As cryptocurrencies become more a part of the global financial mainstream, so too does the push from governments around the world to secure control over the movements of digital assets and crypto tax law. For many years, cryptocurrencies have enjoyed a period in a tax grey area. Now, that grey is quickly becoming both a little blacker and a little whiter with the US IRS announcing that they will be sending out warning letters to crypto owners stating that back taxes, as well as current and future taxes will need to be paid.
According to the IRS, the letters being sent out indicate that the US government intends to hold crypto owners accountable for years of cryptocurrency dealings. Termed ‘educational letters’, the IRS plans to instruct anyone who is holding or has held cryptocurrency in the past on how to abide by the United States tax laws and how they can go about the process of payment. The same announcement makes it clear that the IRS will continue to seek out new cases and estimates that until the end of August it will have sent out nearly 10,000 ‘warning’ letters.
The recipients of the letters are part of a larger campaign by the IRS to uncover cryptocurrency movements in the US. As stated, the IRS will be looking into making criminal cases and following leads through a range of avenues. The ongoing campaign seems set to continue indefinitely setting forth a new age in crypto use in the United States.
Despite the worry that these letters bring to the table, there are some indications that it is only the beginning, and that enforcement is still to come. The letters appear to be letting people know that a change is coming by informing crypto holders that there will be more information passed on in the near future outlining how exactly the IRS intends to carry out its enforcement. Also part of the announcement is the fact that the IRS has yet to settle on how exactly different aspects of crypto ownership will be carried out. Items like hard forks and cost basis seem to be on the fence at the moment.
Considering that the letters are going out to so many people in so little time, we can assume that the IRS is laying the ground they need to take things to the next level. And, while the ‘next level’ has not arrived yet, we are getting a warning that audits and other expectations may soon be a part of the crypto world. Stay tuned for information regarding this and other issues regarding tax laws involving digital assets in the US.