If you are a HODL-er who has never taken a profit, this warning does not apply.
Otherwise, please pay attention: IRS Sending Warning Letters to More Than 10,000 Cryptocurrency Holders.
The Internal Revenue Service has begun sending letters to more than 10,000 cryptocurrency holders, warning about the penalties for failing to report income and pay tax on transactions involving virtual currencies.
The agency expects its mailing to be completed by the end of August. It is sending three variations of one letter, depending on the information it has about the recipient. “Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency, including increased use of data analytics,” said IRS Commissioner Chuck Rettig.
In recent weeks, IRS criminal investigations chief Don Fort has announced that the agency is also building criminal tax-evasion cases involving cryptocurrency that are expected to be made public soon.
Coinbase Connection
In mid-March of 2018, Coinbase provided information on about 13,000 accounts as requested by the IRS and under a federal-court order.
If you traded cryptos for a profit, it’s probably best to fess up.
The IRS will want penalties and interest but that’s better than being convicted of tax evasion.
Veil of Secrecy Off
The veil of secrecy is off and the IRS is Coming For You.
Some cryptocurrency holders are now disclosing past tax lapses to avoid potential criminal prosecution.
Bryan Skarlatos, a lawyer with Kostelanetz & Fink with several such cases, reminds cryptocurrency investors of the IRS’s success in piercing the veil of Swiss bank secrecy. Since 2009, more than 56,000 Americans who hid money in offshore accounts have paid more than $11 billion to resolve tax issues.
“Digital currency holders shouldn’t think they can hide from the IRS,” he says.
Smaller investors are also feeling heat. Many traded during last year’s price spike, and tax preparers are now asking clients routinely about cryptocurrency sales. They aren’t supposed to sign returns with unreported income.
Letter Received?
If you received a letter you know the IRS knows about you.
If you did not receive a letter you don’t know what they know.
I suspect the IRS will make examples out of some high-profile traders who think they are safe.
This is simply phase one of a crackdown, a tiny, seemingly irrelevant start on the way to far bigger controls.
Mike “Mish” Shedlock
Thank goodness the income tax is voluntary and we can ignore the IRS.
“No man has any natural authority over his fellow men.” ~ Jean-Jacques Rousseau
The IRS knows about everyone, these 10,000 are just the whales.
Congratulations to 10,000 crypto users for getting their recognition by the IRS. And how they claimed Bitcoin etc, was decentralized. Well the blockchain decentralized them right onto the IRS recognition list. Any blockchain crypto currency can get you recognition by the IRS. Congratulations.
So how would a crypto user / advocate avoid such recognition? Use a crypto currency that does not use a blockchain. Such a crypto currency is ClouldCoin. CloudCoin uses it’s own platform, which keeps no record of transactions as the blockchain does. Since there is no record of transactions, there is nothing for the IRS / FBI / NSA or anyone else to track.
But those looking for recognition from the IRS, by all means continue using the “decentralized” blockchain. And don’t think for a second that if you are using some crypto that claims encryption against revelation, such as Monero and Dash, then the IRS won’t discover your use of such blockchain currencies. Quantum computers will reveal all transactions recorded in the blockchain.
I’m pretty surprised to think that anyone would trade anything and not report the profit. It doesn’t seem plausible that the exchanges aren’t sending out 1099’s. My suspicion is that we are looking at a different problem altogether.
I suspect that, unlike brokerage accounts, the Bitcoin markets often see only half the transaction. For example, if I privately accept a Bitcoin in payment, then sell it, the exchange only sees the sale, and not my “purchase”. If a vendor wants to be paid in Bitcoin, and I buy one to pay him, the Exchange sees only the purchase, and not my “sale”. If I don’t trust the Exchange to hold my Bitcoin, and I buy it, then withdraw it to hold myself, then return it to the same, or another Exchange to sell it, they see both sides, but can’t connect them.
How did the IRS find out and why weren’t the trading platforms for BC notifying the holders. The govt doesn’t care if you murder rape and loot but steal from them and you will be in deep shit. I would think holding physical gold would now become more attratctive.
I was notified by Coinbase that the IRS would probably be auditing acct’s. That was 5 or 6 years ago. They now want the tax $$$s since BTC hit 20K.
Will Coinbase supply the requisite IRS forms for filing purposes?
The next step will be the department of justice cracking down on human trafficking, terrorism and other nefarious things that happen in the dark crypto markets online. We already know ISIS was using online crypto markets in order to fund terrorism. The DoJ will make an example out of someone big. That you can be assured of.
Nah, going after the big boys with insider power is too much work for the DOJ. They like the headlines for nailing some small-timer.
Exactly. They are all small timers in the crypto. Somebody is about to become famous.
Well I meant someone big in the crypto markets. Those people are still nobodies in the grand scheme of things but they will serve as an example to others who try to hide.
I don’t think this is an attack against crypto currencies. The IRS always wants all income reported. The IRS has been doing the same thing to waiters and waitresses forever.
Great, now they can claim capital losses on their bitcoins. Which brings me to another point, central banking fiat is loosing value due to willful malicious debasement. I should be able to write it off, too.
Except the value of the taxes you pay go down by the exact same amount.
Yeah, you are paying taxes in fiat currency. But the value of “all” your money is going in terms of what it can buy with it.
You need a single “o” in “loosing” bunky…
But…but…cryptos were supposed to be so anonymous.
Not if you buy them through a KYC exchange.