It’s considered a vital, compulsory and legalized act for all cryptocurrency exchanges to report all information as regarding crypto transactions to the IRS under the Bank Secrecy Act especially in a country like the US. The required information to be reported are; the transaction details, SSNs, customer names and addresses.
Meanwhile, this compulsory and legalized act to be reported can be tracked even when neglected by defaulters, since all cryptocurrencies via block chain technology has their transactions being recorded on an accessible public ledger making it visible to anyone with the government agencies inclusive.
Subsequently, wallet addresses and their histories can be recognized by a blockchain investigator with just a transaction ID thereby making tracking to be possible for a government agency like the IRS.
Although, the IRS (internal revenue service) also engaged the services of firms like Chainalysis to track blockchain activities and tax fraud to further shows its enablement in overseeing transactions from anonymous crypto wallets.
While some do otherwise, crypto wallets that report to the IRS under government’s directive will collate and share customer data that connects wallet addresses to personal identities. In this article you’ll get to know which crypto wallet that does not report to the IRS.
What Crypto Wallet does not Report to the IRS?
Before crypto investors can engage in crypto transactions via the use of an exchange, it’s demanded by law especially in a country like the US that such exchange should exercise a Know Your Customer (KYC) regulation which entails the collation of individuals (investors) information that include name, date of birth, and a copy of your personal ID.
More so, financial information that includes biometric data is also required. With this being done by major crypto exchanges, the IRS demands report on these records with exchanges issuing 1099 forms to report every customer’s crypto transaction activity.
This is why you may be automatically issued a warning letter as regards your unpaid tax liability since you’re not reporting transactions that have been reported to the IRS via Form 1099.
However, some exchanges don’t exercise KYC regulations and does not issue Form 1099 to their customers. These exchanges are restricted for US residents and usually have transaction limits.
Some of them include; Hodl Hodl, Pionex, TradeOgre, Bisq, ProBit and so on. Other decentralized platforms include; Caveats, Uniswap, PancakeSwap, and so on.
Tools:
- Crypto Tax Calculator For Canada
- Cryptocurrency Tax Calculator Australia
- India Cryptocurrency Tax Calculator
- NFT Tax Calculator
- US Cryptocurrency Tax Calculator
Conclusion
The government especially in a country like the US tagged any act of trying to dodge cryptocurrency taxes as a very bad idea.
Most especially as the world of cryptocurrencies soar more and grow bigger, the government of the US had put more efforts in implementing more resources with strict requirements that will help to drastically minimize crypto tax fraud.
While compliant exchanges provide more security by exercising the KYC regulations and reporting to IRS to ascertain the protection of your assets, Non-compliant exchanges can incur risks like freezing of accounts or withdrawal services.
Hence, the IRS plans an upcoming regulation by 2025 that will authorize crypto exchanges and wallets to report form 1099 that will capture all transaction data in details.