On July 26, the United States Internal Revenue Service (IRS) announced that it was starting to send letters to American cryptocurrency owners advising them to pay taxes. According to the organization, by the end of August, letters will be sent to more than 10 thousand taxpayers.
The IRS 6174-a letter is clearly intended to scare recipients and threaten “future civil and criminal liability” if they do not change their tax returns to accurately reflect their cryptocurrency revenues.
Here is an excerpt from the letter:
Most likely, this letter is part of a general mailing campaign, directed not to all people about whom the IRS has information about the existence of a trading cryptocurrency account. This list should include more than 14,000 Coinbase users identified in the 2017 agendas, as well as taxpayers who receive tax forms (IRS 1099) from US cryptocurrency exchanges.
A taxpayer may receive a letter from the IRS 6174-a, even if he accurately reported all of his earnings related to cryptocurrencies. In this case, this means that the letter was sent only upon the existence of a Coinbase account, and not because the person is suspected of tax fraud. Nevertheless, it is recommended for all those who receive the letter to carefully examine their tax return and make sure that the income from the cryptocurrency is displayed in it accurately. One way or another, receiving an IRS 6174-a letter means the taxpayer has come to the attention of the IRS.
Moreover, you should worry about those who received the letter and did not accurately report their income from cryptocurrency. In this case, you should follow the instructions in the letter as soon as possible and make changes to your tax return. The IRS rarely pursues taxpayers who admit to their violations before they are caught.