by Mish Shedlock, Money Maven:

The Internal Revenue Service has begun sending letters to more than 10,000 cryptocurrency holders, warning about the penalties for failing to report income and pay tax on transactions involving virtual currencies.

The agency expects its mailing to be completed by the end of August. It is sending three variations of one letter, depending on the information it has about the recipient. “Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency, including increased use of data analytics,” said IRS Commissioner Chuck Rettig.

In recent weeks, IRS criminal investigations chief Don Fort has announced that the agency is also building criminal tax-evasion cases involving cryptocurrency that are expected to be made public soon.

Coinbase Connection

In mid-March of 2018, Coinbase provided information on about 13,000 accounts as requested by the IRS and under a federal-court order.

If you traded cryptos for a profit, it’s probably best to fess up.

The IRS will want penalties and interest but that’s better than being convicted of tax evasion.

Veil of Secrecy Off

The veil of secrecy is off and the IRS is Coming For You.

Some cryptocurrency holders are now disclosing past tax lapses to avoid potential criminal prosecution.

Bryan Skarlatos, a lawyer with Kostelanetz & Fink with several such cases, reminds cryptocurrency investors of the IRS’s success in piercing the veil of Swiss bank secrecy. Since 2009, more than 56,000 Americans who hid money in offshore accounts have paid more than $11 billion to resolve tax issues.

“Digital currency holders shouldn’t think they can hide from the IRS,” he says.

Smaller investors are also feeling heat. Many traded during last year’s price spike, and tax preparers are now asking clients routinely about cryptocurrency sales. They aren’t supposed to sign returns with unreported income.

Letter Received?

If you received a letter you know the IRS knows about you.

If you did not receive a letter you don’t know what they know.

Read More @ MoneyMaven.io