No More “Warning” from IRS to Crypto Taxpayers
- Crypto investors receiving new letters from the IRS
- Anytime a mismatch is detected between the trading profit & losses reported by the taxpayer & info received from third party, letters are sent
Internal Revenue Service (IRX) is not going to rest until it has wrung every single dollar that a crypto owner needs to pay in taxes.
After the first batch of letters, some cryptocurrency investors are now receiving a new round of letters from the IRS.
In the fresh batch, the department is telling them that their federal tax returns don't match the information received from the cryptocurrency exchanges. The letters also acknowledge that here trading exchanges, not taxpayers, might be at fault.
IRS Increasing its Focus on Crypto Tax Compliance
These letters, that customers started receiving in the recent weeks are the sign that the IRS is getting increasingly focused on crypto tax compliance.
Just last month, IRS began sending letters to more than 10,000 investors where it warned them that they might owe taxes on crypto transactions.
While some letters told recipients that they might be unaware of their obligations, urging them to file or amend returns, a harsher version gave recipients a deadline to respond in writing and further disclose their dealing in cryptocurrency.
“The first volume of letters I call ‘warning’ letters. Now it’s the IRS saying, we’ve got the records,”
Timothy Speiss of EisnerAmper LLP personal wealth advisers practice told Bloomberg.
Mismatch Between Info provided by Taxpayer & Crypto Exchanges
The last three letter types while were formally announced, this time IRS posted the information on its website.
“We received information from a third party (such as employers or financial institutions) that doesn’t match the information you reported on your tax return,”
the website says.
“This discrepancy may cause an increase or decrease in your tax, or may not change it at all,”
An anonymous spokesman for the IRS told Bloomberg the latest letters will go out to taxpayers anytime a mismatch is detected by the agency between the trading profit and losses reported by the taxpayer and what third parties reported to the IRS.
Crypto assets are deemed property by IRS since 2014 meaning crypto profits and losses are taxable like stocks at capital gains rates.
However, in the light of lack of official rules from the agency, it’s all a guess game for investors how much they owe in taxes.
But it might soon come to an end as IRS Commissioner Charles Rettig has promised further guidelines on recording crypto transactions on tax returns.