More IRS Letters Will Hit Crypto Traders’ Doormats Today

Reading Time: 2 minutes

IRS letters began arriving on the doormats of crypto investors and traders over the weekend warning them to include their crypto earnings on their tax returns, with more due to arrive this week. The letters, the content of which has already been shared on social media, is meant to be a warning that the IRS is looking over the shoulder of crypto traders, although the response of the community hasn’t exactly been one of fear.

Need for Clarity Before Enforcement

The IRS announced Friday that they had started sending letters to “taxpayers with virtual currency transactions that potentially failed to report income…or did not report their transactions properly.” The letters, called “educational” by the IRS, takes the form of a reminder that crypto transactions, including those made between tokens, are subject to tax, and that the recipient hasn’t submitted a tax return “for one or more of tax years 2013 through 2017” that contains any crypto gains. This is despite IRS Commissioner Charles Rettig stating to Congress in May this year that “taxpayers deserve clarity on basic issues related to the taxation of virtual currency transaction”, clarity which hasn’t arrived, despite an announcement earlier this month that new crypto taxation rules were on the way.

Defiant Response From the Community

The response from the community, at least externally, was one of indifference, mainly because most if not all of them already knew that crypto was a taxable asset class – they just weren’t reporting it. Judging by the reactions, it seems most people won’t be bullied into complying with the law, which might turn out to be a somewhat foolish move – even if you don’t agree with taxes, if you choose to live in a land that has them, you may as well pay them.

Blockchain analysis is only going to improve over time along with an increased investigation of crypto activity, making historical records easier to search, and it won’t be nice to keep looking over your virtual shoulder for years to come.