IRS Cracking Down On Crypto-Holding Taxpayers

The Internal Revenue Service (IRS) is going to send letters to about 10,000 cryptocurrency holders warning them about the penalties they will face if they don’t report their income or pay taxes on the transactions, according to a report by The Wall Street Journal.

There are three versions of the letters, which are expected to be mailed out by the end of next month.

“Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency, including increased use of data analytics,” said IRS Commissioner Chuck Rettig.

Insight into the new initiative by the government agency and the reason for the decision is not known. In March of last year, digital currency company Coinbase was compelled by law to provide information for around 13,000 accounts.

One version of the letter asks taxpayers who think they have followed the law to sign a statement saying as much under the penalty of perjury. The letter also said the IRS may be in touch with them.

IRS Criminal Investigations Chief Don Fort said the agency is also planning to soon bring some cryptocurrency tax evasion cases to court. The IRS has information involving which Coinbase customers bought, sold, received or sent crypto worth $20,000 or more between 2013 and 2015.

When it comes to taxes, digital currency is looked at the same way as an investment property or real estate.

Earlier this month, Coinbase reported that the IRS may be thinking about subpoenaing large technology firms in search of taxpayers’ unreported digital currency holdings. The news reportedly comes from a slide deck used in a cyber training session that discussed the many ways in which criminal investigators might come across digital currency tax cheats. The slide deck was said to have been leaked through social media by an accountant. The materials were presented to agency staff at a June event in Washington, D.C. at the World Bank.