Cryptocurrency

 

The Internal Revenue Service (IRS) has sent another batch of its infamous “crypto letter” to individuals suspected of owning digital currency, urging them to correctly report the details of their transactions. The news emerged after users of digital currency tax service CoinTracker.io reported receiving letters from the IRS, one of which was subsequently published on the CoinTracker blog. In a blog post CoinTracker said “[i]t has come to our attention from CoinTracker users that the IRS has started sending out another wave of cryptocurrency tax warning letters to U.S. crypto users.” The mailout was also reported in Bloomberg, which confirmed with the IRS that the letters had indeed been sent to more suspected digital currency holders. As first emerged in 2019 when the tax service began issuing digital currency letters, there are three different types of letters being published—each indicative of the degree to which the IRS thinks individuals are underreporting digital currency transactions. One of the letters in particular, Letter 6173, is issued to those that could foreseeably be subject to a taxpayer audit, representing the highest degree of confidence of underreporting from the tax agency. The IRS is known to be extending its focus on digital currency, and in particular on tax evasion around trading and speculation. A tax summit held back in March outlined much of the agency’s thinking on digital currency, where it was suggested that the agency wanted to do more to tackle those currently underreporting their digital currency dealings. The news will come as a concern to those trading in digital currency, indicating a heightened level of IRS oversight over individual actions in and around digital tokens. It comes at a time of increasing efforts globally to bring more transparency to digital currency transactions, and to ensure those engaging in trading are discharging their tax liabilities honestly.