Ride the Lightning

IRS Warns Thousands of Cryptocurrency Holders to Pay Taxes

July 31, 2019

CNBC reported on July 26^th that the Internal Revenue Service is sending letters to 10,000 digital currency holders who potentially failed to pay the necessary taxes or improperly reported taxes on their digital assets last year. In some cases, the IRS says taxpayers could be subject to criminal prosecution. All of letters will be sent by the end of August.

I am shocked, shocked to discover that some people may be trying to avoid paying taxes by hiding cryptocurrency profits!

"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," says IRS Commissioner Chuck Rettig, who added, "The IRS is expanding our efforts involving virtual currency, including increased use of data analytics."

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.

Based on guidance issued in 2014, the IRS treats all virtual currencies — including bitcoin, Ethereum and XRP — as property under U.S. tax law. That means that like real estate, the sale or exchange of tokens for other goods is a taxable event. And similar to stockholders, digital currency holders are required to report capital gains and losses from cryptocurrency trades.

Most trades count as short-term capital gains, which can be taxed at as high as 39% depending on income bracket. Those who hold bitcoin for more than a year and then sell it, however, are only liable for a long-term capital gains tax, which is levied at a significantly lower rate of 15% to 23.8%.

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

Sharon D. Nelson, Esq., President, Sensei Enterprises, Inc.
3975 University Drive, Suite 225|Fairfax, VA 22030
Email: Phone: 703-359-0700
Digital Forensics/Cybersecurity/Information Technology
https://senseient.com
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