The IRS began tracking Bitcoin transactions and submitted written applications to the court, but was rejected by Bitcoin exchanges

Golden Finance News - Bitcoin enthusiasts regard virtual currency as a promising alternative to "legal currencies" (such as the US dollar), but taxation in Bitcoin transactions has been controversial around the world.

The IRS believes that Bitcoin investment is commodity trading. Image source: Golden Finance

In response, the IRS considers Bitcoin investment to be commodity trading and requires that capital gains or losses from Bitcoin exchanges be treated the same as gains or losses from trading stocks or bonds and reported on Form 8949.

According to the New York Post, the IRS began tracking Bitcoin exchanges in November 2016, requiring Coinbase , the largest Bitcoin exchange operating across the United States, to hand over data and transactions for every account with more than $14 million between 2013 and 2015.

——After the IRS submitted a written application for Bitcoin transactions to the court, the Bitcoin exchange refused to process it, believing that the IRS had "overstepped its authority."

Between 2013 and 2015, when bitcoin was at its peak, the value of one bitcoin traded increased from $20 to $1,100. But the IRS reported that only 802 people in bitcoin exchanges reported bitcoin transactions on Form 8949 in the 2015 tax year. That number was 807 in the 2013 tax year and 893 in 2014.

The New York Post believes that the IRS underestimated Bitcoin transactions from the beginning. Image source: Golden Finance

——In this regard, Martin Mushkin, a professional Bitcoin lawyer, said,

“In my opinion, 800 reported losses or profits from cryptocurrency transactions per year is ridiculously low.”

He added that if publicity and enforcement began now, it would bring in a lot of tax revenue, and that the anonymity of Bitcoin should not be used to evade taxes.

——The New York Post believes that the IRS underestimated Bitcoin transactions from the beginning. The CEO of a Bitcoin exchange once proposed to establish a 1099-B form to give customers transaction taxes. However, due to the budget cuts, the IRS listed this draft as a low priority.

——Michael Lempres, chief legal and risk officer of Bitcoin Exchange, said that the company strictly abides by the law and supports tax reporting of transactions, "but the disclosure of three years of transactions conflicts with privacy interests."

Bitcoin exchanges have been required to register with the Treasury Department's Financial Crimes Enforcement Center's Financial Crimes Enforcement Network (FinCEN), requiring exchanges to report transactions over $10,000 per day, as well as suspicious transactions. Attorney Martin Mushkin predicts that Bitcoin exchanges will respond by reporting as originally required, as well as reporting small accounts with high trading volumes.