Russian tax authorities are getting serious about crypto integration into the national economy and issues of tax collection in particular.
In coverage of this reaction today, Helen Partz at Cointelegraph quotes Russian FTS head Daniil Egorov as saying that the impact of undocumented crypto could “significantly erode” the tax base.
It seems, looking at coverage of the phenomenon, that the Russians are relying on scaring crypto holders to get them to self-report their capital gains.
“When you get into the digital space, you still leave a trail somewhere,” Egorov reportedly said, in what might sound to non-declaring crypto holders like a pointed threat. “And it’s a matter of time before this trail is identified.”
Egorov also reportedly spoke to the practice of getting proactive about greater crypto taxation trends, saying: “We would like to find solutions that shut down a problem as a phenomenon rather than just identifying actions by a specific player.”
That’s similar to how things appear to be moving in the United States, where the IRS reportedly wants to treat crypto like property, but exchanges make it difficult, because they don’t report the proceeds in traditional ways.
“While some crypto exchanges have begun to issue a tax form known as the 1099-K – which is traditionally given to an individual who engages in at least 200 transactions worth an aggregate $20,000 or more – in the context of crypto, this form only reports the total value of transactions,” wrote MacKenzie Sigalos at CNBC this past summer. “The total value does not factor in how much the person paid for the cryptocurrency in the first place, something referred to as the ‘cost basis,’ which makes it hard to calculate the taxable gain.”
Keep an eye on where crypto is going, and importantly, how countries address taxation in exact or inexact ways. The top-level 1040 question added by the IRS on whether filers have “any financial interest in any virtual currency” is maddeningly vague. We’ll keep reporting on current best practices to help crypto holders or indirect investors file properly.