- Internal Revenue Service ( IRS) has sent another stack of letters to alleged cryptocurrency tax defaulters.
- The letter warns U.S. crypto holders that they have information that indicates that they may have misreported their income and pay taxes on their cryptocurrency transactions.
According to a Bloomberg report, the U.S. tax agency verified that it had sent warning letters to cryptocurrency users dated 14 August.CoinTracker.io distributed a copy of the IRS warning letters on its website, claiming that they had received it from one of the users. The crypto tax service provider also claimed through the blog post that numerous Reddit users had received the same letter.
Cryptocurrency tax defaulters warned to file taxes correctly
The IRS warning letter requires U.S. residents to file amended returns or delinquent returns “within the notification period ending in August 2020. Furthermore , the agency cautioned cryptocurrency tax defaulters that they already have accurate records of cryptocurrency owners in the U.S and legal action would be taken if the tax defaulters do not meet their tax liabilities by the due date.
As has been the case in the past, the tax authority can send three different types of letters to taxpayers. The category depends on the state of the ratepayer and the extent to which the body opines that the subject intentionally avoids paying taxes.
According to CoinTracker’s head of Tax and Strategy, Shehan Chandrasekera, the initial two letters, letters 6171 and 6174-A, are intended for educational, and they are more lenient. However, in case the taxpayer receives the third one, letter 6173, they should take action immediately because it bears consequences and is more intense. Notably, this letter entails the risk of taxpayer inspection.
BREAKING! looks like the IRS has started sending out another round of crypto tax warning/educational letters (Dated Aug 14, 2020) to taxpayers. Time for a thread 👇 pic.twitter.com/f3zhJU4rMj
— Shehan 🧗♀️|🇱🇷|🇱🇰 (@TheCryptoCPA) August 25, 2020
U.S. crypto tax laws
Trading crypto assets in the United States are subject to capital gains tax. That implies that at any moment that a U.S. taxpayer buys or sells virtual currencies, they must calculate and report the profits or losses made. Furthermore, those who receive their wages in the crypto form are also required to report this as revenue.
The IRS’s new drive follows a similar campaign where the agency sent warning letters to over 10,000 alleged cryptocurrency tax defaulters back in 2019. Back then, the agency issued the three different letters, requiring taxpayers to respond quickly to the third one.