Last week, the United States Internal Revenue Service sent another round of letters to crypto traders called CP2000. These notices were sent to traders of some crypto exchanges due to inconsistencies found in their tax reports.

Using the information provided by third-party systems — such as crypto exchanges and payment systems — the IRS has been able to determine the amounts traders owe and included the amounts in dollars in the notices. Individuals who have received these notices are required to pay within 30 days, starting on the delivery date indicated in the letter.

Related: IRS Crypto Reporting Letter: A Wake-Up Call No Matter Who Gets One

If you think the exchange — on which you traded — provided your details to the bureau, you are probably right, but do not hold it against the exchanges. The regulation stipulates that all broker and barter exchange services are required by law to annually report trader activity on a 1099-B form, send it directly to the IRS and send a copy to the recipient.

In addition, transaction payment cards and third-party network transactions are also required to report on Form 1099-K, send it directly to the IRS and send a copy to the payee.

The IRS has not yet published specific guidelines for crypto exchanges. In fiat stocks, every broker must submit 1099-B to the IRS and send a copy to the trader. In crypto, the IRS still didn't publish clarification whether exchanges should provide 1099-K or 1099-B.

Exchanges can benefit from the uncertain situation to provide 1099-K — like Coinbase Pro and Gemini — but some do not provide any forms, such as Kraken and Bittrex. Meanwhile, the exchange must provide the users with the 1099-K copy by the end of every January, so they will be available to use it in their capital gains report. The users, at the same time, don't submit the IRS their copy of 1099-K, as they only use this form to calculate and report on their capital gains or loss report.

Similarly, earlier this month, the United Kingdom’s tax, payments and customs authority, Her Majesty’s Revenue and Customs, has reportedly requested that digital currency exchanges provide it with information about traders' names and transactions, aiming to identify cases of tax evasion.

Related: UK Crypto Regulation Is Changing, Recognition Looming at Long Last

In the U.S., data gathered from these exchanges is collected by the IRS and compared to every trader’s 1099-K report. If the reports do not match the data provided by the exchanges, the IRS will send the CP2000 notice to traders. The notice includes the amount every trader is expected to pay within 30 calendar days.

What’s more, the notice generally includes interest accrued, which is calculated from the due date of the return to 30 days from the date on the notice. This Interest continues to mount until the amount is paid in full, or the IRS agrees to an alternate amount. It means that interest began on the due date — on the day that you were supposed to report this for the first time. If you should, for example, have included this capital gains on your 2017 report, the interest will start on April 2018 — the last day you should have reported this gain. And it's calculated until the reply date on the CP2000 notice.

Those who received the CP2000 letter have two options:

If the amount proposed is correct:

Complete the response form, sign it and mail it to the IRS along with the tax payment.

If the amount proposed is incorrect:

Complete the response form and return it to the IRS along with a signed statement outlining why you are in disagreement with the amount listed. It is important to include any supporting documentation to your claims.

It is highly recommended to provide a supporting calculation that is comprehensive and includes all wallet activities and transactions carried out on all exchanges in order to have a complete and accurate report as required by the IRS.

You do not need to file an amended return Form 1040X, but if you choose to do so, you should write "CP2000" on top of it.

It is important to understand that 1099-K reports for individuals trading crypto can be inaccurate in some cases, and does not include the cost basis, which is crucial for crypto trading calculations.

1099-K only asks for the gross amount of the activity. In crypto reports, you need to know how much it costs you (how much you paid when you bought it) and not only how much you got when you exchanged it. You pay capital gains tax on the profit between the buy amount to the exchange (to fiat or another crypto) amount.

The price you pay for it is called “cost basis.” Without it you will not have an accurate report on crypto. 1099-K forms don't ask this information, only 1099-b forms do.

Therefore, crypto activity must be fully calculated and compared to the previous tax filing before replying to the IRS notice.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.