<h2>IRS Is After privacy Coins</h2>
<h3>Here They Come, Let's Keep An Eye On This</h3>
<time><img src="https://cryptogrizz.com/wp-content/uploads/2021/01/canva-photo-editor-1-300x250.png" alt="Robert Kiyosaki Says DeFi Is Biggest Opportunity 2021" width="300" height="250" />Jul 6, 2020,</time><time>12:33pm EDT</time>|7,654 views
<h2><a href="https://www.forbes.com/sites/shehanchandrasekera/2020/07/06/irs-is-trying-to-deanonymize-privacy-coins-like-monero-and-zcash/?sh=a2211d64174d"><strong>IRS Is Trying To Deanonymize Privacy Coins Like Monero And Zcash</strong></a></h2>
<a title="Photo of Shehan Chandrasekera" href="https://www.forbes.com/sites/shehanchandrasekera/"><img src="https://thumbor.forbes.com/thumbor/400x0/smart/https%3A%2F%2Fspecials-images.forbesimg.com%2Fimageserve%2F5df8272d25ab5d0007ce927a%2F960x0.jpg%3FcropX1%3D585%26cropX2%3D2419%26cropY1%3D643%26cropY2%3D2476" alt="IRS Is After privacy Coins" width="400" height="400" /></a>

<a href="https://www.forbes.com/sites/shehanchandrasekera/">Shehan Chandrasekera</a>Contributor<button aria-label="Follow Author"></button><a href="https://www.forbes.com/crypto-blockchain">Crypto &amp; Blockchain</a>I am grateful to be involved in two things that are never going out of business : bitcoin &amp; taxes
<figure role="presentation"><img src="https://specials-images.forbesimg.com/imageserve/5f035052fa327a0006327f3a/960x0.jpg?fit=scale" alt="IRS privacy coin crackdown" data-height="548" data-width="821" /><figcaption>IRS privacy coin crackdown

<small>SHEHAN CHANDRASEKERA</small>

</figcaption></figure>
2020 has been a year with a lot of turmoil but regulators' attempt to crackdown on cryptocurrency has not slowed down whatsoever (<a title="https://www.forbes.com/sites/shehanchandrasekera/2020/06/30/350000-aussie-crypto-users-are-receiving-tax-warning-letters/#534e980d7dcc" href="https://www.forbes.com/sites/shehanchandrasekera/2020/06/30/350000-aussie-crypto-users-are-receiving-tax-warning-letters/#534e980d7dcc" target="_self" rel="noopener" data-ga-track="InternalLink:https://www.forbes.com/sites/shehanchandrasekera/2020/06/30/350000-aussie-crypto-users-are-receiving-tax-warning-letters/#534e980d7dcc" aria-label="350,000 Aussie Crypto Users Are Receiving Tax Warning Letters">350,000 Aussie Crypto Users Are Receiving Tax Warning Letters</a>, <a title="https://www.forbes.com/sites/shehanchandrasekera/2020/05/13/the-irs-is-hiring-consultants-to-crack-down-on-cryptocurrency-tax-evasion/#739ecccc437b" href="https://www.forbes.com/sites/shehanchandrasekera/2020/05/13/the-irs-is-hiring-consultants-to-crack-down-on-cryptocurrency-tax-evasion/#739ecccc437b" target="_self" rel="noopener" data-ga-track="InternalLink:https://www.forbes.com/sites/shehanchandrasekera/2020/05/13/the-irs-is-hiring-consultants-to-crack-down-on-cryptocurrency-tax-evasion/#739ecccc437b" aria-label="The IRS Is Hiring Consultants To Crack Down On Cryptocurrency Tax Evasion">The IRS Is Hiring Consultants To Crack Down On Cryptocurrency Tax Evasion</a>). A <a title="https://beta.sam.gov/opp/6c8e3cfe6059462c8cdd82cea4252966/view#general" href="https://beta.sam.gov/opp/6c8e3cfe6059462c8cdd82cea4252966/view#general" target="_blank" rel="nofollow noopener noreferrer" data-ga-track="ExternalLink:https://beta.sam.gov/opp/6c8e3cfe6059462c8cdd82cea4252966/view#general" aria-label="new listing">new listing</a> posted on the government’s official contracting website on June 30, 2020, shows that the Criminal Investigation Division (CID) of the IRS is hiring private contractors to get more visibility into privacy coins transactions used in illicit activities. According to the <a title="https://drive.google.com/file/d/1eW8upy0VKu9ILbfOeI80lGP0DbJ98BXe/view" href="https://drive.google.com/file/d/1eW8upy0VKu9ILbfOeI80lGP0DbJ98BXe/view" target="_blank" rel="nofollow noopener noreferrer" data-ga-track="ExternalLink:https://drive.google.com/file/d/1eW8upy0VKu9ILbfOeI80lGP0DbJ98BXe/view" aria-label="request for information">request for information</a> posted, the CID is looking for technological solutions that will help trace privacy coins, layer 2 off-chain protocol networks, and side chains.
<figure role="presentation"><img src="https://specials-images.forbesimg.com/imageserve/5f034eb6d07f2a0006fd2570/960x0.jpg?fit=scale" alt="Snippet from RFI - Pilot IRS Cryptocurrency Tracing" data-height="101" data-width="870" /><figcaption>Snippet from RFI - Pilot IRS Cryptocurrency Tracing

<small>SHEHAN CHANDRASEKERA</small>

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<h2>What Are Privacy Coins?</h2>
Privacy coins like Monero, Zcash, Dash and others allow execution of fully anonymous transactions. This in contrast to cryptocurrencies like <a title="https://bitcoin.org/en/protect-your-privacy" href="https://bitcoin.org/en/protect-your-privacy" target="_blank" rel="nofollow noopener noreferrer" data-ga-track="ExternalLink:https://bitcoin.org/en/protect-your-privacy" aria-label="Bitcoin, which are not anonymous">Bitcoin, which are not anonymous</a>. Privacy coins achieve varying degrees of anonymity by obfuscating the transacted amount, wallet addresses, identity of both sender and receiver, and the transaction trail. Full anonymity is sometimes abused for illegal activities such as tax evasion, money laundering, and other non-financial crimes. However, it is important to note that these functions are also used in perfectly legitimate activities as well (e.g. anonymous donations to charity, individuals who simply want to transact anonymously, etc.). Remember that cash also is an anonymous method of transacting used at scale every day.
<figure role="presentation"><img src="https://specials-images.forbesimg.com/imageserve/5f034f4c608f5b000605cf2f/960x0.jpg?fit=scale" alt="Snippet from RFI - Pilot IRS Cryptocurrency Tracing" data-height="205" data-width="875" /><figcaption>Snippet from RFI - Pilot IRS Cryptocurrency Tracing

<small>SHEHAN CHANDRASEKERA</small>

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Based on the RFI posted, IRS will use software created by private contractors to obtain more information on suspicious activity. The deadline to respond to this RFI is July 14, 2020 and private contractors are encouraged to submit bids through emails.

MORE FROMFORBES ADVISOR
<h3 data-ga-track="Advisor Recirc - Single Article - Link 1">What Is Cryptocurrency?</h3>
<a href="https://www.forbes.com/advisor/author/kate-ashford/" data-ga-track="InternalLink:https://www.forbes.com/advisor/author/kate-ashford/">By</a>

Kate AshfordContributor

The language of the RFI suggests that the information is gathered to specifically capture illicit activities and/or test suspicious activity already reported by various agencies. Also, speculators who trade privacy coins should report their gains and losses for tax purposes without being under the false impression that regulators will not know about that activity.

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<em>Disclaimer: this post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.</em>

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<a title="Photo of Shehan Chandrasekera" href="https://www.forbes.com/sites/shehanchandrasekera/"><img src="https://thumbor.forbes.com/thumbor/400x0/smart/https%3A%2F%2Fspecials-images.forbesimg.com%2Fimageserve%2F5df8272d25ab5d0007ce927a%2F960x0.jpg%3FcropX1%3D585%26cropX2%3D2419%26cropY1%3D643%26cropY2%3D2476" alt="Shehan Chandrasekera" /></a>

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Shehan is the Head of Tax Strategy at <a href="https://www.cointracker.io/" target="_blank" rel="nofollow noopener">CoinTracker.io</a> (<a href="https://www.cointracker.io/" target="_blank" rel="nofollow noopener">bitcoin &amp; crypto tax software</a>). He is one of the handful of CPAs in the country who is recognized as a real-world

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<h3><em><strong>IRS Is After privacy Coins</strong></em></h3>
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