IRS Sends Fresh Round of Tax Warning Letters to Cryptocurrency Owners
The U.S. Internal Revenue Service (IRS) has begun sending new warning letters to cryptocurrency owners. This followed the tax agency prioritizing cryptocurrency on its tax forms. “The IRS is getting very serious about cryptocurrency tax compliance,” a tax expert told news.Bitcoin.com.
IRS Sending New Warning Letters
The IRS has started sending out a new round of tax letters to cryptocurrency owners. Several tax service providers revealed on Tuesday that their clients have received a warning letter from the IRS similar to those the agency sent to about 10,000 crypto owners last year.
There are three types of letters. The first type, Letter 6173, specifies a date by which the taxpayer must respond or their tax account will be examined by the agency. The other two, Letter 6174 and 6174-A, only remind taxpayers of their tax obligations. The Taxpayer Advocate Service, an independent organization within the IRS, has said that the IRS letters violate taxpayers’ rights.
“We have information that you have or had one or more accounts containing virtual currency but may not have properly reported your transactions involving virtual currency, which include cryptocurrency and non-crypto virtual currencies,” reads Letter 6174-A, shared by bitcoin tax software provider Cointracker. The letter is dated Aug. 14.
The IRS letter proceeds to advise cryptocurrency owners that if they did not accurately report the cryptocurrency transactions on the federal income tax return, they should “file amended returns or delinquent returns.” The agency warned:
If you do not accurately report your virtual currency transactions, you may be subject to future civil and criminal enforcement activity.
Cointracker co-founder Chandan Lodha shared with news.Bitcoin.com on Tuesday: “We don’t know for sure where the IRS got the user list, however we have seen Coinbase as a common exchange synced across users who are receiving these letters so that does seem likely.”
He continued: “We also know from the US government that in addition to Coinbase subpoena data, they also receive 1099 reports from exchanges, have subpoenaed other exchanges including non-US exchanges like Bitstamp, and are using blockchain analytics software like Chainalysis, Coinbase analytics, and Palantir. They have even gone so as far as to start trying to de-anonymize on-chain privacy coin transactions.”
Lodha outlined that in the past 12 months, the IRS sent out warning letters, added a cryptocurrency question to Schedule 1, issued new crypto tax guidance, and solicited contractors to help them with crypto tax audits. Last week, the agency moved the crypto tax question from Schedule 1 to the front page of Form 1040. He emphasized:
The trend seems to be pretty clear: the IRS is getting very serious about cryptocurrency tax compliance.
What do you think about the IRS’ warning letters to crypto owners? Let us know in the comments section below.
IRS Sends Fresh Round of Tax Warning Letters to Cryptocurrency Owners from Bitcoin News.