US Internal Revenue Service upgrades, sending credits to cryptocurrency users

The US Internal Revenue Service (IRS) is sending a new round of letters to cryptocurrency holders, this time in the letter listing the specific taxes owed by citizens.

When the information on the taxpayer's return is inconsistent with the information obtained by the IRS from a third party, the IRS will issue an announcement CP2000. Although the taxpayer can object to the listed amount within 30 days of receiving the notice, the amount stated in the notice is the amount that the IRS thinks the taxpayer should pay. The agency warned that failure to respond to such letters could result in taxpayers taking additional interest and fines.

Crypto

In July of this year, the IRS began issuing more than 10,000 letters to cryptocurrency holders, instructing and urging them to correctly declare and pay taxes related to cryptocurrencies. CoinTracker co-founder Chandan Lodha said the CP2000 notice was not linked to the 10,000 letters sent earlier. Lodha's company provides software that helps taxpayers calculate taxes related to cryptocurrencies.

"The CP2000 is more serious than the previous 10,000 letters, because the IRS gives an actual, specific amount, and the amount due to be paid, instead of… a very general warning letter."

In a CP2000 notice, the IRS obtained third-party information used to calculate the proposed tax from Form 1099-K. Some cryptocurrency exchanges will send this form to customers whose transaction amount exceeds a certain threshold. The exchange also needs to submit a copy of this form to the tax office.

However, some cryptocurrency tax researchers have questioned the IRS's use of 1099-K to calculate cryptocurrency-related taxes because the table only reflects the cumulative volume of transactions and does not reflect the actual gains that individuals receive through these transactions.

Coin Center senior researcher James Foust has studied the taxation of cryptocurrencies. He says:

“1099-K is not suitable for reporting cryptocurrency tax information. However, 1099-K and 1099-MISC are the only information reports mentioned by the IRS in the 2014-21 notice. I suspect this may be the exchange without national tax. The reason for choosing to use it in the case of clear guidance from the bureau."

It is still unclear how many CP2000 notices were issued this time.