The Internal Revenue Service (IRS) has started sending educational letters to taxpayers titled “Reporting Virtual Currency Transactions.” The intent is to increase virtual currency tax reporting compliance and not necessarily to penalize taxpayers. Some taxpayers may receive a letter despite being fully compliant with all their virtual currency tax reporting obligations. More than 10,000 letters are expected to be sent by the end of this month. Names of taxpayers have been obtained through ongoing IRS compliance efforts.
The IRS is sending correspondence to taxpayers who may have improperly reported virtual currency transactions or failed to report them altogether. As a result, taxpayers receiving the correspondence may be required to amend prior tax filings and pay back taxes, interest, and penalties.
History/Focus on virtual currency
Since taking over as IRS Commissioner, Charles Rettig has made crypto currency reporting and taxation a priority. These letters are the latest in Commissioner Rettig’s program to combat crypto currency tax abuses. The IRS announced a Virtual Currency Compliance Campaign in 2018 to address noncompliance related to virtual currency transactions. Their goal is to inform taxpayers of obligations and examine cases where they believe taxpayers may have intentionally failed to report transactions correctly or at all. The IRS has stated that it plans to issue additional legal guidance in this area soon.
Please select this link to read the complete blog post from OSAE Member Clark Schaefer Hackett.