In July, the IRS announced that it had begun sending letters to taxpayers who may have failed to properly report income and pay any tax associated with cryptocurrency transactions or who did not properly report such transactions. The IRS expects to send more than 10,000 letters before the end of August. Taxpayers who have not properly reported their cryptocurrency transactions are, where appropriate, liable for tax, penalties, and interest, and in certain cases, may be subject to criminal prosecution. Consequently, Taxpayers who own or have disposed of cryptocurrency—even those who do not receive one of the education letters from the IRS—are advised to carefully evaluate their transactions and holdings to determine whether or not they have been fully compliant with their tax and reporting obligations.
For a more detailed discussion, please see the Baker McKenzie Client Alert, “IRS Begins Notifying Owners of Cryptocurrency of Potential Failures to Report Income and Pay Taxes,” distributed on August 13, 2019.