IRS Sending Letters to Cryptocurrency Owners about Unpaid Taxes If you buy and sell stocks,…
Court Allows IRS To Serve Summons To John Doe For Cryptocurrency Usage
Taxpayers Have To Pay The Appropriate Taxes On Any Virtual Currency Gains They Make
The IRS has been focusing on efforts to ensure that taxpayers are properly reporting their earnings from cryptocurrency and meeting their tax obligations. It has increased enforcement over the last few years, as well as further clarified rules surrounding cryptocurrency transactions. As part of its ongoing efforts, the IRS recently won a court ruling for a list of taxpayers involved in cryptocurrency transactions with a certain company.
In April, a Massachusetts federal court agreed to let the IRS issue a “John Doe” summons to Circle Internet Financial, a digital currency exchange based in Boston, as well as its subsidiaries, divisions, predecessors, and affiliates. The summons will allow the IRS to get the details of taxpayers who were involved in at least $20,000 worth of cryptocurrency transactions.
“Because transactions in cryptocurrencies can be difficult to trace and have an inherently pseudo-anonymous aspect, taxpayers may be using them to hide taxable income from the IRS,” officials with the Department of Justice said in a press release.
Cryptocurrency Transactions & Tax Obligations
The IRS clarified that it did not seek the summons because it had reason to suspect that Circle Internet Financial was involved in any wrongdoing. Instead, the IRS is looking for information involving taxpayers that may not have met their tax obligations involving their cryptocurrency transactions.
“Tools like the John Doe summons authorized today send the clear message to U.S. taxpayers that the IRS is working to ensure that they are fully compliant in their use of virtual currency,” IRS Commissioner Charles Rettig said in a press release. “We will enforce the law where we find systemic noncompliance or fraud.”
The IRS has explained that cryptocurrency is treated as income and that taxpayers can claim a gain or a loss on virtual currency. That means that taxpayers have to pay the appropriate taxes on any gains they make.
It is essential that anyone who trades in cryptocurrency speak to an experienced tax professional to understand their tax obligations. Eventually, the IRS will find the unreported income, and officials will assess serious penalties.
Call Our Professional Tax Lawyers In Phoenix Today
If you have been audited by the IRS because of cryptocurrency transactions or you are facing penalties for your failure to pay (or underpayment), call Silver Law PLC today to speak to a tax attorney. We represent clients in audit, as well as in civil and criminal tax litigation. We’ll help you understand your rights and explore all your legal options for reducing your tax obligation and any penalties you may face. Call us today to meet with an experienced tax attorney and learn more.
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