IRS is Sending Out Noncompliance Letters
July 26, 2019
Starting this week, United States taxpayers will be receiving official IRS letters concerning their obligation to report gains in compliance with virtual currency reporting requirements that were published in Notice 2014-21.
According to the IRS release, "The Internal Revenue Service has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income. "
Notice, the key word potentially. According to Twitter posts, the IRS has been sending letters to individuals who believe they are in fact reporting their cryptocurrency taxes in an accurate and proper manner, based on the guidance available to date. It seems at this point in time, the IRS is sending the letter out to just about anyone with cryptocurrency activity reported to the IRS (presumably data that is captured through Coinbase).
Another bit of irony, the letter notes that additional guidance will be released "in the near future." It would have been better, in my opinion, if this new IRS guidance was released before the IRS began sending out non-compliance letters. Because the reality is the IRS is silent on how to track basis and the treatment of forks, each of which could have significant implications on some crypto investors' taxes. For example, a taxpayer may amend in response to the IRS letter, only to find out the pending basis/fork guidance might cause them to need to file a second amendment. Still, taxpayers should take this letter seriously and consider amending as soon as possible if delinquent (and expect a potential second amendment).
These letters follow weeks after a leaked slide deck from the IRS Special Agent division (gun-toting police arm of the IRS) indicating the IRS is gearing up to kick down doors. https://steemit.com/bitcoin/@cryptotax/psa-crypto-tax-alert-the-irs-is-gearing-up-how-the-non-compliant-amend .
I have been writing articles on cryptocurrency taxation since summer of 2017 on Steemit and will continue to cover the updates to the IRS guidance when released.
Stay informed!
Picture Credit: https://pixabay.com/en/bitcoin-cryptocurrency-btc-currency-2868703/
Disclaimer: This series contains general discussion of U.S. taxes in a developing and unclear area of tax law. As always, you should consult your own tax advisor in your jurisdiction to determine your specific situation as this is not personal advice; and consider any future guidance by the Congress/IRS after the date of this article. Under Circular 230 to the extent it applies, this article cannot be used or relied on to avoid any tax or penalties in the U.S., its States or any other jurisdictions. This post does not create a client relationship between the author and the reader.
I am worried about the govt making cryptos a security.
That would impair certain tax positions that have been taken surrounding crypto (i.e. not having to apply the wash sale rule). Agree it's a concern.
It was only a matter of time that it would happen. I just wonder whether or not they themselves are prepared to handle the the complex transactions that have continued to evolve from the asset class over the last couple of years.
Agree, the treatment of systems such as Maker DAO, etc. are probably years away from being addressed.
To listen to the audio version of this article click on the play image.
Brought to you by @tts. If you find it useful please consider upvoting this reply.
Congratulations @cryptotax! You received a personal award!
You can view your badges on your Steem Board and compare to others on the Steem Ranking
Vote for @Steemitboard as a witness to get one more award and increased upvotes!