The Tax collection agency of the US Government, the IRS (Internal Revenue System) recently issued strict warnings to 10,000 cryptocurrency investors. The letters iterated that the users might have broken federal tax laws if they have failed to comply with taxes imposed by law.
IRS Commissioner Chuck Rettig told the media,
“Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency,”
The IRS has expressed worries about the ability of digital currencies to promote tax evasion. Media questioned the IRS about the source they used to obtain the data on the customers. The media suspects that it might have been obtained from Coinbase.
In March 2018, the IRS had procured a court order asking Coinbase to hand over data on customers who sold, sent, or received digital currency worth $20,000 or more between 2013 and 2015.
According to US tax laws, the IRS is required to wait up to three years until it can act against individuals for deficient tax filings. The recent letters sent out by the IRS issued strict warnings to customers. One of the letters required the customer who claimed to have complied by the tax laws to sign a declaration, under penalty of perjury.
Nevertheless, in two other versions of the letter sent to users, the IRS has been entirely lenient and also informed the citizens on steps to follow to be compliant with laws.
Why Are Users in Doubt?
Moreover, the issue is a little more complicated than the willingness of the customers to pay the taxes. Many crypto exchange website does not keep track of all the transactions. Moreover, the users who haven’t recorded data by hand feel helpless and uninformed about the regulations.
Chandan Lodha, chief executive and co-founder of CoinTracker, a digital-currency tax software company told the media,
“This is a problem that people should have been paying attention to for a long time,”
According to an IRS spokesman, there is no explicit requirement that many cryptocurrency sales be reported to the agency by third parties. Sales of stock shares must generally be reported on Form 1099-B to the IRS by the brokerage firm.
However, it seems that there is still some discrepancy between the knowledge base that the accountants can act on. Darren Neuschwander, a Certified Public Accountant, told the media,
“It’s ironic that the IRS is issuing these letters because we’re still waiting to know more rules,”
If you have received the letter and feel unsure about the laws. Please express your views and concerns with us.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com