Made money on bitcoin? IRS wants a bite!

August 06, 2019

The IRS is coming after cryptocurrency traders. And the government isn’t being nice about it.

At the end of July, the IRS started sending letters to people who trade cryptocurrencies like bitcoin, reminding them that they owed taxes on any profits they may have made.

The IRS sent out three letters. The harshest was Letter 6173, which starts, “We have information that you have or had one or more accounts containing virtual (crypto) currency and may not have met your US tax filing and reporting requirements.”

Lou Vlahos, a partner with the law firm of Farrell Fritz, says the fact that Letter 6173 has a response date “tells us that the IRS has some pretty good information (people who got this letter) did not properly report their income or their gains from these virtual currency transactions and that they did not pay the tax.”

The IRS said in 2014, for the first time, that virtual currencies would have general tax principles applied. In 2018, the IRS announced a “compliance campaign” that sounded more like education than anything else.

“I think this is the follow-up,” says Vlahos, who added that this is now the IRS playing hardball. And not only is the IRS looking for taxes that are due, but also people who lie will be subject to perjury charges, says Vlahos.

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  • Related Practice Areas: Tax
  • Featured Attorneys: Louis Vlahos
  • Publications: New York Post