IRS Issues 10,000 Letters to Cryptocurrency Holders, Warns of Devastating Penalties if Tax Obligations Go Ignored!
Starting in late July and continuing through the end of August, the Internal Revenue Service ("IRS") is sending out letters to thousands of holders of virtual currencies, or cryptocurrencies, warning them that they could be breaking federal law if they do not accurately report the details of their transactions. The letters encourage these taxpayers to review any transactions or trades made with virtual currency, as failure to report any income and pay resulting from these transactions could lead to hefty penalties, IRS audits, and possible IRS criminal investigations. Misuse and incorrect reporting of cryptocurrencies could be a felonious act under the view of the IRS.
This move comes as the IRS has begun a heavy crackdown on holders of virtual currencies who are in violation of the Internal Revenue Code. One of the IRS’s main focuses with this crackdown is informing these holders of possible taxes, interest, and sever penalties they may incur, especially on capital gains that taxpayers were not aware they were obligated to report.
The IRS has become particularly suspicious of cryptocurrency and its popularity among users involved in illegal transactions and other nefarious activities. Because of this, the IRS has expressed its concern that the use of cryptocurrency may promote intentional and explicit tax evasion, a felony that can result in serious monetary penalties, as well as the potential for imprisonment.
Taxpayers were warned in a statement released by the IRS to “take these letters very seriously,” as ignoring tax obligations could trigger an IRS audit or criminal investigation if illegal activity is believed to have any influence in these transactions, and a Washington DC Tax Attorney will be needed to resolve your situation and safegaurd you against penalties.
Cryptocurrency is an internet-based medium of exchange which uses cryptographical functions to conduct financial transactions. In other words, it is an electronic cash system that exists only online. Cryptocurrency gained momentum in 2009 when Bitcoin was first released as an open-source software. Today, there are several different cryptocurrencies that are used to make transactions. This list includes, but is not limited to:
- Bitcoin
- Ethereum
- Ripple
- Litecoin
- Monero
- Dash
- Waves
While digital currency is a relatively well-utilized method of making transactions and trading money, it is important to note that it is not controlled by any central authority. However, digital currency is not completely immune from regulation, as the IRS has made clear through its Virtual Currency Compliance Campaign. Through this campaign, the IRS has asserted that US taxpayers are subject to tax on worldwide income from all sources including transactions involving virtual currency. The overall aim of the Virtual Currency Compliance Campaign is to address noncompliance related to the use of virtual currency through multiple treatment streams including outreach and examinations.
One of the first steps in ensuring compliance amongst holders of these various digital currencies is to increase awareness of the taxable nature of cryptocurrency and the risk that taxpayers take in not reporting or underreporting these transactions. While some of these holders may have kept track of their transactions, others are not quite as prepared, as cryptocurrency exchanges weren’t necessarily built to provide users with transaction histories.
Therefore, it is imperative that you resolve your compliance issues voluntarily before the IRS contacts you. However, if the IRS contacts you about an audit, you should be sure to consult with a Washington DC Tax Attorney like Kevin E. Thorn, Managing Partner of Thorn Law Group, to best advise you on how the IRS taxes cryptocurrencies and to protect your rights in the audit in order to minimize any penalties, taxes and fees, and stop the threat of an IRS criminal investigation.
If the IRS does send you a Letter, you need to call experienced counsel ASAP, as you may already be under investigation. These letter includes IRS Letter 6173, IRS Letter 6174, and IRS Letter 6174-A. Mr. Thorn is familiar with these concerning letters and the not so obvious implications receiving one may have on a taxpayer. As a former IRS attorney, Mr. Thorn has insight into how the IRS operates and how to protect his clients. These letters are indicators of possible IRS Audit or Criminal Investigation!
MANAGING PARTNER KEVIN E. THORN CAN HELP CRYPTOCURRENCY HOLDERS COME BACK INTO COMPLIANCE IN WASHINGTON DC, THROUGHOUT THE US, OR AROUND THE GLOBE
Taxation of cryptocurriences is a new and constantly developing area. That is why you need counsel with expertise in IRS enforcement to help you navigate these complex issues, particularly if you are concerned that an audit of your account may lead to other issues, such as foreign reporting compliance, tax evasion, or other criminal activity.
If you hold digital currency and have unreported cryptocurrency transactions and would like to come into compliance with US Tax Law, it is best that you speak with a Washington DC Tax Attorney to better understand your reporting obligations with the IRS. Managing Partner Kevin E. Thorn is a former IRS Attorney who understands how the government communicates with taxpayers and what it expects from individuals who hold cryptocurrency.
As a Washington DC Tax Attorney, Mr. Thorn has made it a priority to work with his clients personally to resolve their specific tax issues and work through the complexities of coming into compliance with US Tax Law. The language of cryptocurrency and taxes can be daunting, and a mistake could lead to devastating criminal penalties.
Thorn Law Group has helped thousands of clients disclose unreported income in the US and throughout the world. Managing Partner Kevin E. Thorn can help you navigate your reporting obligations with ease, leaving you with peace of mind and the assurance that Mr. Thorn will effectively handle any communication with the IRS. He has helped his clients with a variety of different tax issues, saving them thousands of dollars, as well as the time, hassle, and worry of dealing with the IRS. For more information about reporting requirements, visit www.thorntaxlaw.com or call (202) 349-4033 today.
