Tax Fraud in the Times of Cryptocurrency

Happy Friday everybody, hope you’re having a great week and gearing up for a good weekend. This week’s video, I want to talk to you about something that might be pretty interesting to some of you and super boring and irrelevant to others. But it’s one of those things that is becoming an issue, and so I think it’s important that we get out there and start to address it so that you can kind of put this on your radar, and that is cryptocurrencies. If you do not know what a cryptocurrency is, this video, probably not for you. But I do recommend you at least go out and do some research and find out a bare minimum about what these cryptocurrencies are, what it means, because I don’t think they’re going away anytime soon.

So really, the purpose of this video is for those of you who are either into the mining of cryptocurrencies or that you’ve acquired some cryptocurrency. Or more importantly, there’s this new space out there that’s called the NFT space and the NFTs. Again, I don’t want to make this a 30-minute lecture on what an NFT is, but really the gist of it is it’s a digital piece of art that can be identified as being owned by a single unique person. So unlike a picture on your computer that you can copy and paste and send to 30 different people, an NFT is a piece of digital art that a single person owns. And they have a token, a non-fungible token that shows they are the sole owner of that piece of art. Okay?

So, it’s becoming this thing. It’s kind of a brand-new concept, but people are selling, trading, buying these NFTs, using a cryptocurrency, mainly one called Ethereum. So, if you or anybody that you know is into that space or interested in learning about that space, the one thing I want to put on your radar is there was just an article, I believe, in the New York Times. And there’s been a couple of other places that have done some reporting on this, that the IRS and the Federal Government is really starting to look at these spaces because in their minds, it is ripe for crimes like tax fraud and tax evasion and money laundering.

So, if you are in the practice of buying and selling items for cryptocurrencies, what I would recommend is find yourself a very good tax attorney that is familiar with this digital currency market, okay, because there are things that you might not be aware of. For example, if you make cryptocurrency by selling a digital good, under the current version of the tax code, my understanding is you are responsible for paying a capital gains tax on the money coming in that cryptocurrency coming in. A lot of people don’t know that. So, if you sell a large bulk of items, you make a good chunk of cryptocurrency, and then you try to exchange that into the U.S. Dollar, take that money out. You might be in trouble with the IRS, if you don’t know how to properly report that.

Now at the end of the day, I’m not a tax lawyer. Okay? I’m not giving tax advice. I won’t give tax advice. I won’t pretend to understand tax advice that most people give because that’s not what I do. So, the purpose of this video is not to tell you what you need to do in terms of reporting or filing or anything like that. It’s simply to say that it’s something that you should be aware of because it is something the government’s starting to look at. So, if you have any questions about this or you need to know a good tax attorney, please let me know. I’m happy to schedule a consultation or set up a consultation or a meeting for you with some of the tax attorneys that I know and trust and have worked with in the past.

Likewise, if you’re a tax attorney out there and you stumbled on this video, and you’re somebody that has worked in cryptocurrencies before, and you’re familiar with how this process works, please reach out to me. Because I’m looking to try to build my referral network for people that are informed on this topic so that when I have folks call me, I can send them to you, and you can advise them on here’s what you got to do. Here’s how you have to report it and vice versa. And likewise, if they get into trouble, they know who to go to, that you can help them fix it. I can help handle the criminal side and all that good stuff.

So again, if you’re not familiar at all with what any of these things mean or are, I would recommend just spend, you know, an hour or two looking around Google and start educating yourself. Because, like I said, I don’t think this is going anywhere. I do think it’s going to stick around a while. And so, the more, we, as the legal community, kind of educate ourselves and are aware of it, the better we’re going to be able to serve our clients.

As always, if you have any questions, comments, anything you want to run by me, any topics you want to see me cover on a future video, throw me an email, throw me a comment. I’m happy to answer anything that I can. I hope you all have a great weekend, and we’ll talk to you all next week.