The IRS have recently started to issue letters to individuals who have either failed to report or incorrectly reported their virtual currency transactions. This is a part of the IRS operations in order to increase compliance with regards to virtual currency.

The IRS is currently obtaining information regarding individuals virtual currency transactions, through its ongoing compliance effort. An example of this is through a court order to Coinbase (a company that specialises in transactions regarding virtual currency) to transfer information regarding customers virtual currency transactions to the IRS.

More than 10,000 taxpayers are estimated to have been sent letters by the IRS regarding the issues in reporting of their virtual currency transactions and the actions that are required by the taxpayer in order to bring themselves in to compliance.

The IRS commissioner Chuck Rettig recently stated, “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,”

“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.”

With the IRS taking more action with regards to virtual currency transactions, it is important US taxpayers take the necessary steps in order to bring themselves in to compliance in order to avoid potential penalties and possibly criminal prosecution.

Get in touch with one of our tax experts today, for advice regarding cryptocurrency taxation