IRS Reportedly Cracking Down on Unreported Crypto Income

Home » FinTech » Cryptocurrencies » IRS Reportedly Cracking Down on Unreported Crypto Income

IRS Reportedly Cracking Down on Unreported Crypto Income

Following the big Bitcoin boom of 2017, April 2018 saw several reminders that cryptocurrency gains needed to be reported on tax filings. Of course by that time the price of Bitcoin was about half of what it was just a few months before. Nevertheless it seems that the IRS is still intent on getting crypto owners to comply — and now, according to the Wall Street Journal, they’re cracking down on Americans who aren’t properly reporting their gains.

Last month the IRS reportedly began sending out warning letters to more than 10,000 taxpayers they believed may be violating their agencies rules. Furthermore it seems that criminal tax indictments resulting from cryptocurrency holdings could be coming down the pike. As a result, Americans who haven’t been in compliance with the IRS’s reporting rules for cryptocurrencies are being urged to make corrections.

Speaking to the Journal,  Kostelanetz & Fink criminal tax lawyer Bryan Skarlatos shared how he’s been advising clients, saying, “I tell them, ‘It’s time to put your running shoes on.’ You must get to the IRS before they find you, especially if you got a letter.” Interestingly Skarlatos compares the current crackdown to previous efforts by the IRS to ensure that offshore accounts were properly reported. Skarlatos tells WSJ he led 2,000 clients to confess to such accounts over the past decade.

At the same time, some crypto users say the IRS has failed to provide detailed guidelines, making compliance difficult. For example it’s unclear how taxpayers are to calculate the fair market value of their cryptocurrencies for the purpose of reporting. This led Coin Center senior research fellow James Foust to say, “The scary IRS letters tell people to ‘accurately’ or ‘properly’ report their transactions, but what’s that? Maybe they would have filed if they had clear answers and hadn’t felt overwhelmed.” However others are saying this is no excuse. Among them is CPA Jordan Bass who explained, “The tax framework has been clear since 2014. The IRS isn’t going to impose terrible penalties on good-faith efforts, but it will try to make an example of bad actors.”

Considering previous warnings and the current regulatory climate surrounding cryptocurrencies, the IRS’s apparent crackdown was not exactly unforeseeable. Despite that those receiving letters from the agency will likely now have some tough decisions to make. Meanwhile, even if you didn’t catch the attention of the IRS this time around, it’s probably a good idea to further research the agency’s reporting requirements and perhaps even speak with a tax professional before next April rolls around.

Comments

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Google Reportedly Looking to Launch Checking Account

The way Americans bank has certainly changed over the past decade. Not only has the number of bank branches contracted considerably but the companies behind some popular financial accounts weren't even around in 2009. With the rise of banking options, it now seems that one of the largest tech companies...

JetBlue Joins the Basic Economy Bandwagon with Blue Basic

In recent years a slew of major domestic airlines have attempted to compete with more budget-friendly carriers by offering so-called "basic economy" fares. While the trend started with American Airlines, it has since spread to Delta and United. Now it seems another popular carrier is hopping on-board as well. As...