Crypto Tax Audit CEO Clinton Donnelly has revealed that crypto users are skeptical about filing their crypto tax returns due to fears of Internal Revenue Service (IRS) regulations. Donnelly said that crypto users fear that the IRS might decide to change their regulations after they file their tax returns. He noted that this is because the IRS has the discretion to apply or interpret laws as they deem fit.
Crypto tax expert explains traders’ worries about filing returns
In his statement on X (formerly Twitter), Donnelly noted that the fear of not filing tax returns has spread to all the users in the crypto market. In his post on the microblogging platform, Donnelly discussed the present tax rules, which he says apply to transactions in the crypto market. In the notice from the IRS, general tax principles that are applied to property transactions would also apply to transactions in the crypto market.
Donnelly noted that the notice lacks the legal binding of regulation due to it not providing clarity on the stance of revenue collectors in crypto transactions. He said that the IRS had earlier failed to provide any comment related to crypto tax in the sector before it rolled out this notice.
Challenges and penalties for non-compliance
After the IRS published the notice, it asked users to amend their previously filed tax returns. Donnelly explained that investors should be aware of form 8938, as it now provides an option to make the amendments. However, he clarified that the complexity of the form might pose a great deal of challenges for tax preparers.
In his opinion, Donnelly said that the United States IRS should endeavor to make the process of filing returns less tedious and more user-friendly. He added that the IRS can either make things retroactive or interpret and apply the law retrospectively. Donnelly said that just because the IRS has not addressed a particular subject does not mean that it is not covered by the law.
This update means that the IRS being silent is not freedom for people to do what they want. Donnelly clarified that crypto users who have failed to file their form under the Foreign Account Tax Complaint Act (FATCA) risk paying a penalty of $10,000. He noted that users in this category should also be prepared for a 40% accuracy penalty on additional tax related to unreported assets.
