The relationship between the IRS in the United States and the crypto industry is a fairly brief but complex one. For several years, the industry complained about the lack of proper regulations and guidelines they had been given by the IRS in terms of how cryptocurrency-related tax issues should be handled. In 2018, two congressmen even sent an open letter to the IRS urging them to create a more comprehensive crypto tax code. Even as crypto envolves and takes its place within the larger financial world, the issue of how cryptocurrency tax will be handled is not fully resolved.
According to reports published on November 16, 2019, Internal Revenue Service (IRS) Criminal Investigation Chief John Fort has stated that the IRS will be looking into potential issues regarding tax that are caused by ATMs and kiosk that sell bitcoin.
ATMs Under Inspection
According to reports, this is part of a larger initiative in which the IRS is collaborating with law enforcement in order to investigate the use of cryptocurrencies for illicit activities.
“We’re looking at those, and the ones that may or may not be connected to bank accounts […] In other words, if you can walk in, put cash in and get bitcoin out, obviously we’re interested potentially in the person using the kiosk and what the source of the funds is, but also in the operators of the kiosks,” he said.
The IRS, however, will have quite a bit of work on its hands as it is estimated that there are 4,129 bitcoin ATMs and kiosks across the United States as well as one in every major city. Fort, however, has stated that these ATMs are required to perform know-your-customer procedures.
“They’re required to abide by the same know-your-customer, anti-money laundering regulations, and we believe some have varying levels of adherence to those regulations,” he said.
According to Fort, the cryptocurrency space is quite tricky in terms of taxation because it does not have as much transparency and visibility as other sectors, there is a greater chance of noncompliance and while they do not have any case open so far, they have a few that are being looked at.