Last summer the IRS announced a Virtual Currency Compliance campaign aimed at addressing taxpayer noncompliance related to the mining, ownership, and use of virtual currency through a variety of approaches including outreach and examinations. On Friday, the IRS announced that it has taken the next step in its compliance efforts and has begun sending letters to owners of virtual currency. The letters advise taxpayers who have engaged in virtual currency transactions that they may have failed to properly report income and pay tax on their virtual currency transactions. By the end of August, the IRS expects more than 10,000 taxpayers will have been sent letters.
In the announcement, IRS Commissioner Chuck Rettig urges taxpayers “to take these letters very seriously.” Taxpayers who have engaged in virtual currency transactions are advised to review their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties. Commissioner Rettig also states that the IRS is expanding its efforts involving virtual currency transactions, including increased use of data analytics, and is focused on enforcing the law and helping taxpayers fully understand and meet their obligations.
In addition to back taxes, interest, and civil penalties, the announcement also states that virtual currency is an ongoing focus area for IRS Criminal Investigation and, depending on the circumstances, taxpayers engaging in virtual currency transactions could be subject to criminal prosecution.
If you have received a letter from the IRS relating to your virtual currency transactions or have engaged in virtual currency transactions and have not properly reported those transactions to the IRS, contact our office and we would be happy to discuss your situation and explore your options for returning to compliance.
