They said the government couldn’t control it. They said it could never be regulated. But as certain as death, they will try to tax it. And it seems the US Internal Revenue Service (IRS) won’t rest until it’s got every last tax dollar from cryptocurrency traders.
The IRS is sending another round of letters to known cryptocurrency traders advising them that they’ve filed their taxes incorrectly, CoinDesk reports.
In one instance, a taxpayer owed nearly $3,900 for 2017, that’s $3,600 in tax and about another $200 in interest. The letter, seen by CoinDesk, was dated July 29, 2019.
This latest round of communication comes just a few weeks after the IRS first sent “educational letters” to cryptocurrency owners to advise them of any tax they might owe.
The IRS said it sent letters to “more than 10,000 taxpayers” that it had identified as possibly owing tax on their cryptocurrency holdings.
While the letters might sound like harbingers of doom, they are more advisory in nature; recipients are under no obligation to pay. However, recipients will have to provide supporting documentation that demonstrates why they’re not liable for the tax if they refuse to pay.
The IRS is reportedly gathering information about tax payers through Coinbase, a result of the stringent know-your-customer regulations the exchange enforces.
US cryptocurrency traders should be keeping a close on the IRS in coming months. Back in May, the authority said it would be issuing new guidance on cryptocurrencies. In other words, get ready for a whole swathe of clarifications on the tax implications of trading digital assets.
If you’re new to the world of cryptocurrency, it’s worth considering what the tax implications might be before making any trades. It’s probably a safe bet that your local authorities will come for it at some point in the future.
Indeed, this interest from tax authorities isn’t unique to the US. While the IRS is taking a proactive approach, other authorities including those from Denmark, Canada, and France are taking note of the taxes cryptocurrency traders might owe.