Altcoin News: IRS Tells Crypto Holders How Much They Owe to Them

August 15, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

The U.S. Internal Revenue Service (IRS) sent another series of letters to cryptocurrency holders, which this time indicated the exact amount of funds underpaid to the treasury, writes The Block.

Notification in the form of CP2000 is provided for cases when inconsistencies are found between the information transmitted by taxpayers and information that the department receives from independent sources. The amount indicated in the letters corresponds to the expected debt, however, taxpayers can appeal it within 30 days from the receipt of the notice.

In July, the IRS announced the distribution of 10,000 letters of an “educational nature” in which it urged cryptocurrency holders to declare their income from trading in digital assets properly.

According to Co-founder of CoinTracker, Chandan Lodha, the new newsletter is not related to the previous one.

“[CP2000] is more severe [than the previous 10,000 letters] in the sense that there is an actual, specific amount that the IRS is saying that is the proposed amount due, as opposed to… a very general warning letter,” he explained.

In one of these notices, which fell into the possession of The Block, the information used by the IRS to calculate the amount of tax payable was obtained from form 1099-K, drawn up by some exchanges that report customer transactions that exceed a certain threshold. In this form, however, only the total volume of transactions is indicated, but not the profit of a particular trader.

“The 1099-K… isn’t really a good fit for reporting cryptocurrency tax information,” said Coin Center senior research fellow James Foust, who specializes in cryptocurrency taxation. “But it [1099-K] and the 1099-MISC are the only information reports that the IRS mentions in Notice 2014–21 and I suspect that may be the reason exchanges have opted to use it in the absence of clear guidance from the agency.”

Author: Marko Vidrih