A new batch of US crypto users have received warning letters from the Internal Revenue Service, marking the second time the IRS has sent tax warning letters
Along with the controversial virtual currency question in Form 1040, these letters highlight the agency’s effort in managing the crypto tax space. IRS had not conveyed any official communication regarding this last wave of tax warning letters at the time of writing.
The first wave of letters was sent back in July 2019 to about 10,000 crypto users living in the US. The letters came in three different variations: IRS Letter 6173, IRS Letter 6174 and IRS Letter 6174-A.
This second round of letters is dated August 14, according to several crypto users have taken to social media platforms to share the details of these letters.
IRS Letter 6173
IRS Letter 6173 bears the most weight of the three letters and requires that recipients respond by the specified date. Failure to respond leads to a detailed examination of your tax profile. There are three ways of responding to this letter, depending on the situation.
IRS Letter 6174 & IRS Letter 6174-A
Both IRS Letter 6174 and 6174-A are no-action letters as they are only intended to create awareness. These letters are sent to inform recipients of their crypto tax filing obligations, containing information on tax schedules, tax forms and other IRS resources.
In case US traders had omitted, misreported or underreported crypto transactions when filing returns, then they are required to file an amended tax return. Traders are also required to mark the return by writing either Letter-6174 or Letter-6174-A at the top.
It is unclear, at the moment, how the IRS even managed to get its hands on information about these crypto users or how many crypto users received the letters. Nonetheless, we can’t rule out the possibility that the IRS got this information through crypto exchanges that collect and store user data for Know Your Customer purposes.
Credit: Source link