DEALING WITH UNFILED EMPLOYMENT TAXES Taxes can take a big chunk out of your profits.…
IRS Sending Letters to Cryptocurrency Owners about Unpaid Taxes
If you buy and sell stocks, you likely know that you have to pay taxes on any gains that you make. Just because the money came from speculation and not your job doesn’t mean that the money isn’t income in the eyes of the law. However, a lot of people who have bought and sold cryptocurrency like Bitcoin don’t seem to realize the same thing. It may be that they are buying the cryptocurrency for actual use and not for investing, or it may be that they don’t think of the digital currency as “on the grid.”
Unfortunately, no matter what your intended purpose for your cryptocurrency and no matter how you view it, any profits you make from selling the digital coin is subject to taxation. The Internal Revenue Service is making sure that people know that, and it is sending letters to those who have failed to pay taxes on these transactions with information about what they owe – with penalties and interest.
“The IRS is expanding our efforts involving virtual currency, including increased use of data analytics,” IRS Commissioner Chuck Rettig said of the latest initiative. “We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations.”
Rettig said that taxpayers should take the letters very seriously, and they should take steps like reviewing their tax filings or amending their previous returns. Taxpayers should pay the back taxes, interest penalties and interest.
By the end of this month, more than 10,000 taxpayers are expected to receive a letter from the IRS stating that they owe back taxes from the sale of virtual currencies. The IRS started sending the letters at the end of July. Recipients were identified through a series of compliance efforts that the agency has been conducting.
Three versions of the letter are being mailed to taxpayers: Letter 6173, Letter 6174, and Letter 6174-A. The version of the letter that a taxpayer receives depends on their individual circumstances. Each letter explains the tax obligations and what needs to be done to correct the error. The letters also let taxpayers know where they can find additional information on the IRS website, IRS.gov. The site also has the appropriate forms and schedules that taxpayers will need to file an amended return.
The latest letters should not really come as a surprise. The IRS launched the Virtual Currency Compliance campaign last year to help people better understand their tax obligations. The campaign has included audits, taxpayer education, and even criminal investigations. The IRS says it will continue this campaign.
The IRS Criminal Investigation unit has made virtual currency a top focus. The digital money is classified as property for tax purposes, and owners must pay taxes on it as such. The IRS says it will get feedback from taxpayers and tax professionals to provide guidance on the law and how to be compliant. It is already planning to issue more guidance on the issue, though a date has not been announced.
Besides paying interest and monetary penalties, those who do not pay taxes on their virtual currency may face criminal charges.
Getting Tax Help
You should always be working with a tax professional in Tempe when you are investing or are dabbling in cryptocurrencies. Ideally, you would get a certified professional accountant to file your returns, so you could be sure that they were prepared accurately and that you were paying all the appropriate taxes. A CPA can also alert you to changes that affect you so that you never land in trouble because of lack of knowledge.
If you have already made the mistake, there may still be time to correct it through an amended return. The Tempe tax attorneys at Silver Law PLC may be able to help. Our attorneys can prepare an amended return, ensuring that you meet your tax obligations while also helping to find options you could have missed to lower your tax liability. It’s possible that you could end up owing nothing. We’ll work to minimize your liability. However, if you are also facing criminal charges, we will fight to help you avoid prosecution and to reduce penalties. Contact us in Tempe today to talk with one of our tax attorneys about your options. Our attorneys are all previous IRS attorneys, and they will draw on that background to fight for the best outcome possible for your case.
Silver Law PLC
7033 E. Greenway Pkwy, Ste 200
Scottsdale, AZ 85254
410 South Rampart Blvd, Suite 390
Las Vegas, Nevada 89145