IRS Targets Crypto Investors

Naturally, as with any income, crypto transactions have become a keen target for the IRS tax collectors.  Taxpayers have reported receiving a series of IRS “warning letters” going out to people who the agency believes have misreported their income from these exchange transactions.  Namely, these CP2000 notices basically have the intention to scare the recipients and entice them to review their tax returns for possible underreporting of cryptocurrency income.  

Once you are on the IRS’s radar, it is a good idea to reach out to a tax attorney to assist you in analyzing your previous returns for possible inaccuracies.  At Dallo Law Group we have a team of CPAs and attorneys that specialize in all the latest IRS reporting requirements and we can certainly make sure that you filed your taxes correctly.  If need be, we will also help you amend your returns in order to give you peace of mind and eliminate any potential for trouble. As always and without exceptions, when you work with us, you have the benefit of attorney-client privilege.

No Need For Immediate Alarm   

The buzz about IRS letters that have come out in batches include these number sequences:  6173, 6174, and 6174-A. They typically begin with this wording:

We have information that you have or had one or more accounts containing virtual currency but may not have properly reported your transactions involving virtual currency, which include cryptocurrency and non-crypto virtual currencies.

What is important to bear in mind is that these letters are not insinuating that you did something wrong or that you owe back taxes.  In fact, notices 6174 and 6174-A are not action letters, which means if you are absolutely certain you correctly reported your crypto tax filing obligations, then you may be fine.  However, if you have any doubt, you should reach out to a tax professional to be definite. On the other hand, notice 6173 does require action on your part, and if you are not thorough and timely with what is asked of you, a tax audit will likely be on its way.

In addition, you should know that scam artists are in the loop with the IRS’s campaign of targeting cryptocurrency traders for possible misreporting.  That means they are sending out their own fake letters to people and using scare tactics to scam money from them. Some typical schemes include if payment is not made immediately then arrest is imminent.  Other threats involve the possibility of liens and other seizures on property. Always remember that the IRS would never threaten people with arrest or deportation. Furthermore, take particular notice of how a typical IRS letter is always structured and look for these elements in order to authenticate if it is a real document or a scam.  IRS documents will always include:

• A notice or letter number
• A 1-800 number for IRS contact
• Your tax ID number and the tax year(s) in question
• The letter will come in a government envelope with the IRS seal

Also, remember that the IRS always corresponds through the mail and would never phone you about issues.  Therefore, a clear red flag is when you get a call identified as an IRS agent.  

What To Do Now

Because the IRS is targeting crypto investors who misrepresented their trades in exchange transactions, you can be sure tax agents will be ruthless in getting collections. Dallo Law Group specializes in the digital asset area of tax statutes, as we have a whole staff of CPAs and tax attorneys who are up to date with the latest developments.  Bitcoin and cryptocurrency are a rather new concept to the average accountant; however, as with any other asset that can generate revenue, you must be careful in accurately reporting income on your tax return. We can assist in that area and help amend your previous returns if needed.   

Our attorneys at Dallo Law Group will be happy to evaluate your documents and formulate some options for you.  Dallo Law Group will talk to you about the latest IRS guidance and assist you with all your concerns and questions.  Give us a call anytime at 619-795-8000 or use the contact tab to reach us through our website.