IRS signs contract to track bitcoin companies
The Internal Revenue Service has signed a contract with a company called Chainalysis that offers software for analyzing and tracking bitcoin companies.
The IRS has been pushing for ways to tax bitcoin companies. In 2014, it issued basic guidance in Notice 2014-21 stating that virtual currencies such as bitcoin should be treated as property rather than currency for tax purposes.
The IRS found that only a little over 800 taxpayers declared either losses or profits in bitcoin in 2015. The agency suspects that bitcoin and similar digital currencies are being used for tax evasion. It filed a broad request known as a John Doe summons last November seeking the identities of users from Coinbase, one of the largest bitcoin exchanges in the U.S. But after coming under pressure from members of Congress, the IRS scaled back the request in July to Coinbase users who engage in transactions of $20,000 or more.
Nevertheless, the IRS recently signed a contract with Chainalysis to track and analyze bitcoin transactions through the company’s Reactor tool, according to a report last week in the Daily Beast. Although the original invoice was only for $13,188, a later agreement increased the deal to $124,000, according to ETHNews. The IRS has paid more than $88,700 since 2015 to the company, according to the Daily Beast.
The Financial Accounting Standards Board has also been coming under pressure to develop guidance for how to account for bitcoin and other so-called “cryptocurrency” transactions. According to Thomson Reuters, FASB is in the early stages of developing an accounting standard for digital currency
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