Bitcoin has jumped in value in recent months. The digital currency reported a jump in value three times that of the reported numbers in 2018, a “record-breaking” second quarter. With this in mind, it may not come as a surprise that the Internal Revenue Service (IRS) just announced it is sending out letters to over 10,000 taxpayers suspected of failing to report digital assets like Bitcoin.
Why did the agency send the letters?
The agency has stated the letter were sent to certain taxpayers who may owe capital gains on their digital assets.
The IRS is sending out three different letters, each with information the agency states will help taxpayers come into compliance with tax laws. Two versions are allegedly informational, while a third is more severe. In this third letter, the agency will require the taxpayer to sign, by penalty of perjury, that they are in full compliance with tax law and are reporting all reportable digital assets.
How does the agency know who owns digital assets?
The agency did not explain how it chose the 10,000 taxpayers who will receive the mailing. However, it is likely the agency got the names after it required Coinbase to provide the names, taxpayer identification information and birth dates of those who held over 13,000 Coinbase accounts.
What should taxpayers do in response to these letters?
It is wise to take action to make sure you are in full compliance with applicable tax laws. At this time, it is prudent to take the correspondence seriously. An attorney experienced in this niche area of tax law can review your situation and provide guidance.