With Bitcoin and other cryptocurrencies on the rise, the IRS is stepping up its game. They’re sending out a ton of warning letters to crypto investors, raising concerns about how accurately people are reporting their crypto earnings on their taxes.
A Flood of Warning Letters
The number of these letters has exploded in the last couple of months. Crypto tax experts are saying this is way more than usual. One company, CoinLedger, saw a ninefold increase in people asking for help dealing with IRS letters between May and June! That’s a huge jump. Tax lawyers are also reporting a similar surge in clients needing help with these notices.
What are these letters about?
The IRS letters generally say that they know the recipient has crypto accounts and are asking them to double-check their tax returns to make sure everything is accurate. Some letters just ask for a review, while others demand a response, like an amended return or an explanation of their transactions.
Where’s the IRS getting this info?
It’s a bit of a mystery. One interesting thing is that many of the people getting these letters seem to have accounts with Poloniex, a crypto exchange based in the Seychelles. This makes some people wonder if the IRS got a hold of data from Poloniex. Experts also think the IRS might be using new data they’ve recently acquired to target these letters. It’s not clear exactly how they’re choosing who to send them to, but it’s definitely causing a lot of worry for crypto investors.