{"id":630,"date":"2020-01-01T21:26:00","date_gmt":"2020-01-01T21:26:00","guid":{"rendered":"https:\/\/sommers-taxapedia.com\/archives\/?p=630"},"modified":"2020-12-08T20:04:29","modified_gmt":"2020-12-08T20:04:29","slug":"irs-is-gunning-for-unreported-cryptocurrency-transactions","status":"publish","type":"post","link":"https:\/\/sommers-taxapedia.com\/archives\/irs-is-gunning-for-unreported-cryptocurrency-transactions\/","title":{"rendered":"IRS is Gunning for Unreported Cryptocurrency Transactions"},"content":{"rendered":"\n<p><em>Note: For more information on cryptocurrency taxation and tax planning strategies, purchase my Tax Brief for just $9.95: <\/em><a href=\"https:\/\/www.amazon.com\/Cryptocurrency-Income-Tax-Planning-Brief\/dp\/0977861627\/ref=sr_1_3?keywords=robert+l+sommers&amp;qid=1580431840&amp;s=books&amp;sr=1-3\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Cryptocurrency Income Tax Planning: A Tax Brief (opens in a new tab)\">Cryptocurrency Income Tax Planning: A Tax Brief<\/a><\/p>\n\n\n\n<p><strong>Warning Letters<\/strong>:<\/p>\n\n\n\n<p>It&#8217;s been all over the news that IRS mailed 10,000 letters to potential cryptocurrency participants, warning them that IRS suspects they have engaged in cryptocurrency transactions (IRS uses the term \u201cvirtual\u201d currency) and reminding them to report gains and losses. IRS has received substantial information from Coinbase, which was obligated under court order to turn over transaction records. Coinbase subsequently supplied detailed information on more than 14,000 customers. Using its success against Coinbase, IRS is targeting other on-line exchanges with similar lawsuits and the court have thus far sided with the government.<\/p>\n\n\n\n<p>If you receive an IRS warning letter, treat it very seriously. One letter asks you to sign under penalty of perjury that the response information is correct.1 It unwise to reply without first obtaining professional advice because signing under penalty of perjury could lead to criminal perjury charges if IRS already has or obtains information contradicting your written declaration.<\/p>\n\n\n<div class=\"lyte-wrapper fourthree\" style=\"width:420px;max-width:100%;margin:5px;\"><div class=\"lyMe\" id=\"WYL_I-DUGOTX30c\"><div id=\"lyte_I-DUGOTX30c\" data-src=\"\/\/i.ytimg.com\/vi\/I-DUGOTX30c\/hqdefault.jpg\" class=\"pL\"><div class=\"tC\"><div class=\"tT\"><\/div><\/div><div class=\"play\"><\/div><div class=\"ctrl\"><div class=\"Lctrl\"><\/div><div class=\"Rctrl\"><\/div><\/div><\/div><noscript><a href=\"https:\/\/youtu.be\/I-DUGOTX30c\" rel=\"nofollow\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/i.ytimg.com\/vi\/I-DUGOTX30c\/0.jpg\" alt=\"YouTube video thumbnail\" width=\"420\" height=\"295\" \/><br \/>Watch this video on YouTube<\/a><\/noscript><\/div><\/div><div class=\"lL\" style=\"max-width:100%;width:420px;margin:5px;\"><\/div><\/p>\n<p>WATCH THIS SHORT VIDEO<\/p>\n\n\n<p><strong>IRS Audits:<\/strong><\/p>\n\n\n\n<p>It is now IRS standard audit practice to inquire about cryptocurrency investments. Remember that IRS may already have this information and submitting a false response could lead to criminal charges or severe civil (non-criminal) penalties.<\/p>\n\n\n\n<p><strong>New Tax Return Question:<\/strong><\/p>\n\n\n\n<p>Starting tax year 2019, Form 1040 (Individual Income Tax Return), Schedule 1 poses the following question: At any time during 2019. did you receive sell send, exchange or otherwise acquire any financial interest in any virtual currency?<\/p>\n\n\n\n<p>1]  <a href=\"https:\/\/sommers-taxapedia.com\/archives\/wp-content\/uploads\/2020\/01\/IRS-3-Letters.pdf\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"The three letters are attached to this article. (opens in a new tab)\">The three letters are attached to this article.<\/a><br>2]  <a href=\"https:\/\/sommers-taxapedia.com\/archives\/wp-content\/uploads\/2020\/01\/IRS-Tax-Form.pdf\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"See the attached tax form. (opens in a new tab)\">See the attached tax form.<\/a><\/p>\n\n\n\n<p>You must answer that question \u201cyes\u201d or \u201cno\u201d under penalties of perjury. If you did not have transactions in 2019, there&#8217;s nothing to report and you can safely answer the question \u201cno.\u201d<\/p>\n\n\n\n<p>If you answer the question \u201cyes\u201d and report your taxable cryptocurrency transactions, there is no reason to believe IRS will automatically audit you. If you answer the question \u201cno\u201d and IRS has information to the contrary, you could land in big trouble; if you intentionally failed to report your cryptocurrency transactions, in addition to taxes, penalties <sup>[3]<\/sup> and interest, you could be staring at federal criminal perjury or tax evasion charges. Note: failing to respond when you have significant cryptocurrency transactions is considered the same as marking the box \u201cno.\u201d<\/p>\n\n\n\n<p><strong>Conclusion<\/strong>:<\/p>\n\n\n\n<p>IRS is aggressively pursuing on-line exchanges for information and forcing taxpayers to disclose cryptocurrency transactions with written responses made under penalties of perjury. If you have not reported your cryptocurrency transactions, it behooves you to get into compliance as soon as possible. Deceiving IRS by falsely claiming you do not have any transactions can lead to civil fraud penalties, perjury charges or possibly criminal tax evasion charges, depending on the severity of the situation.<\/p>\n\n\n\n<p class=\"has-small-font-size\">[3] The typical negligence penalty is 20% of the tax due,; however, if there was fraud, the penalty can be 75% of the taxes due. Misleading IRS by falsely checking the box no is an indicator of fraud.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Note: For more information on cryptocurrency taxation and tax planning strategies, purchase my Tax Brief for just $9.95: Cryptocurrency Income Tax Planning: A Tax Brief Warning Letters: It&#8217;s been all over the news that IRS mailed 10,000 letters to potential cryptocurrency participants, warning them that IRS suspects they have engaged in cryptocurrency transactions (IRS uses <a href=\"https:\/\/sommers-taxapedia.com\/archives\/irs-is-gunning-for-unreported-cryptocurrency-transactions\/\" class=\"more-link\">&#8230;Continue reading<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[93,4,1,91,92],"tags":[102,100,101,103,105,104],"class_list":["post-630","post","type-post","status-publish","format-standard","hentry","category-cryptocurrency","category-foreign-taxpayers","category-general-tax-information","category-international-tax-law","category-investments","tag-coinbase-taxes","tag-cryptocurrency","tag-irs-targets","tag-tax-audits","tag-tax-planning","tag-transactions"],"_links":{"self":[{"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/posts\/630","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/comments?post=630"}],"version-history":[{"count":18,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/posts\/630\/revisions"}],"predecessor-version":[{"id":651,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/posts\/630\/revisions\/651"}],"wp:attachment":[{"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/media?parent=630"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/categories?post=630"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/archives\/wp-json\/wp\/v2\/tags?post=630"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}