The Internal Revenue Service is currently stepping up efforts to collect cryptocurrency transaction records, believing that nearly $30 billion in tax revenue will result from the investigation.
Customers that have used the popular tax filing software like TurboTax in the past have probably seen the following question on their last few returns:
“At any time during 2021, did you sell, receive, exchange or otherwise dispose of any financial interest in any virtual currency?”
The IRS believes that many didn’t answer that question honestly last year and plan to investigate Americans that turn up on any crpto transaction reports.
Part of the allure of cryptocurrency is that transactions are not regulated by any government or nation. That’s also why sports betting with Bitcoin has become so popular. Offshore sportsbook sites prefer crypto over USD transactions for many reasons, not least of which is an assumed early investment on their part in altcoins across the board.
So, where does the IRS plan on acquiring this information?
One cryptocurrency broker who is in the crosshairs of the IRS is SFOX who is affiliated with M.Y. Safra Bank. Over $12 billion in crypto transactions have been made using SFOX over the past 7 years, and investigators have already reportedly uncovered offenders who incorrectly reported gains in 2021.
“Based on its recent experiences with cryptocurrencies, the IRS has strong reason to believe that many virtual currency transactions are not being properly reported on tax returns.”
US Attorney’s Office in the Southern District of New York Press Release
One element that could prove difficult to calculate is when deposited cryptocurrency funds at the sites that populate our offshore sportsbook reviews appreciate or depreciate.
Online sports betting sites act as an exchange when holding cryptocurrency in their member’s accounts. When the price of BTC, Ethereum, Dogecoin, and other accepted altcoins fluctuates, those gains and losses are reflected in your sportsbook account holdings.
Appreciation should be reported as income based on cryptocurrency gains, but only if assets are sold to another investor at a profit. What happens if you place a wager with funds that have appreciated and then collect a payout?
That’s where reporting can get tricky because there are taxes that need to be collected for cryptocurrency gains as well as gambling winnings.
Sports bettors that earn over $5,000 in a given year are subject to a tax rate of up to 28%. It is recommended that bettors hold back at least that portion of their winnings for when it comes time to file your income taxes each April. There are also state income taxes that need to be reported on gambling winnings locally, even in regions where domestic sportsbooks have yet to receive regulation.
The feds are now armed with extra help in tracking down potential offenders thanks to recent measures signed into law by President Joe Biden.
Cryptocurrency investors that didn’t report gains in 2021 can expect an audit letter from the United States government over the next few months asking for further clarification.