In our Exton PA office, we are seeing more taxpayers invest in Bit Coin or some other form of Virtual Currency. The IRS has also taken notice. Whereas our clients meet with us to discuss the proper reporting of gains (or losses) from their investments, the IRS focus is on taxpayers who may have willfully or non-willfully failed to report their taxable cryptocurrency and non-crypto virtual currencies.
IRS Commissioner Chuck Rettig stated that “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the laws and helping taxpayers fully understand and meet their obligations.”
The IRS, in its effort to identify taxpayers who may have unwillingly or willingly failed to report gains from their virtual currency transactions, will send 10,000 educational letters to cryptocurrency investors in August. These letters are not being sent at random to taxpayers, but the IRS has obtained the names of cryptocurrency investors through its ongoing compliance efforts and these letters target those individuals.
The IRS is asking taxpayers to review their tax filings and if currency transactions were omitted, to file amended past returns and pay the taxes, interest and penalties related to these unreported transactions.
There are three variation of the educational letter (6173, 6174, and 6174-A). Letters 6174 and 6174-A require no action from the taxpayer. On the other hand, Letter 6173 alleges noncompliance and requires taxpayer action. If the taxpayer fails to respond to the Letter 6173, the IRS will likely examine that tax return.
If a taxpayer is investing in virtual currency abroad, additional filing requirements, such as the Report of Foreign Bank and Financial Accounts (FBAR) on FinCEN Form 114, may be required.
Taxpayers who pay vendors or others via Bitcoin or some other virtual currency, and taxpayers who invest in virtual currencies and sell or exchange those holdings, need to speak with an experienced tax professional to ensure compliance with the Code and IRS Regulations.
For real estate professionals with IRS tax debt issues or tax planning issues, feel free to contact me at (610) 594-2601 or by email at info@keysolutions.us.
Bryan Haarlander, an Enrolled Agent and a Certified Tax Resolution Specialist, is an affiliate member of the Suburban West Realtors® Association and a member of the American Society of Tax Problem Solvers (ASTPS), PA Society of Tax & Accounting Professionals (PSTAP), the National Society of Accountants (NSA) and the National Association of Tax Professionals (NATP).
He is a co-author of “How to Resolve Your IRS Tax Debt Problems” as well as a book on how to start your own business. He has been practicing in Exton for 18 years. His blogs http://www.taxexpertblog.com and http://www.stopmytaxproblems.com discuss pertinent tax and business issues.
By visiting our website you can learn about the 5 Secrets the IRS Doesn’t Share and order a FREE SPECIAL REPORT: Should You Represent Yourself or Hire a Tax Professional.
Keystone Financial Solutions, Inc. specializes in providing innovative tax planning, tax preparation, and solving IRS tax problems. The company’s web site is https://www.keysolutions.us and its telephone number is (610) 594-2601.
If you have any IRS tax debt issues or tax planning issues, feel free to contact me at (610) 594-2601 or by email at info@keysolutions.us.
Disclaimer: Content in this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher of this blog makes no representations as to the accuracy or completeness of any information herein, will not be liable for any errors or omissions, and shall not assume liability for any losses, injuries, or damages from the display or use of this information.
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