Posted 8 months ago | by Ben Armstrong
The IRS Goes Hard in the Paint on Crypto Users – Good Luck!
It looks like the US government is paying attention to cryptos!
According to recent drafts, the famed IRS 1040 form will ask anyone who is filling it out if they used cryptos – in anyway – during 2020.
This change to one of the most commonly used US tax forms isn't happening in a vacuum. Numerous US government agencies are looking for ways to monitor crypto use, which isn't going to be easy.
While there are some ways to keep on top of who is using some forms of 'virtual currency', there are many platforms that were designed to be impossible to track.
The IRS is looking for a way to keep an eye on these privacy-focused tokens, and they join the US Department of Defense (DoD) in soliciting new tools to spy on blockchain users.
Tap-dancing Around The Idea of 'Legal'
We can't tell people to break the law – so that means, if you are a US taxpayer – you better come clean with the IRS and declare any assets you may have, crypto or not.
What we can do is talk about why people who use cryptos may not like US tax law, as it forbids any US taxpayer from having assets that are untouchable by the US government.
The US is one of a handful of nations that taxes its citizens' assets, no matter where they go in the world. Unless you decide to renounce your citizenship, you can think of yourself as a milk cow for Uncle Sam.
Given how the US government sees the right of its citizens to hold private property (you can't), it is no surprise that the US is working on systems that would allow it to spy on blockchain transactions, and putting crypto questions on the front page of the 1040.
By the way, if you don't disclose your assets to the IRS in anyway they deem fit – you are a criminal.
Compliance Seems Like a Stretch
US tax law was written when the US economy was in a great spot.
The idea of a US income tax goes back to before the First World War, when it was designed to tax the rich. They simply inflated the money supply, and now everyone would be a rich bastard by 1914 standards ($28 would buy you an ounce of gold – now you need around $2,000).
Today, three people control around 50% of the wealth in the USA – so it is safe to say that the 'tax the rich' income tax scheme has wholly and completely failed.
The vast majority of the people in the USA are in rough shape financially, and with COVID-19 lockdowns continuing, the likelihood of a compliant populous seems a bit far fetched.
No, what seems more likely is widespread chaos, and calls for major reforms. Violence is already being used in most major cities by angry mobs – and with economic conditions continuing to worsen, this trend is probably going to grow far stronger.
Taxing an angry, violent mob is probably going to be difficult, especially if they understand that the entire system is designed to treat them like chattel.
Given the circumstances, it might be a very good idea for the IRS to reconsider how it operates, or start to buy up remote property in another nation – perhaps an island, where they can just tax each other right up their...
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