Connect with us

Published

on

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.

Continue Reading

Technology

Salesforce’s Agentforce software is coming to OpenAI’s ChatGPT later this year

Published

on

By

Salesforce's Agentforce software is coming to OpenAI's ChatGPT later this year

Salesforce CEO Marc Benioff participates in an interview during the World Economic Forum in Davos, Switzerland, on Jan. 22, 2025.

Chris Ratcliffe | Bloomberg | Getty Images

Salesforce is ramping up partnerships with leaders in generative artificial intelligence as investors continue to fear that the software company faces business risks due to the rapid growth of AI.

Just ahead of its annual Dreamforce conference in San Francisco, Salesforce said Tuesday it will enable the use of AI models from OpenAI and Anthropic inside its Agentforce 360 software. A day earlier, Salesforce expanded Agentforce beyond text chats to also handle voice calls.

“The way people are going to interact with software is going to fundamentally shift,” said Brian Landsman, CEO of Salesforce’s AppExchange business and executive vice president of partnerships, in an interview. The interaction could be in ChatGPT or in Slack, he said.

Salesforce will collaborate with Anthropic to bring Agentforce 360 into Claude, Landsman added.

Shares of Salesforce are down about 26% this year, while the S&P 500 index has gained 13%, as Wall Street seeks faster revenue growth from the cloud software company. So far, Agentforce revenue has been “modest,” Morgan Stanley analysts, who have the equivalent of a buy rating on Salesforce, wrote in a Monday note.

Large software companies are increasingly turning to popular AI model developers for new capabilities. Atlassian, Datadog and Intuit have previously signed deals with OpenAI, and Microsoft has invested almost $14 billion in the company. In September, Databricks committed to spending $100 million on OpenAI models.

As part of Salesforce’s announcement, customers will be able to access corporate information in Agentforce 360 and create charts in Tableau through the ChatGPT assistant, which has more than 800 million weekly users. Last week OpenAI announced a software development kit for integrating third-party applications into ChatGPT.

Companies working with both OpenAI and Salesforce will be able to sell products through ChatGPT’s instant checkout feature later in 2025. Salesforce plans to work with Anthropic on selling products for regulated industries, starting with financial services.

OpenAI said last month that ChatGPT users would be able to purchase products from U.S. Etsy sellers and Shopify merchants.

Meanwhile, Salesforce said its engineering organization is adopting Anthropic’s Claude Code programming product.

“We plan to continue to go much deeper with these partners over time,” Landsman said.

Salesforce CEO Marc Benioff has been defending his company’s position in the AI boom. And on last month’s earnings call, he said Anthropic and OpenAI both use Salesforce tools.

“All these next-generation AI companies ranging from OpenAI to Anthropic to everyone are on Slack,” Benioff, who is also Salesforce’s co-founder, told analysts. “And it is incredible how they’ve used that as their operating system and as their platform to run their companies.”

WATCH: Salesforce CEO Marc Benioff goes one-on-one with Jim Cramer

Salesforce CEO Marc Benioff goes one-on-one with Jim Cramer

Continue Reading

Technology

Instagram rolls out PG-13 content guidelines for teenage users

Published

on

By

Instagram rolls out PG-13 content guidelines for teenage users

Instagram has installed a new privacy setting which will default all new and existing underage accounts to an automatic private mode.

Brandon Bell | Getty Images

Meta will now limit the content that teenage users can see on Instagram to what they would typically encounter in a movie rated PG-13, the social media company said Tuesday.

With the new content guidelines, Meta said it will hide certain accounts from teenagers, including those that share sexualized content or media related to drugs and alcohol. Additionally, teenagers on Instagram will not be recommended posts that contain swear words, though teen users can still search for it.

The changes come after the company has faced waves of criticism over its handling of child-safety and related mental health concerns on its platform.

As part of the changes, Instagram accounts with names or biographies with links to adult-themed websites like OnlyFans or liquor stores will be hidden from teens, the company said. Teen Instagram users will no longer able to follow those kinds of accounts, and if they already do, they will be unable to see or interact with the more adult-leaning content that they share.

Meta executives said during a media briefing that while the company’s previous content guidelines were already in line or exceeded PG-13 standards, some parents said they were confused about what kinds of content teens could view on Instagram. To provide clarity, Meta decided to more closely standardize its teen-content policies with movie ratings that parents could better understand, the executives said.

“We decided to more closely align our policies with an independent standard that parents are familiar with, so we reviewed our age-appropriate guidelines against PG-13 movie ratings and updated them accordingly,” the company said in a blog post. “While of course there are differences between movies and social media, we made these changes so teens’ experience in the 13+ setting feels closer to the Instagram equivalent of watching a PG-13 movie.”

The social media company has come under fire from lawmakers who claim that it fails to adequately police its platform for child-safety related issues.

The company then known as Facebook came under fire in 2021 when The Wall Street Journal published a report citing internal company research that showed how harmful Instagram was for teenage girls specifically. Other reports have also shown how easily teenagers can use Instagram to find drugs, including through ads run by the company.

Over the past year, Meta has rolled out several features intended to provide parents more transparency about how their teenagers are using the company’s apps. In July, Meta debuted new safety tools intended to make it easier for teenage Instagram users to block and report accounts as well as receive more information about who they interact with on the platform.

In August, the watchdog Tech Transparency Project released a report that alleged Meta’s ties and sponsorship of the National Parent Teacher Association “gives a sheen of expert approval” to its “efforts to keep young users engaged on its platforms.” The National PTA said in a statement that it doesn’t endorse any social media platform, while Meta said at the time that it is “proud to partner with expert organizations to educate parents about our safety tools and protections for teens, as many other tech companies do.”

Meta said its new Instagram content guidelines will begin rolling out Tuesday in the U.S., UK, Australia and Canada before expanding to other regions.

WATCH: Is an AI Bubble Brewing?

How investors can think about the potential AI market bubble

Continue Reading

Technology

California just passed new AI and social media laws. Here’s what they mean for Big Tech

Published

on

By

California just passed new AI and social media laws. Here's what they mean for Big Tech

Governor Gavin Newsom speaks at Google San Francisco office about ‘Creating an AI-Ready Workforce’ that new joint effort with some of the world’s leading tech companies to help better prepare California’s students and workers for the next generation of technology, in San Francisco, California, United States on August 7, 2025.

Tayfun Coskun | Anadolu | Getty Images

California Gov. Gavin Newsom signed a series of bills Monday targeting child online safety as concerns over the risks associated with artificial intelligence and social media use keep mounting.

“We can continue to lead in AI and technology, but we must do it responsibly — protecting our children every step of the way,” he said in a release. “Our children’s safety is not for sale.”

The latest legislation comes as the AI craze ushers in a wave of more complex chatbots capable of deep, intellectual conversation and encouraging behaviors. Across age groups, people are leaning on AI for emotional support, companionship and in some cases, romantic connections.

A recent survey from Fractl Agents found that one in six Americans rely on chatbots and worry that losing access would stunt them emotionally and professionally. More than a fifth of respondents reported having an emotional connection with their chatbot.

Many lawmakers have called for laws requiring Big Tech to better protect against chatbots promoting unsafe behaviors such as suicide and self-harm on their platforms.

The bills signed into law by Newsom on Monday are intended to address some of those concerns.

The changes

One of the laws passed by California implements a series of safeguards geared toward AI chatbots.

SB 243 is the first state law of its kind and requires chatbots to disclose that they are AI and tell minors every three hours to “take a break.” Chatbots makers will also need to implement tools to protect against harmful behaviors and disclose certain instances to a crisis hotline.

The law allows California to maintain its lead in innovation while also holding companies accountable and prioritizing safety, Newsom said in a release.

In a statement to CNBC, OpenAI called the law a “meaningful move forward” for AI safety standards.

“By setting clear guardrails, California is helping shape a more responsible approach to AI development and deployment across the country,” the company said.

Another bill signed by Newsom, AB 56, requires that social media platforms including Instagram and Snapchat to add labels that warn users of the potential mental health risks associated with using those types of apps. AB 621, meanwhile, heighten penalties for companies whose platforms distribute deepfake pornography.

The other key law, known as AB 1043, requires that device makers, like Apple and Google, implement tools to verify user ages in their app stores. Some Big Tech companies have already endorsed the law’s safeguards, including Google and Meta.

Last month, Kareem Ghanem, Google’s senior director of government and affairs and public policy, called AB 1043 one of the “most thoughtful approaches” to keeping children safe online.

The impact to big tech

The new laws require a series of changes to many long-standing business models. But D.A. Davidson’s Gil Luria said companies should experience a “distributed” impact from these new measures, since all businesses are forced to accommodate the rules.

“For AI chats the timing is beneficial since these companies are still working out their business models and will now accommodate a more restrictive approach at the outset,” he said.

Other countries have already enacted rules tougher restrictions on AI. Last year, the European Union passed the AI Act that includes fines for companies that violate the laws’ framework that includes a social scoring systems.

Utah and Texas have also signed laws implementing AI safeguards for minors. The Utah law, for example, requires that Apple and Google to verify user ages and it requires parental permission for those under 18 to use certain apps. These laws have also raised questions over whether harsh restrictions violate free speech or bans are the most effective solution.

California isn’t the first jurisdiction to pass laws like these, but Newsom’s signings carry significance due to the size of the state’s population and the fact that many tech companies are based in the San Francisco Bay Area.

WATCH: Why it’s time to take AI-human relationships seriously

Why it’s time to take AI-human relationships seriously

Continue Reading

Trending