Taxing authorities in the United States, in Illinois, and even throughout the world are reportedly cracking down on wealthy individuals and others who are using cryptocurrency to avoid taxes.
The authorities in several countries, including the United States, see these efforts as a form of tax evasion, and these major economic powers are now pooling resources to curb what they see as an abuse of the system. What this means for those in the greater Chicago area is that if they are heavily involved in cryptocurrency, they may be subject to some additional scrutiny by the IRS over the next few years.
Cryptocurrency is a relatively new economic concept. Because it is still novel, it may be difficult to understand.
To summarize, the idea behind traditional currency, even in electronic transactions, is that there is some third party with authority that is refereeing the system. For example, when using a debit card to buy merchandise, the referee is the bank who will in most cases allow the transaction. However, if there is no balance on the account, then the referee calls foul by alerting the merchant that the card is declined, that is, the bank will not foot the customer's bill.
Through a number of mechanisms, cryptocurrency allows money to change hands electronically without the need of a referee. In other words, the electronic system itself keeps the system working so that people do not spend money, or credit, that they do not have.
Because governments are still largely working within the traditional system, the world of cryptocurrency is a place where dodging taxes is relatively easy. The status quo, however, is changing.
Of course, those who deal in cryptocurrency should make a good faith effort to follow the law. However, some may find themselves unfairly or even falsely accused of tax evasion. A strong defense will be necessary in such cases.