Virtual Currency? The IRS Is Looking For You.
Last year the Internal Revenue Service (IRS) announced a Virtual Currency Compliance Campaign to address perceived noncompliance by taxpayers related to the use of virtual currencies (e.g., Bitcoin).
More recently, the IRS sent letters to more than 10,000 taxpayers with virtual currency transactions who may have failed to properly compute and report taxable income. The educational letter has three variations: Letter 6173, Letter 6174 or Letter 6174-A.
The letters encourage taxpayers to review their previous tax return filings and amend them as necessary in order to self-declare the income and pay the tax, interest and penalties due.
According to IRS Commissioner Chuck Retting, the IRS is continuing to expand its enforcement efforts connected with virtual currency, including the use of data analytics. They’re also making more resources available to taxpayer to help them fully understand and meet their obligations.
While some countries may not tax virtual currency transactions, the United States is not one of them. The IRS considers virtual currency property for federal tax purposes and provides guidance on how general federal tax principles apply to virtual currency transactions. State income tax laws should also be reviewed to determine the proper tax treatment and compliance requirements.
If you received one of the letters from the IRS and would like assistance, please contact us.
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