For the Defense - Vol. 6 Issue 3 - 37
requirements
There are some, but not many, regulatory
for
hosted
wallet
Companies that operate hosted wallets
services.
are
required to register as Money Service Businesses
( " MSBs " ) with FinCEN, which requires that all
MSBs maintain an anti-money laundering ( " AML " )
policy. As a result, these companies must conduct
customer due diligence, which involves collecting
basic information like a customer's driver's license.
MSBs are not federally insured and " depositors "
invest at their own peril.
Unlike banks, MSBs also do not have IRS reporting
requirements so they are not required to issue
Forms 1099 to their customers. Some MSBs have
begun issuing Forms 1099 in response to pressure
from their customers or regulators. However,
MSBs only issue IRS Forms 1099-K, which are filed
when the recipient has a gross amount of total
reportable payment transactions
that
$20,000 and more than 200 transactions.8
exceeds
The
critical point is that the Form 1099-K only reports
the gross amount paid to the recipient in the
calendar year. The IRS, however, expects taxpayers
to report each transaction individually. Taxpayers
are responsible for computing their basis and
holding period to determine if they qualify for the
long-term capital gains rate. As such, Forms 1099K
do not provide sufficient information to prepare
an accurate tax return.
The General Accounting Office has reported
that, in general, the extent to which taxpayers
accurately report their income is closely aligned
with the amount of income that third parties
report to them and to IRS.
Given the absence
of information reporting (i.e., issuance of Forms
1099),
unreported
cryptocurrency
income
is
believed to be a measurable component of the
tax gap.
Taxpayers Face Substantial Criminal and Civil
Liabilities For Failing to Accurately Report Their
Cryptocurrency Income
Like all unreported income, the IRS imposes
substantial civil and criminal penalties against
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Vol. 6, Issue 3 l For The Defense 37
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For the Defense - Vol. 6 Issue 3
Table of Contents for the Digital Edition of For the Defense - Vol. 6 Issue 3
Contents
For the Defense - Vol. 6 Issue 3 - 1
For the Defense - Vol. 6 Issue 3 - 2
For the Defense - Vol. 6 Issue 3 - Contents
For the Defense - Vol. 6 Issue 3 - 4
For the Defense - Vol. 6 Issue 3 - 5
For the Defense - Vol. 6 Issue 3 - 6
For the Defense - Vol. 6 Issue 3 - 7
For the Defense - Vol. 6 Issue 3 - 8
For the Defense - Vol. 6 Issue 3 - 9
For the Defense - Vol. 6 Issue 3 - 10
For the Defense - Vol. 6 Issue 3 - 11
For the Defense - Vol. 6 Issue 3 - 12
For the Defense - Vol. 6 Issue 3 - 13
For the Defense - Vol. 6 Issue 3 - 14
For the Defense - Vol. 6 Issue 3 - 15
For the Defense - Vol. 6 Issue 3 - 16
For the Defense - Vol. 6 Issue 3 - 17
For the Defense - Vol. 6 Issue 3 - 18
For the Defense - Vol. 6 Issue 3 - 19
For the Defense - Vol. 6 Issue 3 - 20
For the Defense - Vol. 6 Issue 3 - 21
For the Defense - Vol. 6 Issue 3 - 22
For the Defense - Vol. 6 Issue 3 - 23
For the Defense - Vol. 6 Issue 3 - 24
For the Defense - Vol. 6 Issue 3 - 25
For the Defense - Vol. 6 Issue 3 - 26
For the Defense - Vol. 6 Issue 3 - 27
For the Defense - Vol. 6 Issue 3 - 28
For the Defense - Vol. 6 Issue 3 - 29
For the Defense - Vol. 6 Issue 3 - 30
For the Defense - Vol. 6 Issue 3 - 31
For the Defense - Vol. 6 Issue 3 - 32
For the Defense - Vol. 6 Issue 3 - 33
For the Defense - Vol. 6 Issue 3 - 34
For the Defense - Vol. 6 Issue 3 - 35
For the Defense - Vol. 6 Issue 3 - 36
For the Defense - Vol. 6 Issue 3 - 37
For the Defense - Vol. 6 Issue 3 - 38
For the Defense - Vol. 6 Issue 3 - 39
For the Defense - Vol. 6 Issue 3 - 40
For the Defense - Vol. 6 Issue 3 - 41
For the Defense - Vol. 6 Issue 3 - 42
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