CRYPTOCURRENCY OWNERS BEWARE, THE IRS IS LOOKING FOR YOU!

As circumstances change and new situations arise, the IRS changes as well.  They modify practices and implement new programs in an effort to maximize both tax compliance and revenue collection.  The latest target of the IRS is cryptocurrency.  The IRS recently sent out approximately 10,000 letters to crypto account owners.  This tells us that the IRS is obtaining data on account owners and, in some instances, their transactions.  While the IRS does not share with the public exactly what they are doing and how they are obtaining this information, we do know that there are various technologies that the IRS uses to recover this type of information.  The important take-a-way is that virtual currency transactions are taxable and just because it is not subject to 1099 reporting, does not mean that the IRS does not know about it.  Further, given the increase in popularity of cryptocurrency, the IRS will continue to put more resources into this area.  In fact, the IRS implemented what they call the Virtual Currency Compliance campaign and this is likely just the beginning. 

So if you had virtual currency transactions, be sure to include that activity on your tax return or provide it to your accountant.  If you have already filed tax returns that omitted virtual currency activity, amend those tax returns.  This is not a fight you want to have with the IRS.