These IRS witch hunts do little but inspire FUD about bitcoin, thus hampering widespread acceptance, and keeping the US financial system in a bygone era.
Also, is there any idea about how much money the IRS could possibly recover through bitcoin? Is bitcoin even a significant source of loss for the IRS as compared to say, cash?
I'd say one advantage of bitcoin is the lack of reporting requirements if you wanted to move money without letting the IRS know. So I could see how bitcoin could be a loss for the IRS.
Right, but the IRS has already classified bitcoin and provided guidance as to reporting requirements [1]. This situation isn't much different to cash wages. You can in theory not report any of it, but then you're breaking essentially the same law.
My question is: don't losses from unreported cash wages vastly outnumber losses from unreported virtual currencies and isn't that likely to remain the case for the forseeable future?
With this sort of action, is the IRS signaling a belief that virtual currencies will replace cash for average citizens in the near future?
I'm not sure there is the massive "losses from unreported cash wages" you seem to imply there is.
There's two main forms of "cash wages" in the US. One being wait staff, the other being "under the counter pay" to workers, generally labor intensive. Wait staff who regularly under report their tips are easily identified by the IRS. In the second case, these generally aren't well paid jobs (thus wouldn't generate much, if any, tax revenue).
There's underreporting and tax evasion in almost any business which can be conducted on a cash basis. I know of a heating air-conditioning contractor (now deceased I believe) who regularly got customers to write checks directly out to him and take those to a check cashing business. He was very clear he was doing this to evade taxes.
They aren't implying there are massive losses. They implied that the losses from cash, whatever they are, would massively outnumber the losses from cryptocurrencies. (And thus that cryptocurrency-focused reforms are missing the point.)
The IRS regularly busted people for this when I waited tables back in the 90s, so I can't imagine that it got harder for them to do so now with more advanced technology.
TIL. They are tax excempt where I live. However it looks like in that case it's even less of an issue because seems like the employer is required to report this for calculating medicare contributions anyways if I understand this correctly.
Agreed. But from what I recall having worked in restaurants, etc, the IRS does take steps to encourage reporting of any cash wages by pressuring employers to notify their employees of that obligation.
So it must be considered a signifcant source of taxable income to them.
But of course thats just one example of possible cash income...