Better Regulations Needed for Stopping Crypto Tax Evaders

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John McAfee is the antivirus software pioneer and also the founder of McAfee Associates. The company is renowned for launching the McAfee VirusScan, the first commercial antivirus software, in the market in the late 1980s. This ended up contributing to the growth of a multibillion-dollar industry. According to the United States Department of Justice, John McAfee was indicted on five counts of willful failure of filing a tax return and tax evasion. If convicted, it could lead to a maximum sentence of 30 years and he would also have to pay U.S. penalties and taxes. The DOJ announced its charges a little while after civil charges were brought against McAfee by the U.S. Securities and Exchange Commission, related to his crypto offerings.

Along with the United States, McAfee has been a rather controversial individual in various countries. After claiming that the U.S. government charged him for using crypto, he went into ‘exile’. Last year, he tweeted from a boat rather foolishly and boasted that he hadn’t filed any tax returns. After his arrest in Spain, his indictment by the DOJ was unsealed and it showed that he hadn’t filed returns from 2014 to 2018. During these four years, he had earned millions from speaking engagements, consulting work, selling the rights of his life story for use in a documentary and cryptocurrencies. 

He is accused of tax evasion by having his income paid into crypto exchange accounts and bank accounts in the names of nominees. It is also alleged that he concealed assets in others’ names, such as real estate property and a yacht. There are tax consequences associated with the exchange or sale of cryptocurrencies, holding them as an investment or using them to pay for goods and services and it usually results in a tax liability. The Internal Revenue Service is responsible for enforcing global tax implications of crypto transactions through a virtual currency compliance campaign, aimed at addressing tax noncompliance globally related to the use of crypto. 

However, it seems that their efforts have proven to be inadequate when it comes to ensuring compliance with tax obligations related to crypto. The IRS appears to have limited data because third parties, like exchanges and financial institutions, report limited information, partly because of unclear information. Nevertheless, there is no denying that these crypto exchanges play an important role in providing the information that’s needed by the IRS for tax administration and the information is lacking.

Studies have shown that misreporting chances are higher when third parties are involved. This is something that needs to be dealt with because cryptocurrencies and blockchain technology are slowly becoming mainstream. Particularly in the light of the COVID-19 pandemic, governments all over the world have been forced to incorporate them into their financial services. The G-20 meeting held two years ago in Buenos Aires characterized crypto as assets, which means that they are set to be adopted as new digital assets and so, concrete plans are needed to prevent tax evaders like John McAfee from getting away with it.