derived from their sale. This approach underscores the IRS’s efforts to integrate cryptocurrency investments within the existing tax framework, ensuring that all property transactions, digital or otherwise, are consistently regulated.

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