The crypto community enjoyed a mostly unregulated early history. These days, however, are long gone. Some rumors still circulate about crafty investors who find ways to cheat the Man; but, despite our best intentions and wishful thinking, he catches up eventually.
Federal regulators have kept an eye on the crypto markets for longer than most of us, and they’ve gotten smart to many of the tricks and schemes people have been using to avoid taxes and fees. Those who have been unlucky enough to get caught are now facing possible jail time. And, despite the privacy protections afforded by many virtual currency transactions, federal agents are catching up with crypto investors who are trying to skirt the law.
LocalBitcoin.Com Trader Ends Up in Federal Court
Just a few months ago, the president of the largest regional chapter of the Association of Information Technology Professionals pleads guilty to conducting an unlicensed money transmitting business. Why? For offering local sales of bitcoins through a popular exchange.
The defendant was caught in a sting operation run by undercover Treasury agents. The transaction he was charged for was one that many members of the crypto community are familiar with. Specifically, he advertised in-person cash-for-bitcoin exchanges on localbitcoin.com. On several occasions, he met up with undercover agents posing as customers where he accepted cash payments for electronic bitcoin transfers. Because he was not licensed as a money transmitter in his state or with the Financial Crimes Enforcement Network, each transaction violated state and federal law.
While this particular defendant has not yet been sentenced, he faces up to five years in federal prison. His take for the crime – $2,122 in fees he collected during the meet-ups. While it sure seemed like good money at the time, the investor no doubt regrets his decision in retrospect.
Play It Safe – Avoid the Feds With a Good Accountant
As the individual in the above example learned the hard way, avoiding tax liability or other financial regulations can expose you to massive legal and financial liability in the future. The federal government has never been shy about flexing its enforcement muscle, and you don’t want to find yourself on the wrong end of a federal case.
Tax evasion is never ok. However, smart tax planning is a good way to avoid excessive liabilities. The skilled cryptocurrency accountants at Happy Tax can get you the tax advice and planning services you need to minimize tax exposure and protect your virtual currency assets.