IRS Sends Letters Reminding Taxpayers That, Yes, Cryptocurrencies Are Taxable

By:
Chris Gaetano
Published Date:
Jul 29, 2019
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The IRS has begun sending letters to owners of cryptocurrencies to remind them that, despite not being connected to any sovereign nation, the U.S. government still requires that taxes be paid on them. By the end of August, more than 10,000 taxpayers will receive these letters, with the recipients' identities having been obtained through various ongoing IRS compliance efforts. The letters are meant to be educational rather than threatening, with much of the content centered around how to pay the tax and how to correct previous filing errors. 

IRS Notice 2014-21 (PDF) 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. The IRS anticipates issuing additional legal guidance in this area in the near future.

"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," said IRS Commissioner Chuck Rettig. "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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