The internal revenue service (IRS), has begun to send out letters notifying crypto holders who owe the institution to pay their taxes in good time or face harsh penalties. The IRS is known for not mincing its words, and effecting stern action on all defaulters.
According to the Guardian, the IRS has sent out about 10,000 letters to crypto investors and holders warning them of serious punishment if they fail to pay taxes on their crypto revenue; or fail to report the crypto revenues coming in from their crypto investments.
The Wall Street journal reported that the tax organization sent out three different letters on the issue, which practically sent out the same message. Though the message was pretty much the same, the letters were drafted slightly differently depending on the information the IRS has on the individual crypto investor. The IRS letters indicate how serious the institution is on the issue of crypto tax evasion, and this is what IRS commissioner Chuck Rettig had to say about it;
“Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency, including increased use of data analytics”
This statement should spur action among crypto investors and traders who are yet to meet their tax obligations to the tax man. The mention of data analytics means that the organization is seriously tracking down all involved in the space in order to identify and keep track of any defaulters. Most of the names of crypto holders that IRS has in its possession appear to have been generated from a database that contains the information on 13,000 crypto investors who have sold, bought, or received digital coins worth $20,000 or more in the period between 2013 and 2015.
The IRS is also said to be in the process of stepping up the sternness against those in the crypto space who try to evade paying their tax obligations. The IRS will reportedly seek to make the evasion of paying crypto taxes illegal. The tax body sees this move as a solution since it will most likely deter any crypto investors from trying to evade taxes.
Considering the seriousness of this issue, and the fact that the IRS is talking tough and threatening stern action against defaulters, it is wise to look at some of the reasons why tax evasion happens in the space. Could it be that there is a lack of clarity among crypto investors that causes them to default? There is also the issue of accountants being unwilling to familiarize themselves with crypto taxation, which creates a loophole that the IRS hopes to seal.
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