IRS alerts virtual currency owners of nonfiling consequences

The IRS has begun sending what it calls “educational letters” to taxpayers it has identified as not reporting virtual currency transactions or reporting them incorrectly (IR-2019-132). The IRS says the letters (Letter 6173, Letter 6174, or Letter 6174-A) are intended to help taxpayers understand their tax and filing obligations for cryptocurrency. The IRS says that by the end of August, it will have sent more than 10,000 of the letters.

The letters point the recipients to the IRS website and inform them which forms and schedules to use and where at the IRS to send them.

“Taxpayers should take these letters very seriously by reviewing their tax filings and, when appropriate, amend past returns and pay back taxes, interest, and penalties,” IRS Commissioner Chuck Rettig said in a news release.

The IRS warned as well that it has stepped up enforcement in this area, including criminal prosecutions. Last year, the IRS launched a Virtual Currency Compliance campaign within its Large Business and International Division.

The only IRS guidance on virtual currency transactions is Notice 2014-21, under which the IRS treats cryptocurrencies as property, rather than currency, for federal tax purposes. The IRS announced that it intends to issue further guidance on the topic in the near future.

— Sally Schreiber, J.D., (Sally.Schreiber@aicpa-cima.com) is a Tax Adviser senior editor.