IRS letter campaign puts cryptocurrency investors on notice
The U.S. Internal Revenue Service has begun sending "educational letters" to U.S. taxpayers who have been engaging in "virtual currency transactions" and whom it says either "potentially failed to report income and pay the resulting tax" they were seen to owe on certain of these virtual currency transactions, or failed to "report their transactions properly."
The warning, which came in a notice published yesterday (July 26) and which the IRS made a point of saying is part of a larger, "ongoing" focus on virtual currency, is seen as a warning to any investors who may have hoped to hide their wealth from the taxman by channeling it into cryptocurrencies, as many observers have been suggesting is likely, and possibly contributing to the interest in such currencies.
"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," IRS commissioner Chuck Rettig said, in a statement included in yesterday's published notice.
"The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law, and helping taxpayers fully understand and meet their obligations."
The IRS said it began sending the educational letters to taxpayers during the week that just ended, and that by the end of August, "more than 10,000 taxpayers" will have received them.
It said the names of those receiving them had been obtained through various ongoing IRS compliance efforts.
Last year the IRS announced what it called a "Virtual Currency Compliance campaign" to address tax noncompliance related to the use of virtual currency through outreach and examinations of taxpayers.
In its published notice, the IRS stressed that it plans to remain "actively engaged in addressing non-compliance related to virtual currency transactions through a variety of efforts, ranging from taxpayer education to audits to criminal investigations," and that it "anticipates issuing additional legal guidance in this area in the near future."
Last year the IRS's audit division identified cryptocurrencies as one of five areas that U.S. taxpayers could still use to avoid their tax obligations. IRS officials have also been quoted as saying that they would imminently be announcing criminal tax evasion cases involving digital currency investors.
To read the IRS's statement in full on its website, click here.
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