When it comes to Bitcoin, there is a lot of talk about anonymity. But can the IRS really track Bitcoin transactions?
The simple answer is yes, the IRS can track Bitcoin transactions. However, it should be noted that tracking Bitcoin transactions is not as easy as tracking traditional financial transactions.
This is because Bitcoin is a decentralized digital currency, which means there is no central authority that keeps track of all the transactions taking place.
The Internal Revenue Service (IRS) can track Bitcoin transactions. Therefore, taxpayers should take care to accurately report all Bitcoin-related income on their tax returns and be aware that the IRS has the capability to detect and assess taxes on any unreported income. Furthermore, taxpayers must keep accurate records for all Bitcoin transactions and be prepared to provide them to the IRS upon request.
That being said, the IRS has been working on ways to track Bitcoin transactions. In 2015, the IRS issued guidance on how it would treat Bitcoin and other virtual currencies for tax purposes.
And in 2016, the IRS started working with Chainalysis, a company that specializes in tracking cryptocurrency transactions.
So while tracking Bitcoin transactions may not be as easy as tracking traditional financial transactions, it is certainly possible for the IRS to do so.