The IRS recently announced that they will be sending notices to 10,000 taxpayers regarding missing cryptocurrency transactions from their returns. The IRS will send out letters 6173, 6174, and 6174A. These letters are similar to the notices being sent out to persons who leave off stock trading.
Many ordinary persons that invested and lightly traded various types of coins since 2017 were misled by various online blogs (as well as their own judgement) that nothing is required to be reported to the IRS unless the coin is sold for “fiat,” or back into ‘legitimate’ currency, such as USD. This is false.
If you are trading one cryptocurrency for another, you must report this sale on form 8949, same as if you were actively trading stocks in the stock market. The principle of like-kind exchange does not apply here.
This is not professional advice, however, we do recommend that you employ someone with experience for guidance if you have left off crypto trading from your return. We have already been approached since June with several persons that have been contacted by the IRS regarding this matter and have helped them reach a resolution with the IRS.
It is better to amend your return prior to the IRS flagging it, as additional “substantial” or “material understatement” penalties are assessed by the IRS in instances where the IRS catch the missing transaction first.
If you have any additional questions, please don’t hesitate to call us at 408.412.3373 or email us at info@keystonetaxes.com.
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