The Internal Revenue Service just issued a notice that it has started sending letters to US taxpayers with cryptocurrency transactions who may have failed to do proper reporting that would result in a tax liability.
According to the notice,
“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. 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 agency says more than 10,000 people will receive one of three letters by the end of August: Letter 6173, Letter 6174 or Letter 6174-A.
“All three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors.”
Taxpayers are pointed to appropriate information on IRS.gov, including which forms and schedules to use and where to send them.
The notice closes with a reminder that taxpayers who fail to comply can be prosecuted.
“Taxpayers who do not properly report the income tax consequences of virtual currency transactions are, when appropriate, liable for tax, penalties and interest. In some cases, taxpayers could be subject to criminal prosecution.”
In April, a bipartisan group of 21 members of the House of Representatives sent a letter to the IRS, asking the agency to clear up “substantial ambiguity” on how taxpayers should deal with crypto transactions.
Despite efforts by members of Congress to have the IRS issue a revised set of guidelines to help taxpayers, the new notice points to guidance issued in 2014, which states that virtual currency is property for federal tax purposes, and mentions that the IRS plans to issue additional legal guidance in the near future.