Have you received income from virtual currency transactions? If so, this income must be reported on your tax return.
The IRS has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.
“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,” said IRS Commissioner Chuck Rettig. “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations.”
The IRS expects to send over 10,000 letters to taxpayers by the end of August. For taxpayers receiving an educational letter, there are three variations: Letter 6173, Letter 6174 or Letter 6174-A, all three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors.
Letter 6173 requires a response. This letter is sent to taxpayers who did not report virtual currency for one or more years over the 2013 – 2017 period.
Letter 6174 is partially an educational letter. No response is required. However, if the taxpayer learns that virtual currency income should have been reported differently, an amended return should be filed.
Letter 6174A is similar to Letter 6174. However, in 6174A, the letter indicates the IRS may send follow-up correspondence about potential enforcement.
For guidance on Virtual Currency, see this IRS Publication