Cryptocurrency and taxes are often an unhealthy mix. While it is evident anyone owning cryptocurrency should pay taxes on their financial gains or losses, most US-based enthusiasts don’t think so. As such, the IRS is now actively warning crypto holders to file their taxes correctly, or face the consequences.
Another Attempt by the IRS
Given the current lack of cryptocurrency regulation in the United States, one would be inclined to think Bitcoin and altcoins aren’t subjected to tax laws. That is a wrong assumption, as the IRS has made it very easy to understand all holders must report their taxes correctly. So far, it seems unlikely most holders will do so voluntarily.
To ensure things go according to plan, the IRS has now come up with a new initiative. It is a rather interesting way to keep all cryptocurrency holders on their toes at all times. By actively sending a later to thousands of enthusiasts who might be thinking of filing their taxes incorrectly, the agency simply confirms it is watching everything and everyone.
So far, roughly 10,000 of these letters have been sent, although that number will likely increase in the coming weeks. In the letter, recipients are reminded of the penalties for failing to report income and pay taxes regarding Bitcoin and altcoin profits. Given how 2018 was not the best year for the cryptocurrency industry, it is difficult to determine how many US-based traders effectively pocketed a profit. Even so, that doesn’t warrant incorrect tax filings by any means.
This new initiative also shows the IRS has a vast database of people who are suspected of owning any form of cryptocurrency. Given the agency’s “reliance” on Coinbase for some of this information, it is certainly possible a fair few of that platform’s users are in the crosshairs. Other exchanges operating in the US also have to keep tabs on who owns cryptocurrency and how they trade Bitcoin and altcoins respectively. This has caused some friction among enthusiasts, but there is very little one can do about these requirements.
Interestingly enough, not everyone is getting the same letter template either. Sources close to the matter confirmed there are at least three variations, which further shows the agency is cataloging the information they have on cryptocurrency enthusiasts in the US. One of the letters asks recipients to sign a statement declaring they are in compliance with tax rules. if this document is signed untruthfully, those individuals will face major penalties and potentially spend some time in jail for trying to deceive the national tax agency.
The bigger question is what this all means for the cryptocurrency industry in the United States. As regulators continue to look for ways to introduce guidelines for all service providers and users, a lot may hinge on how this tax filing process goes. Now that everyone knows the IRS means business, it wouldn’t be in anyone’s best interest to try and game the system. After all, doing so could have major repercussions for Bitcoin and altcoins in the US over the next few years.
Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency or digital currency.