[2019-07-26] The IRS is warning thousands of cryptocurrency holders to pay taxes

[figmentofmyass]

10k+ taxpayers are receiving warning letters from the IRS. there are 3 types of letters---one is just a "soft notice" that is information-only, not alleging any misreporting. the other two are a bit more threatening. this is how one user on reddit described them:

6174: Basically means they know you have crypto
6174-A: Basically means they think you broke the law and haven't paid your taxes, and may or may not start enforcement actions on you soon
6173: Means they are sure you broke the law, and are coming after you now.

here's the article from CNBC. an excerpt:

If you own bitcoin or other cryptocurrencies, you might want to check your mailbox.

The Internal Revenue Service is in the process of sending letters to U.S. citizens who own virtual currency and potentially failed to pay the necessary taxes and to those who improperly reported taxes on digital assets last year, the agency announced Friday.

“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,” IRS Commissioner Chuck Rettig said in a news release. “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics.”

The agency said it started sending out letters last week that by the end of August will reach 10,000 taxpayers. The list of names was obtained through “various ongoing IRS compliance efforts.” In some cases, the IRS said taxpayers could be subject to criminal prosecution.

Last year, popular trading platform Coinbase alerted 13,000 customers that it was complying with a court order to provide the IRS with information on accounts worth at least $20,000 from the years 2013 to 2015. The IRS did not say whether its mailing list was a result of the Coinbase disclosures.

and also an insightful article written by a tax attorney on the subject: Crypto Investors Don't Need To Panic About IRS Letter 6174-A, Here's Why

[o_e_l_e_o]

Literally billions avoided by business and HNWIs in tax havens, off-shore accounts, shell companies and the like, but they come after average citizens for making a couple of thousand dollars here or there on bitcoin trading, which for some reason they feel entitled to a cut of. Land of the free.

Presumably this is linked to the several thousand accounts which Coinbase handed over to the IRS last year. Everyone should bear in mind if you have completed KYC requirements on any exchange, though, the IRS will eventually end up with your details.

Given that every crypto trade, even crypto-to-crypto trades which never touch fiat, are a taxable event, I suspect the proportion of people accurately reporting their crypto taxes is very small.

[salamat700]

In life, only two are very certain the first one is death and the other while still living is tax. Of course, that depends a lot on which country you are in and if you are well-off or not as usually moneyed people can easily find many loopholes in the law that they can exploit. As to lesser mortals just like me, I have no choice but to follow and pay what can be due to the government regardless if I am into cryptocurrency or not. This is the role of the taxman or IRS for this matter. We have to pay tax to avoid the inconvenience of being hounded by the long reach of the governmental arms...and that is regardless if we agree with the government or not.

[LeGaulois]

Step by step Taxes departments started to develop and use big data. It's getting a little trendy and I can tell you that it's not a myth, they do it in my country already. So the US doesn't even need the disclosure from Coinbase anymore. Banks snitch a lot also.

For me I think it's fair to have to pay taxes, after all, we're the ones who benefit, but I don't necessarily agree with the rates applied.
In fact, more taxes I pay more I'm happy because it means I earned more

[Kakmakr]

One way of pissing off the government is to avoid paying taxes and we all know paying taxes are like dying, eventually all of us will die and we know eventually the IRS will knock on your door. The excuse that regulation about Bitcoin was not clearly defined by the IRS, will not be accepted. The US made their tax stance towards Crypto currency very clear, when they officially classified it as a tradeable commodity. 

It was a bitter pill to swallow, but I paid the capital gains on my Bitcoin profits every year. Now I sleep like a baby, because I know they will not knock on my door in the future. <Go to them and talk to them and pay the damn taxes> 

[hatshepsut93]

Literally billions avoided by business and HNWIs in tax havens, off-shore accounts, shell companies and the like, but they come after average citizens for making a couple of thousand dollars here or there on bitcoin trading, which for some reason they feel entitled to a cut of. Land of the free.

Maybe because those are legal loopholes while crypto falls under general trading regulation?

Also, they might want to setup precedents to discourage people from thinking that crypto's are some sorts of tax heavens, so they are just being proactive instead of waiting until crypto becomes widespread as a method of evading taxes.

And this just shows us again that exchanges are a central point of failure in crypto economy, and as long as majority of people use them as gateways to cryptocurrency, cryptocurrency itself can be regulated.

[Harlot]

I guess the mandatory requirement for registered exchanges requiring them to submit transaction records of their customers are really paying off. That's the only way they know that these citizens are holding and earning cryptocurrencies.  View it as violation of privacy but taxes are taxes and its their obligation to pay it, with a disturbing amount reaching to thousamds of people I think they should be alarmed that the IRS are always on their radar, it's either they comply or the the whole US crypto industry suffer the consequences.

[squatter]

I guess the mandatory requirement for registered exchanges requiring them to submit transaction records of their customers are really paying off. That's the only way they know that these citizens are holding and earning cryptocurrencies.

If you mean the FATF travel rule, it hasn't been implemented yet. The US still needs to pass a new law requiring that exchanges comply with those rules. The recipients of these letters were most likely drawn from customer data Coinbase handed over to the IRS by court order.

Here are some interesting insights from someone who supposedly worked at the IRS:

They are almost certainly joining up some of their internal tax filing database tables with external datasets (probably coinbase) and trying to estimate how much they think you owe.

What they will most likely do is create a prioritized list of everybody who they sent letters to, and only pursue audits of a small minority at the top of the list who does not end up paying what the IRS is estimating (guessing) they still owe. They're looking for return on investment. They have a small team dedicated to this campaign (maybe 5 people part time) and are looking to generate more revenue from voluntary payments from the letter campaign then they spend on the staff running it. The small minority at the top of the list that they refer to the audit teams works the same way. Audits are resource intensive for the IRS and they are very short staffed. They can only afford to go after the biggest fish. Unless you have egregiously not been paying your crypto taxes, you won't be referred to the audit team, and you will most likely get forgotten about.

[timerland]

Probably the worst move for the IRS's crypto sector to make. There millions worth of taxes avoided by large corporations via crypto, shell companies, and other ways. I don't see a reason to go after the average joe, and I don't think anyone out of the 10,000 people contacted actually used abused the system to a large scale.

Also very surprising - Coinbase handed over thousands of user accounts last year... A good survey would be accessing how many of the 10,000+ people used Coinbase.

This is one of the worst feelings - hopelessness. Being forced to pay huge amounts of taxes to the government while you sit here and watch other companies cheat the system without punishment.

Only positive change this is bringing is that regulations are catching up to crypto's technology, which omens mainstream adoption.

[mich]

Internal Revenue Service Sends New Round of Letters to Crypto Holders

https://cointelegraph.com/news/internal-revenue-service-sends-new-round-of-letters-to-crypto-holders

Last week, the United States Internal Revenue Service sent another round of letters to crypto traders called CP2000. These notices were sent to traders of some crypto exchanges due to inconsistencies found in their tax reports.

[Carlton Banks]

they'll get nothing from me


I don't give money to thieves, gangs or murderers, no matter how much they threaten me, or however respectable they claim to be

[BitHodler]

they'll get nothing from me


I don't give money to thieves, gangs or murderers, no matter how much they threaten me, or however respectable they claim to be

It's easy talking right now, until you come to a point where you realize that no amount of money is worth the torture and imprisonment the government gangsters subject you to when you don't pay your taxes.

I am against certain forms of taxation as well, but that still isn't worth it to me to not pay anything and risk very long prison time. You only live once, so why make things unnecessarily more complicated for yourself?

I do wonder though, what made you become so aggressive against taxation? Have you been treated unfairly because of a dispute between you and your tax authority?

[Carlton Banks]

It's easy talking right now, until you come to a point where you realize that no amount of money is worth the torture and imprisonment the government gangsters subject you to when you don't pay your taxes.

this is true. i'm not paying 1 satoshi though

I am against certain forms of taxation as well, but that still isn't worth it to me to not pay anything and risk very long prison time. You only live once, so why make things unnecessarily more complicated for yourself?

you only live once, why sell everyone out just for yourself?

I do wonder though, what made you become so aggressive against taxation? Have you been treated unfairly because of a dispute between you and your tax authority?

It was when I discovered that the established media, financial system, academia and the justice system were housing a bunch of lying crooks that prop up a false narrative of how the government are just here to help you, when in fact they're squashing regular people's power, their ability to fight back, and murdering millions and millions of them instead

BitHodler, do you want to stand by and maintain that system? you have massively questionable ethics if so, that's the sort of thinking that gave us Apartheid or Nazi Germany. What wouldn't you do to save your own skin?

I'm already past my limit with the genocide, then lying to me and everyone else to actually attempt to convince me genocide is necessary. But you're cool with that?


"Cowardice asks 'is it safe?'
Vanity asks 'is it popular?'
Expediency asks 'is it politic?'

But conscience asks 'is it right?'
And there must come a time, when we do something not because it is safe, popular, or political
But because it is right"

[PrimeNumber7]

Internal Revenue Service Sends New Round of Letters to Crypto Holders

https://cointelegraph.com/news/internal-revenue-service-sends-new-round-of-letters-to-crypto-holders

Last week, the United States Internal Revenue Service sent another round of letters to crypto traders called CP2000. These notices were sent to traders of some crypto exchanges due to inconsistencies found in their tax reports.

This article talks about 1099-k forms, and I believe there was a report of a number of tax payers receiving the CP2000 due to discrepancies between the 1099-k and their filed tax returns.

My understanding is that the 1099-k is for when someone uses Coinbase for example to process bitcoin transactions from customers and will only be generated if certain thresholds are met.  I am surprised the author of the article claims to be a tax professional. I don’t think this will apply to many coinbase account holders, as it doesn't affect "retail" accounts, according to my understanding.

[freedomgo]

I'm thinking of this scenario that will be experience by people who hold crypto in our country, we have a local exchange which we register with KYC, so since they are monitored by the government particularly the central bank, I'm sure the tax implementer already have our data.

Thus far, there is no warning yet since there is no clear crypto regulation yet in our country, but I know the moment it will be implemented, it's hard to mess up with the tax implementor or they called that agency as IRS in the US.

[BitHodler]

BitHodler, do you want to stand by and maintain that system? you have massively questionable ethics if so, that's the sort of thinking that gave us Apartheid or Nazi Germany. What wouldn't you do to save your own skin?

I'm already past my limit with the genocide, then lying to me and everyone else to actually attempt to convince me genocide is necessary. But you're cool with that?


"Cowardice asks 'is it safe?'
Vanity asks 'is it popular?'
Expediency asks 'is it politic?'

But conscience asks 'is it right?'
And there must come a time, when we do something not because it is safe, popular, or political
But because it is right"

Of course I do not want to support that system, but I have seen it myself how people have been subjected to so much horror just for not paying taxes (which governments call tax evasion to make it sound worse) that I don't want to ever go through that myself.

I can understand why you may not like my view on this, but we're all different and not everyone is as daring as you are to not pay a penny in tax even when they force you to do so. In other words, you choose prison time over paying tax.

I'm however not sure how long you will be able to stay firm in prison. You're going against an entity that doesn't care for a single moment that you are suffering in prison for decades until you finally realize this torture isn't worth it.

[Carlton Banks]

so you'll pay for mass murder, child sex slavery and the psychological manipulation to stop people reacting against it, just so you can avoid being bullied too?


nice

[rodel caling]

Actually it's clearly U.S government have an interest all about cryptocurrencies they know how crypto useful and important as expensive money in the future.
But only one thing government want go clear uaing crypto need to regulate it to collect taxes for the holders to become legal specially the trading.
Simple reason i seen for this situation if government hate bitcoin and bitcoin is threat for the economy whynthe government want to collect taxes from the crypto currency.

[1BTC EQUALS 1CAR]

That is why if you are from US then you need get the hell out of here and live in bitcoin tax-haven countries like Germany. Sooner or later, their staff will come knocking on their door and they investors of btc will have no choice but to pay huge taxes that is more than what they eaarned  for trading bitcoin where the US does not even recognize it as a currency.

[serjent05]

For me I think it's fair to have to pay taxes, after all, we're the ones who benefit, but I don't necessarily agree with the rates applied.
In fact, more taxes I pay more I'm happy because it means I earned more

Indeed, we are living in a land where the government maintain it.  So definitely we need to contribute in form of taxes.  Wether they (government officials)corrupt it or not, we are bound to it(taxation) and is our responsibility as a people of a nation.  Lucky, in my country, taxation on the cryptocurrency is not yet implemented though they are getting more tight regarding its regulation and I believe sooner or later our governemtn will implement it too.