The Internal Revenue Service (IRS) reported this Friday that it will be cracking down on cryptocurrency holders that refuse to pay taxes on their asset holdings within any Bitcoin wallets. To do so, the space will be sending out letters to any affected users, claiming that they should pay these taxes now.
IRS is sending out “educational letters”
In a news post on the IRS official website, the space shared this information. Starting the post:
“For taxpayers receiving an educational letter, there are three variations: Letter 6173, Letter 6174 or Letter 6174-A, all three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors. Taxpayers are pointed to appropriate information on IRS.gov, including which forms and schedules to use and where to send them.”
The post also includes a comment from the Commissioner of the IRS, Chuck Rettig. Here, he says 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.” Rettig continues, stating that “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.”
This news comes shortly after the IRS revealed its Virtual Currency Compliance campaign to “address tax noncompliance” for any taxpayers that simply refuse to pay their dues regarding cryptocurrency trading. Methods include but are not limited to audits, taxpayer education, and even criminal investigations.
Moreover, the blog quotes the IRS Notice 2014-21, which claims the following:
“IRS Notice 2014-21 states that virtual currency is property for federal tax purposes and provides guidance on how general federal tax principles apply to virtual currency transactions. Compliance efforts follow these general tax principles. The IRS will continue to consider and solicit taxpayer and practitioner feedback in education efforts and future guidance.”