The Internal Revenue Service (IRS) is the tax collection agency of the US federal government. It collects taxes from individuals, businesses, and financial institutions, including those dealing with cryptocurrencies. But many crypto exchanges do not report to the IRS. Read on to find out which ones they are and why they don’t report.
Cryptocurrency Exchanges That Don’t Report to IRS
Most of the major crypto exchanges, including Coinbase, Gemini, Kraken and Binance, do report to the IRS. However, there are some exchanges that do not report to the IRS. These include decentralized exchanges (DEXs), peer-to-peer (P2P) exchanges, and certain foreign exchanges.
Decentralized Exchanges (DEXs)
Decentralized exchanges (DEXs) are exchanges that operate without a central authority. This means that users can trade directly with each other, without going through a third party. DEXs do not report to the IRS because they are not required to do so. Additionally, since users are trading directly with each other, there is no need to report their trades to the IRS.
Peer-to-Peer (P2P) Exchanges
Peer-to-Peer (P2P) exchanges are similar to DEXs in that they do not require a central authority. However, unlike DEXs, P2P exchanges require users to go through a third party before they can trade with each other. This third party is usually a broker or escrow service. Since the third party does not report to the IRS, P2P exchanges are not required to do so either.
Foreign Exchanges
Foreign exchanges are those that operate outside of the US. These exchanges do not report to the IRS because they are not subject to US laws and regulations. Additionally, since the IRS does not have jurisdiction over foreign exchanges, they do not require them to report to the IRS.
What Are the Advantages and Disadvantages of Not Reporting to the IRS?
The main advantage of not reporting to the IRS is that users can avoid the hassle of dealing with tax forms and filing taxes. Additionally, users can avoid the risk of being audited by the IRS. On the other hand, not reporting to the IRS can be risky, since users may be subject to fines or penalties if they are caught. Additionally, users may not be able to take advantage of certain tax deductions or credits if they do not report their trades to the IRS.
Conclusion
Cryptocurrency exchanges that do not report to the IRS include decentralized exchanges (DEXs), peer-to-peer (P2P) exchanges, and certain foreign exchanges. The main advantage of not reporting to the IRS is that users can avoid the hassle of dealing with tax forms and filing taxes. However, not reporting to the IRS can be risky, since users may be subject to fines or penalties if they are caught.
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