If you’ve been trading Bitcoin and haven’t been reporting your earnings to the IRS, you might be getting a surprise in your mailbox.
The IRS is cracking down on cryptocurrency traders who didn’t report their earnings on their taxes. By the end of next month, around 10,000 people are expected to get letters from the IRS asking them to pay back taxes on unreported earnings from cryptocurrency trading, Engadget reports.
Last year the IRS launched a “Virtual Currency Compliance campaign” to address noncompliance related to the use of virtual currency.
“U.S. persons are subject to tax on worldwide income from all sources including transactions involving virtual currency. IRS Notice 2014-21 states that virtual currency is property for federal tax purposes and provides information on the U.S. federal tax implications of convertible virtual currency transactions,” reads the announcement. “The Virtual Currency Compliance campaign will address noncompliance related to the use of virtual currency through multiple treatment streams including outreach and examinations. The compliance activities will follow the general tax principles applicable to all transactions in property, as outlined in Notice 2014-21. The IRS will continue to consider and solicit taxpayer and practitioner feedback in education efforts, future guidance, and development of Practice Units. Taxpayers with unreported virtual currency transactions are urged to correct their returns as soon as practical. The IRS is not contemplating a voluntary disclosure program specifically to address tax non-compliance involving virtual currency.”
Last week the IRS started sending “educational letters” to some taxpayers. The names of those who are receiving the letter were acquired from “various ongoing compliance efforts” conducted by the IRS.
“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.”
Taxpayers that do not accurately report their earnings through cryptocurrency trading are liable for the tax for those earnings as well as penalties and interest. In some cases, the IRS notes that those who have not paid taxes on cryptocurrency earnings could potentially face criminal prosecution.
- Everything you wanted to know about VPNs (but didn’t want to ask)
- T-Mobile beats out Verizon for title of fastest mobile network in U.S.
- Amazon to pay customers up to $1,000 in damages for defective items
- Why the Bitcoin bust could finally bring down inflated GPU prices
- NFTs have a climate problem, and the solution isn’t coming fast enough