In a situation when the crypto market is trying to push itself to the peak point on the graph of coinmarketcap, high profile regulatory authority is sending letters to digital currency holders to pay taxes on their activities concerning digital assets.
IRS Sends Warning Letters
According to the official reports by the Internal Revenue Service (IRS), taxpayers who deal or even dabble in digital currencies will be receiving the letters this month. This comes after the evaluation that taxpayers didn’t report IRS about their income resulting from dealing with virtual currencies.
Also, it elaborates that they’re not paying the tax on transactions properly. Accordingly, the agency is sending warning letters to over 10,000 crypto holders, which may also be subject to penalties for dodging taxes on their digital currency investments.
The Agency’s Commissioner Charles Rettig details this matter in a Friday’s report as follows;
“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,”
While the crypto community is wondering the data of over 10000 crypto holders, IRS states that it is an outcome of the “various ongoing IRS compliance efforts.”
Agency Tracking Tax-Payers
As per the report, there are three variations on the letter; letter 6173, letter 6174, or letter 6174-A. Collectively, all three letters target tax-payers to understand the respective tax-obligations. While the versions of all three letters are from IRS itself, it carries different purposes. According to IRS, one version alleges noncompliance while another informs that the IRS knows about their activity associating with virtual currencies. The official press details that;
“[a]ll three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors.”
As for now, IRS is sending letters to 10000 tax-payers possibly by the end of the August. However, in the year 2018, IRS finds that cryptocurrency is one among the five areas where taxpayers can easily skirt the taxes.
It is worth to note that, as per the guidance of 2014, IRS defines all virtual currencies, such as Bitcoin, Ethereum, XRP as property under U.S. tax law. Accordingly, tax-payers has to report the IRS on their capital gains and losses from cryptocurrency trades.
IRS Commissioner Chuck Rettig, explains,
“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.”
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