Again, I assume if you get the wicked 6173 form letter that you have to sign and send in stuff. They simply want to look over your
filed tax returns from 2013 to 2018?
I don't think so. They already have all your past filings.
They are basically saying, "We know you didn't report your virtual currency transactions. File your delinquent returns if you didn't file, and amend your returns if you did. Otherwise explain yourself and sign your statement under penalty of perjury so we can come after you later."
The 6174 and 6174-A letters indicate more leniency, or lack of real suspicion at all if this is really just a generic mass mailing.
OK...I filed from 2013 onward. Indeed I had to 'amend' 2013 Tax Returns due to the fact the IRS released the 2014 guidelines like 10 days before the April 15th IRS pay
deadline. I always thought that was suspicious as hell. So previous to the 2014 guidelines, my CPA said, you sell any BTC..I went NOPE thus no tax issues. Also NO equipment
deduction for the mining. So I had to pay the mining income as such. After the guidelines, I amended to reflect the 2014 guidelines and thus paid little taxes because of equipment
purchased and thus the equipment right off from gross. So as far as I can tell I'm legal as hell. However, all the background stuff or calculations and btc addresses to and from
mining, etc was all just printed out and/or written down. For example no CVS back then etc. So it was all by hand with paper calculated etc. So every day I got a payout for
mining etc, mostly LTC to BTC, I had to write down the $$$ it was that day and how much was paid out to the address. All by hand.
I've done it this way since. Same for BTC addresses in/out etc for equip or whatever and/or mining. Thus each year has a tub for itself marked by year with all the paper
calculations I needed to get the stuff that is put on to the return. If they expect this in electronic or pdf format with equipment pictures and etc, etc. I can show it on paper. How the hell I could send this all to someone in bulk even with notes and they could figure it out is beyond me. I did it according to the guidelines of 2014 by the IRS, but again at those times you picked and exchange (think I mostly used worldcoinindex) I went by the daily charts for price and just kinda kept u
So that is my main worry if an audit. The getting all this in electronic format and more organized if I needed to do such.
1) You get a call they want your complete files all sent to them including calcs/background info/receipts etc ASAP.
2) If I sent such, even all in pdf or xeroxed the works they would toss up their hands, likely tell me to pdf it all with summary and notes.
3) thus, in reality, you would probably have to do a monthly of the following with expectations you would have to handhold the IRS agent
who knows zip about crypto and BTC thru his own 2014 IRS guidelines and the process etc.
example:
Jan 2013
Do below monthly for eventual yearly summary of all for 2013.
1) pdf all equipment with pictures and receipts
2) pdf all mining with pdf and addresses as well
3) pdf all crypto sold pdf and addresses as well (also cap gains 40% or 20% or losses from sales)
4) pdf all office/biz supplies for that month.
5) pdf all-electric used mining a month.
Make a monthly folder of the above labeled Jan 2013
Start a 2013 folder of all the monthly above put together month by month. By that, I mean a running total of:
2013 Folder Mining Income with addresses and daily mining prices, again total month by month.
2013 Folder Equipment Purchased (or sold) all receipts, perhaps pictures.
2013 Folder Crypto Sold with cap gains. Running Total with cap gains/losses
2013 All office/biz expenses like Internet etc, etc.
2013 All-Electric used mining as running total month to month
Then a folder of all the above for the entire year as you add them together. You eventually get a complete
pdf and electronic version with monthly folders and charts for 2013. Do this thru 2018. Yech!
So fine, I bet you $$$ to donuts that I will get an IRS agent that has NO clue on the 2014 guidelines or worse yet
be using whatever new guidelines supposedly coming this year of 2019 and applying it backwards to 2013.
Indeed, it will be like I had to walk the CPA lady through on how crypto worked for tax purposes from 2013 onward.
Of course, me knowing the crypto tax law better than the IRS guy who had this 'mess' fall into his/her lap, that he is uncomfortable with, he will be
grateful for my help, right?
Not a frigging chance. As this cluster would continue with his/her learning curve as well, I'm
afraid the IRS agent will be beyond pissed off. Also it would take long, his/her boss would be
on the IRS's ass on why, this could dovetail badly.
My brother sells investments. He had a random audit. They told him his 'process' for doing taxes was wrong because they did
not want to deal with mucking thru everything. So they told him to settle and give them 12k and the IRS would go away for his 'sloppy bookkeeping'
He ss a finical fiduciary and investment consultant was beyond pissed off because he knew he was correct. Had to be or it was his ass
with his regular business.Last I heard he got them down to 3K and was still pissed off and working it down further. (This took months).
He though had the knowledge that he was correct and the IRS was not, alas, not like us other mortals.
So likely, IMHO, the dog and pony show, IF you are legit and IF you get everything to an electronic format, they likely being
new to crypto at the IRS end will simply still toss up their hands and just say you owe such and such and fine you to get the whole process done.
Thus it will be rinse/wash/repeat as the cluster***k moves thru the crypto universe.
So I'm just gonna see.
My CPA says it will be damn hard for the IRS with the efforts expended by me and likely anyone else
with just the bad 2014 guidelines to get anyone who legitimately has tried to pay crypto taxes since 2013 etc.
But that doesn't mean they won't Nickle and dime the process to such an extent you just pay off $5-10k to them to get out from under IRS scrutiny.
According to the CPA lady, they have to show some $$$, the more time they spend chasing down and individual account
the more they look stupid, thus the fine and/or 'adjustment' to whomever on whatever pretext of 'like my brother' not liking your process, as an example,
of how your doing or keeping track for taxes. You pay the $$$ fee/adjustment and the IRS agent looks like they did their job and everything moves on to
the next schmuck..on the list.
So I will wait, if it does happen, I will lose months of my life putting this in electronic and pdf format. I then will get the
wtf is all this. I will then explain using small words, further pissing off (according to my CPA) the un-informed IRS agent.
At the point, if it looks like the IRS agent kinda half-assed believe I tried my best with the 2014 clusterf***k of guidelines, he then
will fine me according to how pissed off and/or clueless he is about Bitcoin and Crypto taxes and to justify to his bosses
that his time was not wasted.
At that point, unless it is crippling, you pay the damn fine or past corrections he deems
appropriate and calls it a win and move on. This was the sunny vision of my CPA.
Just the kinda thing you want to hear from your CPA which between 2013 and now has also been utterly underwhelmed
by the process and learned this bit by bit.
The CPA also, being knowledgable about this, told me I was the ONLY person that she did crypto with. Mainly, because she started with me in 2013.
This is of course because she knew me, god knows she was not gonna work with this mess with new clients who might lie about the source of their crypto
that she signed off on as a CPA, no thanks. Great, will be 2 people in the room pointing out to the future IRS agent that he/she is clueless, that surely
will help a person's case with the IRS.
So anyway, I guess I should be grateful, that I did my stuff as best I could with these half-assed guidelines and even though just masses and masses of paper, call it a win,
even if I get audited or indeed the dreaded 3rd letter 1674.
It may all be in paper my kill all trees process and maybe a mess to xfer to electronic and pdf format, but I
was pretty anal about keeping records. Also, a CPA that backs me on what I did, year by year.
But damn, this is gonna be an ugly process indeed if it is based on the 2014 guidelines only and my expectation that the IRS agents are
not gonna be up to speed on this at all. Also, new regulations also may go back to 2009 as well. Remember the 2014 guidelines went
all the way back to 2009 for capital gains on spent individual Bitcoin.
So we will see, hopefully, they will simply see a progression of BTC and Crypto mining from 2013 till now by a CPA and
look for actual folk trying to cheat on taxes. (yeah right, I'm likely screwed..just saying)
Anyway, you are correct, the issue only comes to play above if you get the dreaded 1673 letter and/or an audit.
Still, for whomever, the above of those getting such a 1673 letter and/or audit is gonna suck massively IMHO.
Hope, I'm wrong, but I sure doubt it.
Brad