The US Internal Revenue Service (IRS) has started to send out crypto tax warnings notices (dated 14 August 2020) to US taxpayers looking for a declaration for their investments.
26 August 2020 | AtoZ Markets – Cryptocurrency has become very popular over the last few years. This growing popularity has led governments to pay close attention to it. According to the IRS, Bitcoin and other cryptocurrencies should be treated as property rather than currencies for tax purposes.
US Cryptocurrency Users Receive IRS Notices
The US IRS has begun sending new crypto tax warning notices to investors. All these notices are dated 14 August. The IRS has requested information about their crypto trades, suggesting that they may have falsely reported their transactions. IRS also said in the notices:
“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, which include cryptocurrency and non-crypto virtual currencies.”
The IRS can issue three different types of letters, depending on the taxpayer’s circumstances. These warnings categorized into: Letter 6173, Letter 6174, and Letter 6174-A. Letters 6174 and 6174-A are non-action letters. It means that the receiver does not have to respond to these letters if he/she meet all the crypto tax filing obligations outlined in the letters. However, letter 6173 carries the risk of a taxpayer audit. If the receiver does not respond to this letter on time, his/her tax account will be audited by the IRS.
The IRS first sent a warning letter in 2019 to more than 10,000 cryptocurrency users. IRS also said it could enforce penalties including criminal prosecution, five years in prison, and a fine of up to $250,000 for not reporting crypto transactions.
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