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IRS Withholding on Crypto Cryptocurrency Coming Soon!

IRS Withholding on Crypto Cryptocurrency Coming Soon!

According to Law360, The Internal Revenue Service will begin this year to more strictly enforce the requirement to withhold taxes for cryptocurrency payments to nonresident aliens, an attorney who has represented clients in related matters said at a Saturday tax conference in Washington, D.C.

While the requirement to withhold 30 percent of payments to nonresident aliens is already in the tax code, the IRS will start more strictly enforcing that rule for payments that use cryptocurrencies, Bryan Skarlatos, attorney at Kostelanetz & Fink LLP, said at an American Bar Association Section of Taxation conference.

Cryptocurrencies such as bitcoin operate as digital means of exchange and are not regulated by central banks. Internal Revenue Code Section 1441 requires that 30 percent of payments to nonresident aliens must be withheld for tax purposes.

Indeed, the U.S. Department of Justice is not working from scratch when it comes to understanding and prosecuting crypto-related crimes, Jason Poole, an attorney at the department's tax division, told the conference audience.

Because prosecutors have had a chance to learn more about cryptocurrencies by pursuing litigation such as the Silk Road money-laundering case, there is substantial institutional knowledge in law enforcement agencies to address all kinds of crypto-related matters, Poole said.

“There’s a lot of prosecutorial experience that we’re drawing on from the U.S. attorney’s offices and across DOJ,” Poole said.

Plus, the mainstreaming of these currencies provides criminal enforcement officials with the tools necessary to successfully prosecute cases, Poole said.

“You see a bigger ecosystem being built up around cryptocurrency, and with that, these kind of markets with the exchanges and other things, these are the bread and butter of a financial investigator and financial prosecutor of how to follow the money,” he said.

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Read more at: Tax Times blog

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