Tag: cryptocurrency laws

[Ivan on Tech] Got it. So let’s get back to the list. So we see, for example, the IRS asks you about emails, screenprints, hardcopy prints, transaction receipts, and so forth. Wire transfers. Lists of all virtual currency kiosks like BTM, ATM, and so forth. So you can see on the screen the other points. 

And so this is the new thing for this year? Or this was in this questionnaire even in the past? Or it’s completely new?

[Clinton Donnelly] Well, this is the second information document request that we’ve gotten for cryptocurrencies. And it’s a form they’re using. 

These exact same words occurred on the first one. 

In this case, with this client, they were amending their 2017 tax return, and they were reporting the anti-money laundering forms and reporting they’re like-kind exchange. 

And they had never received one of those educational letters that came out last year telling people to check the returns. They had never received that. They received this just because their tax return included cryptos. 

This document comes out of the Philadelphia office, which is interesting because that’s not where he mailed his return. The Philadelphia office is the one that’s handling strictly cryptocurrency compliance. 

So it’s very interesting. They turned it over to the crypto department.  And these questions are very scary. 

But the bottom line is they’re asking for every shred of documentation, however meager, about everything crypto you have. 

Now, if you were a trader and you did all your trading on, let’s say, Binance and Coinbase, you’re probably in a good position because those exchanges keep very good transaction records. You’re probably bringing money in and out from Coinbase. They have very strong records, every trade, every transaction, all the transaction fees, well-documented. So that pretty much addresses all your needs. 

Now, if you’re using Shapeshift, EtherDelta, other peer-to-peer exchanges, over-the-counter trades, things that generate very light documentation, or if you want to capture that transaction record, you have to capture it right then and there because there’s no permanent log. You know, those exchanges, you’re dependent on having these records. And if you don’t have them, well then, you know, that gets into what an audit is all about.

Now, you know I was talking to this very guy, and he said he’s been through two audits before, not crypto, just regular audits. 

And I said “You understand how this works?”

He goes, “yes.” 

He said, “The first thing is you never talk to the IRS yourself. You always have a representative.”

I said, “that’s absolutely right.”

Just like on the T.V. shows, you know, when the police haul in the suspect, they put him in the room. There are two policemen asking questions, you know, and they read you your rights. You never say anything until your lawyer is present. 

They are experts at getting you to say things that are to cause trouble later. They go right for the jugular. 

So that’s what we do with IRS representation. That’s what I do. I represented a 117 people last year with the IRS. 

So we represent, we talked to the IRS on your behalf. That takes a lot of emotion out, takes a lot of fear out. And, you know, we basically put together documents. 

We try to bury the IRS with the documents. We are as honest as possible and try to make them feel like, “You are wasting your time on this client. You know, there are bigger fish to fry. You’re not going to get anything out of this client.” And that’s what we do. 

Hey, I got a quote for you from a U.S. Senator, Henry Belmont of Oklahoma. And he makes the statement; he says, “In a recent conversation with an official at the IRS. I was amazed when they told me if taxpayers of this country ever discover that the IRS operates a 90% bluff, the entire system would collapse.”

[Ivan on Tech] Right.

[Clinton Donnelly] It’s just like when the police haul you in as the suspect. They don’t know anything. The police don’t know enough. They’re trying to get information from you. 

So having an intermediary kind of tightens up that pipeline. Make sure we defend your rights in that process. 

I mean, you’re reading this right now, and you’re probably thinking, “Oh, my gosh. Oh, my gosh. I don’t know if I have those records anymore.”

That terror, that’s what they want. The IRS operates on fear. 

They only want to publicize when they’ve crushed people on the news. You know, they only take cases to court that they know they can win. 

All right. So they always publicize how effective they are. That’s because they cherry-pick what they’re going after.

Learn More: Full Service Crypto Tax Filing by Donnelly Tax Law