In the past 60 days, there has been a significant increase in the number of Bitcoin holders in the US receiving warning letters from the IRS. Many of them were unprepared for this turn of events.
Spike in Inquiries to Tax Consultants
According to CoinLedger, inquiries to tax consultants regarding cryptocurrency have surged by 758% in the last two months. Tax firms like Taxing Cryptocurrency confirm this trend. The most common letter is Letter 6174, which does not accuse cryptocurrency owners of wrongdoing.
IRS Casting a Wide Net
Many of those receiving notifications are everyday traders who believed they did everything right. The IRS has been collecting data from exchanges like Coinbase and Poloniex, enabling them to verify tax filings. Ben Yoder, Customer Success Manager at CoinLedger, stated, "These aren’t tax evaders; they’re everyday investors who held Bitcoin or Ethereum and thought they did everything right."
Future of Crypto Taxation
Starting in 2026, crypto exchanges will begin sending out Form 1099-DA, showing gains and losses. If this information is not accurately reflected in tax returns, cryptocurrency holders may receive a CP2000 notification. David Kemmerer, CEO of CoinLedger, emphasized, "The IRS has more visibility into crypto than ever before, but without accurate cost basis data, even compliant investors can get mistakenly flagged."
With the ongoing changes in cryptocurrency taxation, owners need to pay close attention to their finances and maintain thorough documentation. Being prepared for potential IRS notifications and knowing how to respond is crucial.
