In addition to earlier letters, the U.S. Internal Revenue Service (IRS) is now warning investors who’re already filed their income tax but reportedly misrepresented the income generated from crypto transactions.
IRS Sends New Round of Letters
As Coingape reported, IRS in July sent 10000 educational letters to crypto users, asking them to report and pay their tax properly on the income from their virtual currency holdings. Unlike the earlier letters, the new notices, CP2000, specify that the agency encountered a difference in the amount of income that investors filed as part of tax filing. Accordingly, the agency seeks to collect the difference amount from a few crypto holders who misreported income from exchange transactions. To note, the agency gathered this information independently from the third party.
Upon receiving this notice, investors can dispute the amounts within 30 days; failing to respond would result in penalties. As per the Chandan Lodha who is the co-founder of CoinTracker, a firm that helps taxpayers to ascertain their crypto-related taxes states that;
“[CP2000] is a slightly different letter, Lodha said. “Basically what it says is ‘hey we have a report from one of the financial institutions you use and the amount they reported to us the IRS is different than the amount you, the taxpayer, reported and this is the amount you owe’ and it’s a 30-day letter meaning you have to respond in 30 days.”
Lodha also reveals that this letter usually circulated outside of the crypto space and this is the “new phenomenon” that IRS is sending out within crypto space this time. However, according to Justin Woodward who is an attorney with TaxBit tax calculating startup, these letters have been around crypto users since August.