IRS Sending Letters Based on Cryptocurrency

In 2017 the IRS won its fight with Coinbase, a cryptocurrency exchange, and recieved information on customers who traded cryptocurrency. On July 26th the IRS announced that they’re sending letters to individuals who may need to file or amend their returns to report cryptocurrency transactions.

The IRS notice states:

The Internal Revenue Service has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.

“Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties,” said IRS Commissioner Chuck Rettig. “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations.”

The IRS started sending the educational letters to taxpayers last week. By the end of August, more than 10,000 taxpayers will receive these letters. The names of these taxpayers were obtained through various ongoing IRS compliance efforts.

For taxpayers receiving an educational letter, there are three variations: Letter 6173Letter 6174 or Letter 6174-A, all three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors.

The 6174-A letter likely means that the IRS believes you are in compliance. However, letter 6173 is more serious and states that “For one or more of tax years 2013 through 2017, we haven’t received either a federal income tax return or an applicable form or schedule reporting your virtual currency transactions.” If you recieve this letter it is potential trouble and you should consult a tax professional immediately. This letter requires a response. You can reach us at (801) 685-7600 or richard@rferronecpa.com.

You can read the origianl article here

The IRS is sending another round of letters to some cryptocurrency investors telling them that their federal tax returns don’t match the information received from virtual currency exchanges. The letters acknowledge that the trading exchanges, not the tax payer, may have made the error and are a new front in the agency’s burgeoning scrutiny of the industry. More information about this second round of letters can be found here.

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Marci RomneyIRS Sending Letters Based on Cryptocurrency