Digital Currency Now Becoming Visible

September 14, 2020

Did you think your Bitcoin was beyond the long arm of tax law? Sorry to break it to you, but it is not. Not only does the IRS now ask about cryptocurrency transactions on the front page of form 1040, the agency has acquired a list of digital currency users, we learn from the article, “IRS Sends Fresh Round of Tax Warning Letters to Cryptocurrency Owners” at Bitcoin.com News. Cointracker’s Chandan Lodha suspects the IRS built this mailing list from a subpoena of Coinbase data, though the agency has subpoenaed several other exchanges and is using blockchain analytics software. So much for secret transactions. Writer Kevin Helms reports:

“Several tax service providers revealed on Tuesday that their clients have received a warning letter from the IRS similar to those the agency sent to about 10,000 crypto owners last year. There are three types of letters. The first type, Letter 6173, specifies a date by which the taxpayer must respond or their tax account will be examined by the agency. The other two, Letter 6174 and 6174-A, only remind taxpayers of their tax obligations. The Taxpayer Advocate Service, an independent organization within the IRS, has said that the IRS letters violate taxpayers’ rights. … The IRS letter proceeds to advise cryptocurrency owners that if they did not accurately report the cryptocurrency transactions on the federal income tax return, they should ‘file amended returns or delinquent returns.’ The agency warned: ‘If you do not accurately report your virtual currency transactions, you may be subject to future civil and criminal enforcement activity.’”

The assertion that these letters violate taxpayers’ rights rests on the right to privacy described in the IRS’ own Taxpayer Bill of Rights (PDF). We do not suggest anyone count on that claim to keep them out of trouble, however. The agency has helpfully published guidelines for those who must report cryptocurrency transactions, as discussed in this article.

Cynthia Murrell, September 14, 2020

Comments

One Response to “Digital Currency Now Becoming Visible”

  1. Carl Engelbrecht on September 15th, 2020 8:00 am

    When do you thing we’ll start to see xrp and the quantum financial system?

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