IRS Ramping Up Efforts to Audit Cryptocurrency Traders and Holders

2019-10-26 12:45

A source within the Internal Revenue Service (IRS) has apparently confirmed the tax collection agency plans to send out a new batch of audit notices. The notices will be a follow-up to the 10,000 letters sent out in August.

The IRS is increasingly focusing on the cryptocurrency industry and a new round of audits may soon be upon us. Many Americans were unsure what to expect when the agency sent out 10,000 or so letters in August. Now, there have been multiple reports that the IRS is further intensifying its investigations into big-time cryptocurrency traders.

A few days ago, BeInCrypto reported that a new checkbox has appeared on 1040 form requiring individuals to disclose whether they received, sent, or exchanged any cryptocurrency since 2013. The IRS confirmed as well, that failure to answer this question honestly would have criminal repercussions. Naturally, many were shocked because not only did it target traders, but holders seemed to also be at risk.

IRS Sending Audit Notices to Cryptocurrency Traders

It appears that the IRS is taking this one step further and actually plans to send out audit notices.

As reported by Crypto Tax Girl (@CryptoTaxGirl), Judith McNamara of the IRS has confirmed that “based on new data,” the agency will be sending out more audit notices. It’s currently unclear whether every individual who received a letter in August will also be receiving an audit notice.

Per Judith McNamara of the IRS, based on new data that the IRS has, it will likely be sending out more audit notices soon in addition to the initial 10,000 letter campaign that was sent out in August.

— Crypto Tax Girl (@CryptoTaxGirl) October 23, 2019

Back in August, the letters varied in tone and what was required. For some, they were simply notified that the IRS knows they hold cryptocurrencies. Others received a letter demanding immediate action and a proper response. However, it now appears that some of these individuals will be receiving an audit letter which will likely demand a response, unlike last time.

Old Laws for New Technologies

Many have criticized the IRS for applying old taxation rules to a fundamentally new concept like cryptocurrencies. The tax situation on mining, hard forks, airdrops, and staking rewards, among others, is still incredibly unclear. Moreover, crypto-to-crypto trades are each supposed to be individually taxed, which makes calculating these numbers incredibly frustrating and time-consuming.

Overall, the IRS’s foray in the cryptocurrency industry is unwelcome, but it has been a long time coming. It remains to be seen how many cryptocurrency traders (or even holders) will end up receiving these audit letters.

Did you receive a letter from the IRS in the past few months regarding your cryptocurrency holdings? Tell us about your thoughts below in the comments.

Images courtesy of Shutterstock, Twitter.

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The post IRS Ramping Up Efforts to Audit Cryptocurrency Traders and Holders appeared first on BeInCrypto.

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