The IRS wants their money, and even if you’ve paid it – they’ll keep on your tail.
The united states internal revenue service (IRS) has been found to be sending mass generic letters to crypto users to scare them into paying tax. And they’re not just targeting people they believe may be holding onto their money and not reporting accurate tax – they’re sending it to anyone and everyone.
This has been made known by a Forbes report by Tyson Cross, a well-known tax attorney. He’s reported that a lot of his clients have received 6174-A letters, which threaten the reader with civil action if they don’t declare all their cryptocurrency earnings.
The letter itself reads…
‘We have information that you may have or had one or more accounts containing virtual currency but may not have properly reported your transactions involving virtual currency, which include cryptocurrency and non-crypto virtual currencies.’
The letter ends with ‘If you do not accurately report your virtual currency transactions, you may be subject to future civil and criminal enforcement activity.’
Cross says that while the letter appears personal in nature, it’s much more likely to be a mass-sent letter, targeting anyone the IRS believes may have cryptocurrency accounts. Many of his clients who have accurately reported their crypto earnings have received this letter, and so the chances of it being personal are slim.
When you get a letter from the IRS, whether you’ve done anything illegal or not – the natural response is that sinking feeling which says ‘uh oh, I missed something.’ However there’s no reason to panic if you received such a letter and have followed all of your financial reporting responsibilities. Scare tactics are one of the key ways any authority gets its money from its citizens, especially if those citizens have the choice to hide what they earn in a very easy way.
In 2017 the IRS forced the then-budding exchange Coinbase to turn over its 500,000 userbase list to them. While this was later changed and overturned in court to a much lower figure of their highest earners, it’s certain that the IRS does indeed have a large number of crypto users on its lists.
The US government is scared of cryptocurrency
It’s fairly clear that the US government are still massively scared of cryptocurrency and its potential to de-throne them as the ones in control of the country’s finances, however at the same time we can understand where they’re coming from. If you had a list of people who you knew had magical secret internet money, and you also had a list of people who have reported using that magical money – and you find the list doesn’t match – then you’d be a little concerned as well, especially if the reporting of that money was your own personal (and your company’s) livelihood.
The industry is still relatively new when it comes to regulations and crypto tax, and we’d be idiots if we ignored the fact that a major switch to non-regulated crypto instead of fiat under the current circumstances would be terrible for the government and the structure of the country. Sure, crypto is very popular amongst the ‘taxation is theft’ crowd, but without tax, and without a tested model to replace it, then the financial and social ecosystem of the country (and any country) would collapse. While we may see the IRS and the government as our enemies in many ways, we forget that they’re mostly made up of people just like you and me, who want to earn a wage and make sure their lives and the lives of everyone else in the country runs smoothly. After all – isn’t one of the main social aspects of crypto about bringing the world together in equality? Yes, that includes every single person who works at the IRS.