The U.S. Internal Revenue Service has declared that it will send warning letters to Americans who owe back taxes related to cryptocurrency. Around 10000 letters will be send by the end of this month. The IRS newsletter has also stated that “the names of these taxpayers were obtained through various ongoing IRS compliance efforts.”
IRS Commissioner Chuck Rettig said in a statement that “Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties.” There are three variations of the letter,termed as the Letter 6173, Letter 6174 or Letter 6174-A, that are being send and the IRS has already started mailing the first stage from last week. Rettig also said that “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics.”
The first report of people receiving these letters came out this week and as per the press release from IRS, those who have cleared their taxes might also find them at the receiving end of such letters. The release also says that some cryptocurrency holders may find themselves subject to audits.
It was first reported in the month of May that IRS is beginning to frame a new set of guidelines for cryptocurrencies, this being the first such effort since 2014. Since the decision made by IRS to treat cryptocurrencies as intangible property for tax purposes, a number of organizations have requested the IRS for updated guides on the issue.
In a recent training guide on IRS staff which was leaked online, it was mentioned that IRS may consider issuing subpoenas to tech companies to find out about cryptocurrency wallets of any individuals. It also goes to mention that IRS agents can monitor social media accounts for necessary tracking. This proves that the IRS has tough plans for anyone who is trying to hide their money through cryptocurrency deals.
These letters will advise the taxpayers to clear any taxes that they owe or to file amended tax returns regarding their cryptocurrency holdings. IRS also mentioned that the taxpayers who fail to mention the tax implications resulting from virtual currency transactions are subject to tax, penalties and interest. In some cases, this can also lead to criminal prosecution. The IRS has provided a separate notice highlighting the guidelines on how federal tax principles apply to virtual currency transaction and it plans to issue further legal guidance in future.
It seems that that the IRS is not ready to accept any further tax evasions through cryptocurrency dealings.
