Over 10,000 crypto HODLers have received a firm warning from the Internal Revenue Service (IRS), the United States’ government’s tax organization just last week in the form of letters. They sent about three variations of such letters out by following the information that the IRS has about each individual.
One variation demanded that its recipient sign a statement declaring that they complied with tax law under the penalty of perjury. An IRS Commissions official, Chuck Rettig said that they should not take lightly this warning, “taxpayers should take these letters very seriously,” he said. “The IRS is expanding efforts involving virtual currency, including increased use of data analytics.”
We have known for some time now that the IRS has set up working groups to “identify potential tax evaders.” Signs that the IRS has been cracking down on individuals and businesses that deal in cryptocurrencies have been appearing since the historic bull run of 2017. The most famous incident of all occurred in late 2017 when US-based cryptocurrency exchange and wallet service Coinbase was court-ordered to hand over account records for 13,000 of its users.
Fund managers have reported that most people who received these were Coinbase users. However, there is evidence to suggest that the data may have come from other cryptocurrency exchanges operating in the US too.
The IRS has also been acting as a participating member of the Joint Chiefs of Global Tax Enforcement (J5) group, which was formed to investigate crypto-related financial crimes, including money laundering and tax evasion. The IRS may work with cryptocurrency exchanges in the future and get more data on tax evaders. This has come out as an innovative way to tackle tax crimes and develop processes for handling cryptocurrency taxes and crimes.
The right move we suggest traders and investors to make is to ensure that they are filing taxes accurately. There isn’t much time left for the actual crackdown on tax evaders. Data collected back in 2018 revealed that the number of cryptocurrency holders who were properly reporting their crypto was low. Back then the IRS had a lack of clarity on crypto taxes but this isn’t the case anymore. Even though some tax evaders may not have received their letter yet, they should definitely keep their eyes open for one.