The U.S. Internal Revenue Service (IRS) has sent out a new round of warning letters to crypto holders about correctly reporting their transactions.
This is not the first time such a thing has happened. In 2019, the IRS sent letters to over 10,000 cryptocurrency holders, advising them to pay back taxes or file amended returns. According to a report published on Tuesday by CoinTracker, a second wave of letters has arrived.
CoinTracker published a copy of one of the letters. It reads, “we have information that you have or had one or more accounts containing virtual currency but may not have properly reported your transactions involving virtual currency.”
There were numerous posts on Reddit and other social media platforms expressing confusion and concern over the letters.
The warning letters come in three varieties, andseemingly depends on individual circumstances and the degree to which the IRS thinks that person is intentionally dodging taxes.
Anecdotal reports indicate that many of the letters were of the less severe variety. CoinTracker Head of Tax Strategy, Shehan Chandrasekera, tweeted this reassurance:
3/In case if you get one, don't panic. 6174 & 6174-A are less severe educational letters.
If you believe you filed your crypto taxes right, no action is needed.
If you missed any crypto portion when you filed or you didn't file a return, you must amend or file a new return.
— Shehan (@TheCryptoCPA) August 25, 2020
The third version of the letter referred to as ‘6173’ by the IRS, is more serious as it carries the risk of an audit and requires taxpayer action.
In response to the news, the Director of Communications at the CoinCenter Neeraj Agrawal posted a link to the IRS Taxpayer Advocate Office’s statement on previous letters. The statement indicates that the IRS uses these “soft” letters primarily as a tool for “informing, educating, and encouraging voluntary compliance.”
The statement also notes that 6173 “crosses over from educating to imposing onerous taxpayer production burdens outside the arena of an examination.”
At the time of this press, the IRS has not released any official communication about the latest batch of letters. However, this development alongside the new placement of cryptocurrency-related questions on the 1040 tax form, serves as further evidence that the IRS is intensifying its focus on crypto tax compliance.
Midnight