The IRS is warning thousands of cryptocurrency holders to pay their taxes

Source: CNBC
Published: Jul 26, 2019
Author: Kate Rooney
Post Date: 2019-07-26 15:49:47 by nolu chan
Views: 2143

The IRS is warning thousands of cryptocurrency holders to pay their taxes

Kate Rooney
Published 2 hours ago
Updated an hour ago
26 Jul 2019

Key Points

  • 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.

  • “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.

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

The Internal Revenue Service is in the process of sending letters to U.S. citizens who own virtual currency and potentially failed to pay the necessary taxes and to those who improperly reported taxes on digital assets last year, the agency announced Friday.

“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,” IRS Commissioner Chuck Rettig said in a news release. “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics.”

The agency said it started sending out letters last week that by the end of August will reach 10,000 taxpayers. The list of names was obtained through “various ongoing IRS compliance efforts.” In some cases, the IRS said taxpayers could be subject to criminal prosecution.

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.

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#1: jeremiad    To: nolu chan (#0)

I still would not comply. Find a country with no income tax, therefore no extradition for tax evasion if necessary. Of course I don't have enough retirement income to claim.

jeremiad posted on 2019-07-27 00:55:42   Reply   Private Reply

#2: Tooconservative    To: jeremiad, nolu chan (#1)

Find a country with no income tax, therefore no extradition for tax evasion if necessary.

The IRS can place a hold on the State Department issuing you a passport. I'm sure you can appeal their ruling but you'd still have to fight them for a passport if they claim you are in tax arrears and that you might be a flight risk. Especially if you are suddenly interested in non-extradition countries.

They closed those loopholes about a decade back, when they broke the financial privacy of Swiss banks along with every other bank in the world.

I've often thought that that might mark a dividing line in history, when America finally became a global empire officially.

Tooconservative posted on 2019-07-27 01:50:27   Reply   Private Reply

#4: nolu chan    To: Tooconservative, jeremiad (#2)

The IRS can place a hold on the State Department issuing you a passport.

The IRS can drain your bank and checking accounts, and place a lien on your home and other property.

Running to another country to avoid capital gains tax seems a bit of an extreme measure. If I have enough capital gains to consider such a measure, I doubt the tax would be more than an inconvenience. But, to each his own.

nolu chan posted on 2019-07-27 15:00:07   Reply   Private Reply

#5: goldilucky    To: nolu chan (#4)

The IRS had income defined according to their 1939 codified income tax codes. Income did not include money derived from your personal labor. That is a fact.

I've noticed the IRS has elected to make a claim of $20,000 in bank assets which they claim they can seize. That is contrary to their own IRS publications 1040 where it states that those who made income of $12,000 for last year would be required to file to report. This would also apply to any stock sales or losses made in the process of trades.

goldilucky posted on 2019-07-27 15:13:14   Reply   Private Reply