Tax Due: IRS Sends Warning Letter to 10,000 Crypto Speculators

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Hello. Pay up. That's essentially the message the IRS is sending to those trading cryptocurrencies.

If you are a HODL-er who has never taken a profit, this warning does not apply.

Otherwise, please pay attention: IRS Sending Warning Letters to More Than 10,000 Cryptocurrency Holders.

The Internal Revenue Service has begun sending letters to more than 10,000 cryptocurrency holders, warning about the penalties for failing to report income and pay tax on transactions involving virtual currencies.

The agency expects its mailing to be completed by the end of August. It is sending three variations of one letter, depending on the information it has about the recipient. “Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency, including increased use of data analytics,” said IRS Commissioner Chuck Rettig.

In recent weeks, IRS criminal investigations chief Don Fort has announced that the agency is also building criminal tax-evasion cases involving cryptocurrency that are expected to be made public soon.

Coinbase Connection

In mid-March of 2018, Coinbase provided information on about 13,000 accounts as requested by the IRS and under a federal-court order.

If you traded cryptos for a profit, it's probably best to fess up.

The IRS will want penalties and interest but that's better than being convicted of tax evasion.

Veil of Secrecy Off

The veil of secrecy is off and the IRS is Coming For You.

Some cryptocurrency holders are now disclosing past tax lapses to avoid potential criminal prosecution.

Bryan Skarlatos, a lawyer with Kostelanetz & Fink with several such cases, reminds cryptocurrency investors of the IRS’s success in piercing the veil of Swiss bank secrecy. Since 2009, more than 56,000 Americans who hid money in offshore accounts have paid more than $11 billion to resolve tax issues.

Digital currency holders shouldn’t think they can hide from the IRS,” he says.

Smaller investors are also feeling heat. Many traded during last year’s price spike, and tax preparers are now asking clients routinely about cryptocurrency sales. They aren’t supposed to sign returns with unreported income.

Letter Received?

If you received a letter you know the IRS knows about you.

If you did not receive a letter you don't know what they know.

I suspect the IRS will make examples out of some high-profile traders who think they are safe.

This is simply phase one of a crackdown, a tiny, seemingly irrelevant start on the way to far bigger controls.

Mike "Mish" Shedlock

Comments (18)
No. 1-9
2banana
2banana

But...but...cryptos were supposed to be so anonymous.

Maximus_Minimus
Maximus_Minimus

Great, now they can claim capital losses on their bitcoins. Which brings me to another point, central banking fiat is loosing value due to willful malicious debasement. I should be able to write it off, too.

KidHorn
KidHorn

I don't think this is an attack against crypto currencies. The IRS always wants all income reported. The IRS has been doing the same thing to waiters and waitresses forever.

Casual_Observer
Casual_Observer

The next step will be the department of justice cracking down on human trafficking, terrorism and other nefarious things that happen in the dark crypto markets online. We already know ISIS was using online crypto markets in order to fund terrorism. The DoJ will make an example out of someone big. That you can be assured of.

hmk
hmk

How did the IRS find out and why weren't the trading platforms for BC notifying the holders. The govt doesn't care if you murder rape and loot but steal from them and you will be in deep shit. I would think holding physical gold would now become more attratctive.