IRS sends tax warnings to over 10000 US crypto traders
It’s official - the US government is cracking down on crypto.
In just the last few weeks, US president Donald Trump went on an anti-Bitcoin twitter rant, followed by 2 full days of hearings (held in both chambers of the US Congress) on Facebook's upcoming cryptocurrency. And if those two events left any doubt about America’s rising interest in the crypto industry, here comes the Internal Revenue Service to make it crystal clear.
As reported by everyone from Coindesk to CNN yesterday, the IRS has begun sending letters to over 10000 US cryptocurrency holders - some more threatening than others.
According to IRS' own press release on the matter, the crypto holders will receive one of the 3 letter variations: Letter 6174, Letter 6174-A or Letter 6173.
The first two seem to be relatively mild, warning the recipient that they ‘may not know the requirements for reporting transactions involving virtual currency’, and listing them out in turn.
Letter 6173 goes a step further, asking the recipient to - if he/she believes they’ve followed the law - sign a statement declaring, under penalty of perjury, that they are in compliance with tax regulations.
"Taxpayers should take these letters very seriously”, says IRS Commissioner Chuck Rettig, “by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties"
So how did IRS find out who has crypto? While the release only mentions that the names were obtained ‘through various ongoing IRS compliance efforts’, both the media and the community believe they came from Coinbase, which provided information on about 13000 accounts to the IRS last year, under a federal court order.
The data provided was on customers who bought, sold, sent or received digital currency worth $20,000 or more between 2013 and 2015. Coinbase has not provided comments on the matter so far.
The community response says it all:
- Not unexpected. We already knew the IRS had "been in touch" with Coinbase.
- Just read about the IRS sending letters. I assume they got their list of people from Coinbase (people between 2013-2015 who bought or sold more than $20k).
- IRS taxes based on exchange records. Doesn’t matter how private your coin is if your trading on regulated exchanges.
- It’s crazy that people who have a coinbase account thought they could get away without paying taxes, especially when coinbase sent the IRS the same trade information used for tax filing. People had to see this coming.
The news quickly spread across the cryptoverse, with several reddit users mentioning they’ve already received an IRS letter, and expressing varying degrees of concern about it:
The general crowd reaction, however, was mixed. While some had little sympathy for the letter recipients saying it was their own fault if they were purposefully dodging taxes:
Others quickly invoked the good old ‘taxation is a lie’ argument instead:
In a similar vein, some suggested the IRS should go after the ‘real criminals’ and tax-ddging billionaires, instead of casual hobby traders:
Still, there’s definitely a sense of palpable FUD surrounding the news, with some trying to get a crash course on tax management in the reddit comments:
Finally, in a classic case of community wisdom, there’s been an avalanche of hilarious ‘tips and tricks’ on how to successfully avoid the taxman.
For example, since you only have to worry about taxes on sell your coins, you can easily solve this issue by just HODLing FOREVER:
If that doesn’t work for you, you could simply ignore the IRS:
….or even better - ignore your own mailbox (???):
Finally, if you’re really concerned about the American tax machine coming after your crypto receipts, reddit reminds us there’s a bulletproof solution already being used by thousands of crypto traders worldwide - just be bad at it: