IRS is going after cryptocurrency users with warning letters about back taxes

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from CNN Business,

The IRS has begun sending thousands of letters to US cryptocurrency holders warning them they may have incorrectly reported the taxes they owe on their transactions involving digital money.

“Because there wasn’t a lot of guidance from the IRS except for one publication, many people were like, ‘I’ll get around to it,'” said Nicole Green, a tax preparation professional. “Now the IRS is knocking on doors.”

The existing guidance, IRS Notice 2014-21, said that for the purposes of federal taxation, virtual currency is property. When a user purchases cryptocurrency at a given price and then later trades it away — whether by buying a coffee or by selling it on an exchange — the sale is subject to capital gains tax because it is considered property.
Failing to report the transaction to the IRS could expose the user to criminal and financial penalties.

For those who have received notices, Green said, the best next step is to request your wage and income transcript , which shows all of the data the IRS receives, over the past few years. You may owe taxes on the full amount, but you may not.
“Do not freak out,” she said. “But you do need to take action. Get a copy of your transcript. Call a tax professional and amend your return if you need to.”

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