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By RTTNews Staff Writer | Published: 11/12/2020 9:13 AM ET
The Tax Law Offices of David W. Klasing warned investors of U.S.-based cryptocurrency exchange Coinbase that the U.S. Internal Revenue Service (IRS) is coming after them for failure to report virtual currency holdings. They have knowledge of increased IRS enforcement activity involving Coinbase.
This information is based on first-ever transparency report released by Coinbase in October, which contained some data that shows the IRS, and its Criminal Investigation Unit as being one of the top receivers of information from Coinbase, alongside the FBI and CIA.
The data reveals that the IRS is requesting information from Coinbase for speedily tallying the information with its own taxpayer data. It is looking for discrepancies about investors holdings on Coinbase that have not been reported by them on taxpayers' returns.
The tax law firm urges investors, who have failed to report holding Bitcoin or other virtual currencies on their past returns or filed an incomplete or misleading returns related to cryptocurrency holdings, to act immediately.
The firm warns that it will be too late to amend their returns or take advantage of a voluntary disclosure program once an audit or criminal tax investigation begins. However, amendments can be safely made only where small amounts of tax went unreported.
Many people who hold cryptocurrency still do not realize, or simply ignore, their tax and reporting requirements and can end up facing serious civil and criminal trouble later.
The IRS treats virtual currency as a commodity or property, and not as real currency, for federal tax purposes. Therefore, virtual currencies are also subject to capital gains laws. The current guidance for taxpayers is to file each and every transaction executed using a cryptocurrency.
The IRS has been sending out multiple compliance letters to investors of virtual currencies such as Bitcoin, whose tax return information did not match data reported to the IRS by third parties such as employers and banks.
In August, the IRS revealed in a draft Form 1040 released by the IRS for U.S. individuals to file their income tax return for 2020, where every American tax filer will be asked about their cryptocurrency transactions and investments.
After asking for personal details, the draft form asks, "At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?"
This is the latest move by the tax regulator to show its seriousness on taxing cryptocurrency transactions and investments.
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Article written by an RTT News Staff Writer, and posted on the RTT News.com website.
Article reposted on Markethive by Jeffrey Sloe
