The United States Internal Revenue Service is blinded by its desire to defeat cryptocurrency. It rushes to enforcement without first thinking how best to get there. It has spent millions of taxpayer dollars training its personnel and procuring private contractors to uncover noncompliance by crypto users. The IRS is arming its people to aggressively enforce the tax laws applicable to cryptocurrency. All the while, it ignores “established” frameworks to help achieve tax compliance and collection on crypto transactions.
Crypto tax amnesty is the easiest and fairest way to get from point A to point B, yet the IRS prefers unfair and aggressive tactics that disproportionately affect one population of taxpayers — the young.
That framework, a well-publicized amnesty program, began over 10 years ago. There is already a fine blueprint to follow. In March 2009, the IRS announced a foreign tax amnesty program named the Offshore Voluntary Disclosure Program, or OVDP. The program came in response to U.S. taxpayers not disclosing their foreign bank accounts and not reporting billions of dollars in tax on foreign income. In exchange for voluntary disclosure and payment of tax, OVDP offered taxpayers an opportunity to avoid criminal prosecution and pay far smaller penalties (sometimes, none at all). Without OVDP, taxpayers faced jail time and a variety of draconian civil penalties. The program was a great success — in just seven months, some 15,000 disclosures were made, netting nearly $3.5 billion in back taxes, penalties and interest.
Seeing the utility of OVDP, the IRS extended the program through several iterations. In total, some 56,000 taxpayers came forward and the IRS collected more than $11 billion in back taxes, interest and penalties. Even the worst prognosticator could predict a similar result with a crypto tax amnesty program. Consider this: There is a crypto “tax gap” of $25 billion dollars, nearly 37 million Americans now own some form of…