A recent report from the IRS indicates plans to conduct an investigative survey on the number of Americans who use cryptocurrencies in the year 2020. Every worker filing their income returns is required to answer whether they engage in digital currencies or the crypto world.
The exact questions displayed on the returns document asks the individual citizen if they receive, sell, send, exchange, or if they still receive financial interests in the form of virtual currencies. According to Cointracker, a crypto tax software firm, the IRS agency’s move signifies its dedication to taxing cryptocurrencies.
The New Income Tax Draft
In 2019, the IRS made it clear that American workers are not honest about crypto involvement in their earnings and undertakings. The new draft Form 1040 shows the IRS’s efforts to recognize the number of crypto users in the United States.
The virtual currency question was previously located on Schedule 1 of the tax report. This section was an optional part to fill from the 2019 form on additional income and adjustments to income. However, the IRS moved it to the front page, making it mandatory for everyone filling the tax report to answer it.
IRS Further Observations
IRS looks forward to finding the right path on tracking transactions with the help of privacy coins, layer two protocols that incorporate lightning networks and sidechains. According to the U.S Department of the Treasury, the IRS seeks a collaborative system that is going to evaluate ledger-based transactions that relate to any blockchain technology or privacy coins.
Besides, the investigative agency plans to introduce a protocol that links crypto data to investigators. This mechanism seeks to engage other investigators in the crypto movement. The IRS is asking for a library of wallet addresses to monitor illicit activities involving cryptocurrencies.
The privacy coins set to be looked into include Monero, Zcash, Dash, Grin, Komodo, Verge, and Horizen.
The Question of Taxing PoS Protocols
Taxing the PoS system still poses a challenge to Congress after threats from the IRS to do so beyond reasonable values. Congresspeople aired a heated debate concerning a high amount of taxes imposed on staking rewards through the Proof of Stake protocol.
According to the Proof of Stake Alliance (POSA) founder, proof of work requires heavy machinery for mining splitting every concept of security of the network. Furthermore, he adds that the PoS protocol is different since every token owner is responsible for securing the network.