IRS crypto tax refund: a kind gesture or a trap?
Regulation

IRS crypto tax refund: a kind gesture or a trap?

By Giorgi Mikhelidze - 18 Nov 2019

Chevron down

According to reports, the Internal Revenue Service of the United States of America has given a refund to several crypto investors who paid their due taxes accordingly. One specific example is a man who was refunded $3900 that he paid during the first IRS warnings in mid-August.

The IRS had distributed letters to US citizens citing that they had to pay sufficient tax on the crypto assets they had in their possession at the time. Several crypto investors believed that the government had absolutely no access to their cold or hot wallets, and therefore did not file any tax, believing that they would not be traced.

It seems that their gamble was correct, as there’s almost no way the government could potentially possess knowledge on substantial crypto holdings residing on cold wallets.

Many believe that this crypto refund was a kind gesture from the IRS, “rewarding” citizens who complied with the rules and filed the correct amount for their due taxes on cryptocurrencies. But many crypto experts believe that this is nothing but a trap to simply identify as many crypto holders as possible for future taxation. As many have mentioned, skimping out on the first month’s worth of taxes was worth it for them to gain additional tax money in the future from a larger community.

Drawn parallels to marketing campaigns

Many experts have mentioned that this “kind gesture” from the Internal Revenue Service resembles the marketing campaign of several companies where they tried to identify customer behaviour by offering them products for free.

One example that came floating up was the XM Bonus, which was a monetary gift for trader customers to determine what the average trader’s strategy was like and what percentage of the trader base was actually performing profitably.

According to experts, these small handouts of the taxes already given to the IRS are a PR move to somehow “de-vilify” a government organisation in the eyes of crypto investors. As we already know, most crypto investors tend to lean to a more decentralised and deregulated market compared to any other investor.

Crypto refund: a hidden motive?

Several crypto tax consultants have taken to their Twitter to notify crypto investors about the potential motives behind these handouts.

As already mentioned, there is no legitimate way the government can determine the number of assets in the possession of a specific investor.

What this means is that even if investors filed false amounts, the government would have no way of knowing, they would simply classify them as a Bitcoin holder.

This tax refund could be a strategy to classify these Bitcoin holders even further. Things like market makers, large holders, smallholders and etc.

Even though it seems quite drastic on the surface, it could be a relatively beneficial initiative. It’s likely that once classification is over and done with, the IRS will implement different taxation laws for different holders. 

With the handout of around $3500, the IRS is telling the crypto community that they can have all of their assets legitimised and have them returned soon after.

Giorgi Mikhelidze
Giorgi Mikhelidze

Giorgi is a Georgia software developer with two years of experience trading on the financial markets. He is now working to spread the knowledge about the Blockchain in his country and share all of his findings and research to as many crypto enthusiasts as possible.

We use cookies to make sure you can have the best experience on our site. If you continue to use this site we will assume that you are happy with it.