Investor vs. IRS, Canada crypto regulations & Japan crypto tax breaks?
87,000 new IRS agents, a crypto investor takes on the IRS in court, and new regulation from Canada. It's been a busy couple of weeks in the world of crypto. We've got all you need to know and more in the Koinly crypto news round-up.
IRS adding 87,000 new agents and increasing crypto tax enforcement
As part of the Inflation Reduction Act, the IRS is getting $80 billion in funding to increase enforcement, make operational improvements, and modernize systems.
Reports suggest the IRS will hire as many as 87,000 new agents. With the increased focus on crypto - including updating the virtual currency question on the tax return form - it's very likely the IRS will be specifically pursuing digital asset monitoring and compliance activities.
Crypto investor can sue IRS over John Doe Summons
A crypto investor has revived a challenge to sue the IRS over its information-gathering tactics.
The IRS has used John Doe summons against some of the largest crypto exchanges including Coinbase, Kraken, and Poloniex. These summons compel crypto exchanges to share user data with the IRS. But one crypto investor is challenging their right to do this.
On the 18th of August, the 1st Circuit Court of Appeals ruled that taxpayers are entitled to sue the IRS over its information-gathering tactics in Harper v. Rettig.
This decision allows Harper to go back to the trial court to argue that the IRS's use of a John Doe summons to attain his trading records was unconstitutional and obtained in violation of his Fourth and Fifth Amendment rights.
Although it's early days, the case has the potential to set a precedent for future John Doe summons usage should the trial go in Harper's favor.
Australia Mapping Crypto Tokens in Regulations Review
The Australian government is starting a review of crypto assets ahead of new regulations.
The government wants to map crypto tokens to help understand which assets are being used in Australia and how best to regulate them.
Token mapping is just one part of the review, the government is also seeking to identify gaps in Australia's regulatory and licensing frameworks, organizational structures, consumer safeguards, and custody obligations for third-party custodians of digital assets.
A previous report on the crypto industry by the Australian Parliamentary Committee found that one of the major issues in digital asset regulation was a lack of standard definitions and classifications by national and international regulators.
A public consultation paper is due soon.
Regulatory changes for Canada crypto exchanges
The Ontario Securities Commission is enforcing new regulations on crypto exchanges, including the popular Canadian exchange Newton.
Newton informed users several changes were being made to their accounts in light of the legislation - including adding a trading questionnaire, net buy limits, and portfolio loss notifications.
The trading questionnaire will collect information about user's knowledge of crypto investing, their financial situation, and their risk tolerance. Users must complete the questionnaire to continue using their Newton account.
The exchange will then use the risk tolerance data to notify customers when their portfolio approaches a loss level they've indicated they're comfortable with.
Finally, depending on the province of residence, users may see net buy limits imposed on their accounts for some digital assets.
Lobby groups pressure Japanese government for crypto tax breaks
Two crypto lobby groups have asked the government in Japan to reform crypto tax laws to reduce the tax burden.
Current corporate crypto tax rates in Japan are eye-wateringly high - with businesses paying up to 55% in tax.
But there might be light at the end of the tunnel. Japan's Financial Services Agency (FSA) and the Ministry of Economy, Trade and Industry are considering a tax reform proposal for 2023. The proposal could exempt crypto startups that issue their own tokens from paying taxes on unrealized gains.
The news comes after outlets had recently reported heavy tax burdens were forcing businesses and investors to abandon the country.
South Korea to tax airdrops
The South Korean government clarifies that crypto airdrops are considered gifts under tax legislation and are subject to tax.
The government had previously stated last year it would start taxing inherited or gifted tokens under local inheritance tax laws - but many investors had hoped airdrops would not be considered gifts.
The news means recipients of crypto airdrops may face tax rates of up to 50%.
Want to learn more? Sharpen your skills with our essential crypto tax guides.