It wasn’t but a few years back when crypto currency started making mainstream news. IRS had not provided guidance on how to tax the currency. Crypto users were positive they wouldn’t have to pay taxes, because the government wouldn’t have the information needed to track them. Fast forward to 2019 and now the IRS is sending over 10,000 letters to crypto currency holders informing them of their tax duties. The IRS obtained the names of the taxpayers through summons given to the crypto exchanges.
The IRS Large Business and International division (LB&I) had previously announced the approval of five additional compliance campaigns. LB&I’s goal is to improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of limited resources. In plain english their job is to find tax returns with a high chance of errors and collect money and interest from that taxpayer. As a U.S. person you are subject to tax on worldwide income from whatever source derived, including transactions involving virtual currency.
The IRS has a focus on this area with real intentions on curbing noncompliance by taxpayers. The IRS letters are also conveying different messages to taxpayers. The letters were aiming to educate some taxpayers, while others are receiving letters about audits or criminal investigations being pursued. Professionals at IATC Inc always advocate staying in compliance with the tax code to avoid penalties and fines. Crypto traders should contact us for help with any letters they receive.