The United States Internal Revenue Service is sending letters to taxpayers who possess cryptocurrency, compelling them to pay taxes they may owe or to file revised tax returns regarding their holdings. The IRS declared its letter campaign via a press release on July 26th.
IRS also mentioned that it has started sending letters, and by the end of next month, it will send over 10,000+ letters to the crypto investors. The names of the taxpayers were collected from different ongoing IRS compliance efforts.
According to the press release, IRS has started mailing what it refers to as “educational letters” last week. There was a total of three variations of the letters: Letter 6173, Letter 6174 or Letter 6174-A, that were made to help taxpayers to understand their tax and filing obligations and how to correct their previous errors.
IRS Commissioner Chuck Rettig stated:
“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.”
In May, it was being noted that IRS is going to start its work on new guidance about cryptocurrencies, its first such effort since 2014. Various organizations and crypto advocates have suggested the agency in the last few years to update its guidance following its decision to handle cryptocurrencies as a form of immaterial property for tax purposes.
Various firms doubt the IRS’s intentions. As per July 26th Forbes report, Lawyer Tyson Cross said that the tax authority might be using a list of taxpayers found by Coinbase in 2017 to carry out a blanket campaign, saying;
“This would seem to indicate the IRS is sending these letters to taxpayers as a fishing attempt without any real belief that each recipient has under-reported.”
Cross further says that some of his clients and tax professionals despite doing accurate reporting of their taxes have received a Letter 6174-A.
Cross suggested investors not to panic if they have received a letter, but to conduct the accuracy of their tax returns entirely, and should remain alert as they are on the agency’s radar.
Earlier, data released before the preceding tax year showed that only 0.04% of the tax filers were reporting capital gains from crypto investments to the IRS.