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For years, cryptocurrency holdings of U.S. taxpayers have existed in a sort of reporting gray zone. But now, those crypto wallets are getting a whole lot of attention from the Internal Revenue Service and President Biden, who appear determined to crack down on tax cheats.

The timing makes sense.

The president needs to raise money, relatively quickly, for his own ambitious economic agenda. And the “tax gap,” which is the difference between taxes paid and taxes owed, is a big pool of cash ripe for the picking. IRS chief Charles Rettig says the country is losing about a trillion dollars every year in unpaid taxes, and he credits this growing tax gap, at least in part, to the rise of the crypto market.

The federal government is so convinced of the potential for income from back-due taxes that the White House wants to give the IRS an extra $80 billion and new powers to crack down on tax dodgers, including those parking their cash in crypto. 

“The IRS is in the business of collecting revenue,” said Shehan Chandrasekera, CPA, and head of tax strategy at CoinTracker.io, a crypto tax software company. 

“Historically, if they spend $1 for any type of enforcement activity, they make $5…I think crypto enforcement activities are even higher than that,” he said.

Non-compliance made easy

In the U.S., it is easy to be an unintentional crypto tax cheat.

For one, the IRS hasn’t exactly made it easy to report this information. 

Tax year 2019 was the first time the IRS explicitly asked taxpayers whether they had dealt in crypto. A question on form Schedule 1 read, “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”

But experts said the question was vague, and crucially, not everyone files this specific document. A Schedule 1 is typically used to report income not listed on the Form 1040, such as capital gains, alimony, or gambling winnings. 

So in 2020, the IRS upped its game by moving the virtual currency question to the 1040 itself, which is used by all individuals filing an annual income tax return. 

“[They put it] right after your name and social security number, and before you put any income numbers or deduction numbers in,” explained Lewis Taub, CPA and director of tax services at Berkowitz Pollack Brant. This made the question virtually impossible to miss. 

But perhaps the bigger issue, according to Shehan, is that many filers have no clue how to calculate their crypto capital gains and losses.

If you trade through a brokerage, you typically get a Form 1099-B spelling out your transaction proceeds, streamlining the reporting process.

That doesn’t happen in the crypto world, Shehan said. “Many crypto exchanges don’t report any information to the IRS.” 

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. 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.

“A lot of people have actually over-reported their income, because they got confused,” explained Shehan. 

But the biggest issue driving non-compliance is the fact that the tax rules surrounding digital currencies are still being worked out, and in a state of constant flux.

‘Taxable event’

The IRS treats virtual currencies like bitcoin as property, meaning that it is taxed in a manner similar to stocks or real property. If you buy one bitcoin for $10,000 and sell it for $50,000, you face $40,000 of taxable capital gains. While this concept is relatively simple, it isn’t always clear what constitutes a “taxable event.”

Is buying dogecoin with your bitcoin a taxable event? Purchasing a TV with your dogecoin? Buyingan NFT with ether? 

All of the above are technically taxable events.

“The government says if I buy something with crypto, it is as if I liquidated my crypto no differently than if I sold any other property,” said Taub.

Mining dogecoin for fun qualifies as self-employment income in the eyes of the government. According to cryptocurrency tax software TaxBit – which recently contracted with the IRS to aid the agency in digital currency-related audits – tax rates vary between 10-37% on mining proceeds. 

“Crypto miners have to pay taxes on the fair market value of the mined coins at the time of receipt,” wrote crypto tax attorney Justin Woodward. While there are ways to get creative to minimize this tax burden, such as classifying mining as a business and deducting equipment and electricity expenses, it takes a bit of filing acrobatics to make it work.  

Earning interest on the bitcoin sitting idle in your crypto wallet also counts as income and is taxed as such. Exchanges like Coinbase have also begun to send Form 1099-MISC to taxpayers who earned $600 or more on crypto rewards or staking. 

The IRS crypto crackdown

Crypto trading volume may have fallen off a cliff in the last few weeks, but the overall market value of digital currencies is still up about 75% this year. The IRS has made it clear that it wants a piece of the action.

The agency recently ramped up efforts to subpoena centralized crypto exchanges for information about noncompliant U.S. taxpayers. 

This spring, courts authorized the IRS to issue John Doe summonses to crypto exchange operators Kraken and Circle as a way to find individuals who conducted at least $20,000 of transactions in cryptocurrency from 2016 to 2020. 

The IRS also put this same type of summons to use in 2016, when it went after Coinbase crypto transactions from 2013 to 2015.

Issuing these summons one exchange at a time is a clumsy way to capture noncompliant U.S. taxpayers, but it can be effective, according to Jon Feldhammer, a partner at law firm Baker Botts and a former IRS senior litigator.

In 2019, the IRS announced it was sending letters to more than 10,000 people who potentially failed to report crypto income. 

Rettig said in a statement that taxpayers should take the letter “very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties.”

Sample Letter 6173
IRS

According to Shehan, the infamous “Letter 6173” gave individuals 30 days to respond to the IRS, otherwise they risked having their tax profile examined. Letters went out again in 2020, and a fresh round of these stern warnings are expected to be sent this autumn.

Even the threat of a letter has a lot of people seeking the counsel of accountants as to whether they should get ahead of a potential audit and be proactive about amending past returns.

“A lot of people ask me on Twitter: ‘Oh my god, in 2018, I had $200 worth of capital gains I didn’t report. What should I do?'” recounted Shehan. “In that case, it just is not worth amending the return to pick up $200 worth of income…The high-level thing is that if you didn’t do anything intentionally, you are fine.”

The IRS is also getting smarter about uncovering crypto tax evaders with the help of new data analytic tools it can employ in-house. 

The agency’s partnership with TaxBit is a part of this effort. Taub describes the software as being able to go through cryptocurrency wallets and analyze them to figure out what was bought and sold in crypto. In addition to enlisting the services of the vendor itself, Taub says that IRS agents are being trained up on the software as a way to identify tax dodgers.

Biden’s new crypto rules

The president’s 2022 budget proposal could lead to a raft of new crypto reporting requirements for those dealing in digital coins.

The U.S. Treasury Department’s new “Greenbook,” released in May, calls for more comprehensive reporting requirements for crypto, so it’s as hard to spend digital currencies without getting reported as it is to spend cash today.

One proposal would require businesses to report to the IRS all cryptocurrency transactions valued at more than $10,000. Another calls for crypto asset exchanges and custodians to report data on user accounts which conduct at least $600 worth of gross inflows or outflows in a given year.

Another potential major blow to crypto holders: Biden’s proposal to raise the top tax rate on long-term capital gains to 43.4%, up from 23.8%

“Crypto gains are being taxed as any other type of gain in assets, either at long-term capital gains or ordinary rates. President Biden has proposed to eliminate the difference between the two,” said David Lesperance, a Toronto-based attorney who specializes in relocating the rich. 

Lesperance told CNBC the proposal would also function retroactively and apply to any transactions which took place after April 28, 2020. 

“This translates into $19,800 in increased capital gains tax for each $100,000 in capital appreciation of crypto,” he said.

Amid the rising crypto crackdown here in the U.S., Lesperance has helped clients to expatriate in order to ditch their tax burden altogether. 

“By exercising a properly executed expatriation strategy, the first $750,000 in capital appreciation is tax-free and the individual can organize themselves to pay no U.S. tax at all in the future,” he said. 

But Lesperance warned that taxpayers need to move fast. “The runway to execute this strategy is very short,” he said.

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Nvidia positioned to weather Trump tariffs, chip demand ‘off the charts,’ says Altimeter’s Gerstner

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Nvidia positioned to weather Trump tariffs, chip demand 'off the charts,' says Altimeter's Gerstner

Altimeter CEO Brad Gerstner is buying Nvidia

Altimeter Capital CEO Brad Gerstner said Thursday that he’s moving out of the “bomb shelter” with Nvidia and into a position of safety, expecting that the chipmaker is positioned to withstand President Donald Trump’s widespread tariffs.

“The growth and the demand for GPUs is off the charts,” he told CNBC’s “Fast Money Halftime Report,” referring to Nvidia’s graphics processing units that are powering the artificial intelligence boom. He said investors just need to listen to commentary from OpenAI, Google and Elon Musk.

President Trump announced an expansive and aggressive “reciprocal tariff” policy in a ceremony at the White House on Wednesday. The plan established a 10% baseline tariff, though many countries like China, Vietnam and Taiwan are subject to steeper rates. The announcement sent stocks tumbling on Thursday, with the tech-heavy Nasdaq down more than 5%, headed for its worst day since 2022.

The big reason Nvidia may be better positioned to withstand Trump’s tariff hikes is because semiconductors are on the list of exceptions, which Gerstner called a “wise exception” due to the importance of AI.

Nvidia’s business has exploded since the release of OpenAI’s ChatGPT in 2022, and annual revenue has more than doubled in each of the past two fiscal years. After a massive rally, Nvidia’s stock price has dropped by more than 20% this year and was down almost 7% on Thursday.

Gerstner is concerned about the potential of a recession due to the tariffs, but is relatively bullish on Nvidia, and said the “negative impact from tariffs will be much less than in other areas.”

He said it’s key for the U.S. to stay competitive in AI. And while the company’s chips are designed domestically, they’re manufactured in Taiwan “because they can’t be fabricated in the U.S.” Higher tariffs would punish companies like Meta and Microsoft, he said.

“We’re in a global race in AI,” Gerstner said. “We can’t hamper our ability to win that race.”

WATCH: Brad Gerstner is buying Nvidia

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YouTube announces Shorts editing features amid potential TikTok ban

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YouTube announces Shorts editing features amid potential TikTok ban

Jaque Silva | Nurphoto | Getty Images

YouTube on Thursday announced new video creation tools for Shorts, its short-form video feed that competes against TikTok. 

The features come at a time when TikTok, which is owned by Chinese company ByteDance, is at risk of an effective ban in the U.S. if it’s not sold to an American owner by April 5.

Among the new tools is an updated video editor that allows creators to make precise adjustments and edits, a feature that automatically syncs video cuts to the beat of a song and AI stickers.

The creator tools will become available later this spring, said YouTube, which is owned by Google

Along with the new features, YouTube last week said it was changing the way view counts are tabulated on Shorts. Under the new guidelines, Shorts views will count the number of times the video is played or replayed with no minimum watch time requirement. 

Previously, views were only counted if a video was played for a certain number of seconds. This new tabulation method is similar to how views are counted on TikTok and Meta’s Reels, and will likely inflate view counts.

“We got this feedback from creators that this is what they wanted. It’s a way for them to better understand when their Shorts have been seen,” YouTube Chief Product Officer Johanna Voolich said in a YouTube video. “It’s useful for creators who post across multiple platforms.”

WATCH: TikTok is a digital Trojan horse, says Hayman Capital’s Kyle Bass

TikTok is a digital Trojan horse, says Hayman Capital's Kyle Bass

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Tech stocks sink after Trump tariff rollout — Apple heads for worst drop in 5 years

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Tech stocks sink after Trump tariff rollout — Apple heads for worst drop in 5 years

CEO of Meta and Facebook Mark Zuckerberg, Lauren Sanchez, Amazon founder Jeff Bezos, Google CEO Sundar Pichai, and Tesla and SpaceX CEO Elon Musk attend the inauguration ceremony before Donald Trump is sworn in as the 47th U.S. president in the U.S. Capitol Rotunda in Washington, Jan. 20, 2025.

Saul Loeb | Via Reuters

Technology stocks plummeted Thursday after President Donald Trump’s new tariff policies sparked widespread market panic.

Apple led the declines among the so-called “Magnificent Seven” group, dropping nearly 9%. The iPhone maker makes its devices in China and other Asian countries. The stock is on pace for its steepest drop since 2020.

Other megacaps also felt the pressure. Meta Platforms and Amazon fell more than 7% each, while Nvidia and Tesla slumped more than 5%. Nvidia builds its new chips in Taiwan and relies on Mexico for assembling its artificial intelligence systems. Microsoft and Alphabet both fell about 2%.

Semiconductor stocks also felt the pain, with Marvell Technology, Arm Holdings and Micron Technology falling more than 8% each. Broadcom and Lam Research dropped 6%, while Advanced Micro Devices declined more than 4% Software stocks ServiceNow and Fortinet fell more than 5% each.

Read more CNBC tech news

The drop in technology stocks came amid a broader market selloff spurred by fears of a global trade war after Trump unveiled a blanket 10% tariff on all imported goods and a range of higher duties targeting specific countries after the bell Wednesday. He said the new tariffs would be a “declaration of economic independence” for the U.S.

Companies and countries worldwide have already begun responding to the wide-sweeping policy, which included a 34% tariff on China stacked on a previous 20% tax, a 46% duty on Vietnam and a 20% levy on imports from the European Union.

China’s Ministry of Commerce urged the U.S. to “immediately cancel” the unilateral tariff measures and said it would take “resolute counter-measures.”

The tariffs come on the heels of a rough quarter for the tech-heavy Nasdaq and the worst period for the index since 2022. Stocks across the board have come under pressure over concerns of a weakening U.S. economy. The Nasdaq Composite dropped nearly 5% on Thursday, bringing its year-to-date loss to 13%.

Trump applauded some megacap technology companies for investing money into the U.S. during his speech, calling attention to Apple’s plan to spend $500 billion over the next four years.

Evercore ISI's Amit Daryanani on keeping Apple's outperform rating despite tariffs

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