Law360 quoted Kostelanetz & Fink LLP partner Bryan Skarlatos in their recent article on the Internal Revenue Service’s major initiative to ensure that cryptocurrency users pay their fair share of tax.
Mr. Skarlatos told Law360 that “…the 2014 guidance, though incomplete, combined with the assumption that cryptocurrency users would comply with generally accepted tax principles, is likely sufficient for the vast majority of cryptocurrency users to at least make a good-faith effort when filing. I think that for 95% of the transactions out there, you have enough guidance to know what you should do” under the current regulatory framework, Skarlatos said.
While the IRS will likely be forgiving of individuals who have made a good-faith effort to comply, it is also in a position to prosecute those with discernible “badges of fraud,” Skarlatos said.
“They look for things that are clearly wrong from a factual vantage, rather than a gray area,” he said. The agency will likely focus on areas in which “they’ve got pretty clear evidence the person knew they were doing something wrong, as opposed to they just screwed up and there could be a reasonable explanation based on the novelty of crypto.”
The IRS would do well, however, not to try to legislate through prosecution, Skarlatos said.
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