IRS Letters, Notices and How to respond

[confusedcoin]

IRS has started sending out letters for almost 10 thousand cryptocurrency traders. This is mostly a blanket letter which indicates that they know you are into cryptocurrency, better report your gains to avoid issues. These letters are primarily named as 6173, 6174 and 6174-A. Here's some more information on their contents and the next steps. https://bear.tax/blog/6174-a-notice-from-irs-to-cryptocurrency-traders/

A couple of days later, IRS started sending out targeted letters to few cryptocurrency traders. These notices are targeted towards customers whose 1099K has been obtained by IRS via Coinbase. It is mentioned in the letter that "you've traded crypto but you haven't reported it or under-reported it". These notices are termed as CP2501 and CP2000. More information on what they are and how to respond is written https://bear.tax/blog/irs-notice-cp2501-and-cp2000-for-cryptocurrency-traders/

[Vod]

https://bear.tax/

That is a neat service.

- imports your trades from 50+ exchanges
- processes them and removes any unwanted taxable events like withdrawals from exchange to wallet or transfer between exchanges.
- allows you to review unaccounted deposits to get the right purchase price
- does FIFO matching with your trades across exchanges and provide your auto-generated documents
- exports directly to TurboTax, TurboTax Online and TaxAct.
- finally provides a detailed CSV to submit in situations when you receive such notices. This CSV is the one required by your accountant if you are filing your taxes via them.

[timerland]

Neat site!

I love the features I found on it, I tried exporting some of my trades from my personal exchange account and it worked like a charm! I had a look at pricing options and will consider buying it if I choose to use it more. It's a great and neat service, a bit pricy for some of the higher up bundles, but that's understandable.

I read the article that was linked, and it matches the information I found on it from other websites - very well written as well.

I did have a question though. What are the risks if I connect exchange account to the platform? If your platform gets compromised will my exchange account also be lost?

[DaveF]

Has anyone who was not part of the coinbase 13k https://cointelegraph.com/news/how-not-to-panic-if-coinbase-is-turning-over-your-info-to-the-irs-expert-take received one of these IRS letters?

Nobody I know IRL has and the only real way for the IRS to know is if someone told them.
If you never traded / converted to fiat on a US based exchange you probably don't have to worry much.

-Dave
*Barring the person who bought in @ $1 per BTC and sold 10KBTC at $17,500 and bragged about it all over social media.

[DarkDays]

Be careful if you're receiving one of these letters without due cause.

There has been a spate of opportunists sending out letters claiming that tax liens are owed, but these are actually bogus.

Make sure that the letter you received is genuine, e.g. it has personally identifiable information, official seals and contact information etc.

Otherwise, trash it.

[confusedcoin]

For those questions on whether your accounts get affected when such platforms get compromised- here's the answer.

Platform like BearTax only asks for your READ/VIEW only API credentials and most of other exchanges are imported using stand alone CSV files.
1. CSV files are completely isolated from your exchange and there's no question of your account getting compromised there.
2. READ only API means the platform can go get your trades and that's it - it cannot do anything else with your account. Since it doesn't have trade access or withdrawal access or a 2 way communication to your account - this platform getting compromised doesn't effect your assets. 

Example: A software like Mint can get data from your banks and credit cards to show your spending patterns - but that getting compromised is not going to empty your bank accounts as they are just reading information.

Sure, in both the cases - your data (transactions you made) could be acquired but not access to your accounts.