Topic: IRS Cryptocurrency & Tax Compliance Letters sent now. 7/26/19. USA only! (Read 276 times)

Sorry, got a friend of a friend whose wife is IRS agent, it is going to be much more than that, so the rumors go.

They also think it is an utter pain, in that no IRS agent has much of a clue on how this all works either

Hope for the best and prepare for the worst.

Myself, all my stuff is hand done, so if it does come to pass to cover my butt to look over past returns in a grace period, I likely will get a fancy xerox machine

that would allow me to make copies of my stuff from 2013 onward and automatically direct 1 file to monthly/year 1 file to yearly folder 1 file to xerox.

For example equipment purchase with $$$ spent ..copy you get 1 going to a folder for that month equip and 1 going to the yearly equip 2013 folder and 1 paper

say for my real physical files. Of course, it would be a pain, and you'd have to summarize...but if the IRS gets too needy a lot of us will be cleaning up our

previous tax stuff. What would really suck is if they wanted CSV format for time and day to the exact minute off blockchain. I just pulled the daily average

over the years from an exchange like worldcoinindex or coinmarketcap. IF they track stuff that far, a lot of crypto stuff is gonna grind to a halt as folk get their

heads around this and/or catch up or double-check.

Remember the 2014 guidelines said you paid capital gains on individual BTC on the blockchain. Thus a 2009 BTC on the blockchain specific you buy a color

A TV with that for $1,000 and it cost you 25c to mine the BTC in 2009. You owe the IRS 999.75c in cap gains. The IRS also says this kinda stuff about eBay

and nothing happens....but I bet they keep that as well in the 2019 guidelines.

The IRS was forced by Congress for years to do this on a shrinking budget, they very well could make something 'undo-able' just to show Congress to either

screw off or give them a massive budget increase.

Anyway, I figure the likely hood of me having to glean thru my past tax returns and tidy them up into pdf's and double-check, etc is better than 50/50 IMHO.

the bigger whale you are the more work this will be to kinda/sorta get within compliance, even if you did try to do your best since 2013 and now.

Hope I'm dead wrong..but hey, it is the IRS and they did make a statement last time with the 2014 guidelines they released 10 days before the filing deadline.

That IMHO was pretty purposeful and a big FU back to 2009 and other clauses.

I had to scramble in those 10 days to do the mining stuff and now eligible equip deductions etc.

I doubt many whales did that back to the 2009 CPU days. This is the kinda stuff the IRS may expect you to clean your taxes up...on...now that we are a 10k BTC.

Again, but the current Trump Administration is under heavy pressure by banks, they are gonna stick it to us on compliance, I'm afraid, much more that folk expect.

brad

you really think this letter writing campaign will lead to that? it seems like a small scare tactic to encourage voluntary compliance without the IRS actually investigating anything or spending any money. i'm sure a good portion of american whales have already been reporting their income too.

if there's only 10k letters going out---and considering how many false positives people are reporting---they seem to be drawing on very little data and taking very little time to look into this. so far, anyway.


i don't think they will be establishing new requirements like that. more so clarifying the existing tax code re forks, airdrops, staking, overseas accounts, etc. not sure but that's my understanding from this article.

Well, not sure of current but on the date of  3/19/17, according to the IRS, only about 802 people via Coinbase reported their taxes according to IRS on crypto.

So indeed the people who paid or tried to pay taxes could be like under 10,000 folk and

of course, would be the easy, low hanging fruit to go after for adjustments and fees. Just IRS the folk already that did tax forms on Crypto and fish for issues.

Thus really tossing the whole crypto world on its head and dumping price back down for BTC to the $2k to $4k only price, if we were lucky.

https://fortune.com/2017/03/19/irs-bitcoin-lawsuit/

Not good on price if say 20% of whales suddenly have to come clean, or face consequences, in the USA, for all their crypto since 2009.

(See 2014 Crypto Guidelines). Yeah, it applies that far back all the way to 2009.

I don't think the NEW 2019 guidelines are gonna be any better likely worse. Probably require CVS to blockchain on every transaction and .pdf formats. i.e. 'real-accounting'

This and other Trump Administration FUD may put BTC and Crypto prices in the basement until well after next years BTC halving in 2020.

Probably, can't stop crypto and BTC but you probably can game it so the price of all the above is in the basement and keep any newbies away.

Brad

Not the one Brad is talking about, the 6173.

I've seen several reports of people receiving the 6174 or 6174-A -- which don't require a response and suggest only potential misreporting -- after properly reporting their taxes.

Never the 6173, though. The 6173 actually alleges noncompliance, requires the taxpayer's response, and signifies the IRS' intent to further investigate. The first two letters seem like a blanket mailing, but if you got a 6173 the situation seems more worrisome.


I agree that most of this is probably from the Coinbase summons. However, there must be some reason they are sending 3 different letters.


Agreed there, too. They can't audit everybody who has annual Coinbase activity in the low 5 figures. That'd be insane. But virtually everyone is scared of the taxman, so...

There are several reports on the various reddit threads of people who reported and paid taxes correctly receiving the letters. There are also one or two reports of people who have only ever bought bitcoin, and never sold or traded (and therefore would have no taxes to pay) also receiving the letters. It very much seems like the IRS have just blanket sent these to everyone from that Coinbase database (or whatever other source they are using), without actually looking at each account's activity or matching up the activity to the individual user's tax returns.

Edit: As squatter says, these people are likely talking about the 6174s or 6174-As. It does seem the 6173s are more targeted.

There was another interesting post which popped up on reddit today, from a user who (claims to have) previously worked for the IRS: https://www.reddit.com/r/Bitcoin/comments/civvgy/irs_letter_writing_campaign_info_from_insider/. The TL;DR is that they don't have the resources to pursue everyone, that this is the easiest way to try to scare people in to paying up, and likely only a small percentage of the largest traders will be individually investigated. Perhaps these are the ones who have been sent a 6173?

I'm afraid it is more like the scenario in my previous post. You are likely going to have to make folders for each month of all the stuff that month that you did calcs on

elec/equip bought/crypto mined/crypto sold/etc

then make a monthly summary for say the first month Jan 2013 in my case then a summary of all the stuff summarized in the year of 2013

then, of course, everything all added up in a summary for the year, probably listing sub-totals for each month for each folder, etc

the reason this has to be done is they are gonna drill down all the way to the equip you bought. they are gonna pick a month pick to say elec costs and then look at your summary of

such and the bills of such for that month etc. The will spot check on a month by month and year by year basis looking for a screwup on your part

add, IMHO, that the IRS agent is probably unfamiliar with crypto.he then likely will email you follow up questions on why you used like-kind what is a miner? etc

only gonna work, if you have drilled down with summaries bit by bit and month by month

my brother was audited and sent summaries like the above and he is an investment counselor so he had massive amounts and they just tossed up their

hands and tried to make him pay fee/etc/fines or whatever because they did not LIKE his process. The same process of a bank that is.

So best you can hope for IMHO, is you do as I stated month by month thru all 7 years, and they will find something that you missed and you will go

back and forth at that point and probably just go 'screw it' and pay the fine or adjustments and move on.

But the only way this will work is if you account for everything and likely they can find it month by month in a folder with a summary for each month

and it will all have to be in electronic and pdf format now it seems.

IF YOU ARE UNLUCKY ENOUGH to have a FULL AUDIT and someone shows up at your house....well, that actually might be easier these days, at least

you can pull out the files and sit down with such and the CPA and the IRS Agent. But alas, they will only show up at your house and look at a full audit

in that case, if they already think they have you on a mistake or something. Again, these agents have to show they are making progress and getting

fines or adjustments or they have issues with their boss and job. This is what my CPA and Brother and others have said.

So my folder and month by month drill down and summary of such for each year etc..is just the prelude to educating the IRS agent on crypto with

the same roadmap as you have in a clear manner. Sure, if the IRS agent wants to dig thru my paper files/folders month by month that may work too

probably better, if he gets the person to person since you are on the up and up on your taxes attempts with 2014 crypto guidelines.

But 90% of this stuff is done over the phone now and settled on fine or adjustments I guess. I'm just saying if I do get such a letter that they

want more info and I have to sign like the 1673 letter. I'll ask for the 30-day extension and just start converting this and drill down each month

to pdf etc. Because no frigging way I can send the IRS 10lbs or more of documents per year from 2013 to 2018 without making a month to month

outline and a summary (by month list with the total for the year) for each category of elec/miners bought/crypto sold/etc

Its the only way this will fly at this point in time. Indeed the IRS may say for every BTC or Crypto address they want CSV and automatic determination

of BTC price using that method, rather than the old days of taking the daily average from say worldcoinindex.com. The CSV stuff would be to the minute.

That would suck. I could even come out ahead, but it would still suck.

Lastly, they could come out this year with 2019 tax guidelines all the way back to 2009 that completely contract the previous 2014 guidelines...I mean

the 2014 guidelines applied back to 2009, they could just toss out the 2014 guidelines and go all the way back to 2019 and do a complete do-over for

all of us on crypto. Everyone would have to amend from 2013 to 2019. Of course, this is very unlikely, but so IMHO, was the dropping of the 2014 guidelines

10 days before 2014 Taxes were due!

We will be the first to know.

Also, I know zip, just saying how I would approach such and what my expectations of the IRS agent actually knowing about crypto being very, very low.

Brad

I have learned that the Tax is somehow unreasonable, it's more or so more than what should be actually asked .
Also at the same time .. it is 15% and 20% for the people according to single , married and other constraints.
The government states that :

*In addition to profits from selling investments, you'll pay tax on any interest, dividends, or rental or other income you receive. ...( In contrast, interest on bonds, income from rental property, and most other investment income typically gets taxed at higher ordinary rates).*

Taken from a website .

The words are true , but seems absolutely ridiculous
We are supposed to pay taxes at higher ordinary rates , is it fair for people to be taken out their money and efforts for granted , infact we will pay taxes for our skills !

There are countries where BTC is not taxable , the government is again thriving there too without much problem why doesn't they just reduce the tax percentage?

i'm reading the instructions on letter 6173 and it looks like you can just mail everything:


even if your paperwork fills multiple file boxes, it shouldn't be too time consuming. just photocopy everything, box it up, and send it fedex ground or something.

anyway, you haven't actually received a 6173, right? since you reported and paid taxes on your crypto transactions, it's highly unlikely you will get one IMO. those sound like they are reserved for people who are definitely not compliant.

OK...I filed from 2013 onward. Indeed I had to 'amend' 2013 Tax Returns due to the fact the IRS released the 2014 guidelines like 10 days before the April 15th IRS pay
deadline. I always thought that was suspicious as hell. So previous to the 2014 guidelines, my CPA said, you sell any BTC..I went NOPE thus no tax issues. Also NO equipment
deduction for the mining. So I had to pay the mining income as such. After the guidelines, I amended to reflect the 2014 guidelines and thus paid little taxes because of equipment
purchased and thus the equipment right off from gross. So as far as I can tell I'm legal as hell. However, all the background stuff or calculations and btc addresses to and from
mining, etc was all just printed out and/or written down. For example no CVS back then etc. So it was all by hand with paper calculated etc. So every day I got a payout for
mining etc, mostly LTC to BTC, I had to write down the $$$ it was that day and how much was paid out to the address. All by hand.

I've done it this way since. Same for BTC addresses in/out etc for equip or whatever and/or mining. Thus each year has a tub for itself marked by year with all the paper
calculations I needed to get the stuff that is put on to the return. If they expect this in electronic or pdf format with equipment pictures and etc, etc. I can show it on paper. How the hell I could send this all to someone in bulk even with notes and they could figure it out is beyond me. I did it according to the guidelines of 2014 by the IRS, but again at those times you picked and exchange (think I mostly used worldcoinindex) I  went by the daily charts for price and just kinda kept u

So that is my main worry if an audit. The getting all this in electronic format and more organized if I needed to do such.
1) You get a call they want your complete files all sent to them including calcs/background info/receipts etc ASAP.
2) If I sent such, even all in pdf or xeroxed the works they would toss up their hands, likely tell me to pdf it all with summary and notes.

3) thus, in reality, you would probably have to do a monthly of the following with expectations you would have to handhold the IRS agent
who knows zip about crypto and BTC thru his own 2014 IRS guidelines and the process etc.

example:

Jan 2013

Do  below monthly for eventual yearly summary of all for 2013.

1) pdf all equipment with pictures and receipts
2) pdf all mining with pdf and addresses as well
3) pdf all crypto sold pdf and addresses as well (also cap gains 40% or 20% or losses from sales)
4) pdf all office/biz supplies for that month.
5) pdf all-electric used mining a month.

Make a monthly folder of the above labeled Jan 2013
Start a 2013 folder of all the monthly above put together month by month. By that, I mean a running total of:
2013 Folder Mining Income with addresses and daily mining prices, again total month by month.
2013 Folder Equipment Purchased (or sold) all receipts, perhaps pictures.
2013 Folder Crypto Sold with cap gains. Running Total with cap gains/losses
2013 All office/biz expenses like Internet etc, etc.
2013 All-Electric used mining as running total month to month

Then a folder of all the above for the entire year as you add them together. You eventually get a complete
pdf and electronic version with monthly folders and charts for 2013. Do this thru 2018. Yech!

So fine, I bet you $$$ to donuts that I will get an IRS agent that has NO clue on the 2014 guidelines or worse yet
be using whatever new guidelines supposedly coming this year of 2019 and applying it backwards to 2013.

Indeed, it will be like I had to walk the CPA lady through on how crypto worked for tax purposes from 2013 onward.

Of course, me knowing the crypto tax law better than the IRS guy who had this 'mess' fall into his/her lap, that he is uncomfortable with, he will be
grateful for my help, right?

Not a frigging chance. As this cluster would continue with his/her learning curve as well, I'm
afraid the IRS agent will be beyond pissed off. Also it would take long, his/her boss would be
on the IRS's ass on why, this could dovetail badly.

My brother sells investments. He had a random audit. They told him his 'process' for doing taxes was wrong because they did
not want to deal with mucking thru everything. So they told him to settle and give them 12k and the IRS would go away for his 'sloppy bookkeeping'
He ss a finical fiduciary and investment consultant was beyond pissed off because he knew he was correct. Had to be or it was his ass
with his regular business.Last I heard he got them down to 3K and was still pissed off and working it down further. (This took months).
He though had the knowledge that he was correct and the IRS was not, alas, not like us other mortals.

So likely, IMHO, the dog and pony show, IF you are legit and IF you get everything to an electronic format, they likely being
new to crypto at the IRS end will simply still toss up their hands and just say you owe such and such and fine you to get the whole process done.
Thus it will be rinse/wash/repeat as the cluster***k moves thru the crypto universe.

So I'm just gonna see.

My CPA says it will be damn hard for the IRS with the efforts expended by me and likely anyone else
with just the bad 2014 guidelines to get anyone who legitimately has tried to pay crypto taxes since 2013 etc.

But that doesn't mean they won't Nickle and dime the process to such an extent you just pay off $5-10k to them to get out from under IRS scrutiny.

According to the CPA lady, they have to show some $$$, the more time they spend chasing down and individual account
the more they look stupid, thus the fine and/or 'adjustment' to whomever on whatever pretext of 'like my brother' not liking your process, as an example,
of how your doing or keeping track for taxes. You pay the $$$ fee/adjustment and the IRS agent looks like they did their job and everything moves on to
the next schmuck..on the list.

So I will wait, if it does happen, I will lose months of my life putting this in electronic and pdf format. I then will get the
wtf is all this. I will then explain using small words, further pissing off (according to my CPA) the un-informed IRS agent.

At the point, if it looks like the IRS agent kinda half-assed believe I tried my best with the 2014 clusterf***k of guidelines, he then
will fine me according to how pissed off and/or clueless he is about Bitcoin and Crypto taxes and to justify to his bosses
that his time was not wasted.

At that point, unless it is crippling, you pay the damn fine or past corrections he deems
appropriate and calls it a win and move on. This was the sunny vision of my CPA.

Just the kinda thing you want to hear from your CPA which between 2013 and now has also been utterly underwhelmed
by the process and learned this bit by bit.

The CPA also, being knowledgable about this, told me I was the ONLY person that she did crypto with. Mainly, because she started with me in 2013.
This is of course because she knew me, god knows she was not gonna work with this mess with new clients who might lie about the source of their crypto
that she signed off on as a CPA, no thanks. Great, will be 2 people in the room pointing out to the future IRS agent that he/she is clueless, that surely
will help a person's case with the IRS.

So anyway, I guess I should be grateful, that I did my stuff as best I could with these half-assed guidelines and even though just masses and masses of paper, call it a win,
even if I get audited or indeed the dreaded 3rd letter 1674.

It may all be in paper my kill all trees process and maybe a mess to xfer to electronic and pdf format, but I
was pretty anal about keeping records. Also, a CPA that backs me on what I did, year by year.

But damn, this is gonna be an ugly process indeed if it is based on the 2014 guidelines only and my expectation that the IRS agents are
not gonna be up to speed on this at all. Also, new regulations also may go back to 2009 as well. Remember the 2014 guidelines went
all the way back to 2009 for capital gains on spent individual Bitcoin.

So we will see, hopefully, they will simply see a progression of BTC and Crypto mining from 2013 till now by a CPA and
look for actual folk trying to cheat on taxes. (yeah right, I'm likely screwed..just saying)

Anyway, you are correct, the issue only comes to play above if you get the dreaded 1673 letter and/or an audit.

Still, for whomever, the above of those getting such a 1673 letter and/or audit is gonna suck massively IMHO.

Hope, I'm wrong, but I sure doubt it.

Brad

I don't think so. They already have all your past filings.

They are basically saying, "We know you didn't report your virtual currency transactions. File your delinquent returns if you didn't file, and amend your returns if you did. Otherwise explain yourself and sign your statement under penalty of perjury so we can come after you later."

The 6174 and 6174-A letters indicate more leniency, or lack of real suspicion at all if this is really just a generic mass mailing.

Again, I assume if you get the wicked 6173 form letter that you have to sign and send in stuff. They simply want to look over your

filed tax returns from 2013 to 2018? I would take months if I needed to pdf all my calculations and other stuff to get the info

for the tax forms to them. I did my stuff with paper (back then no other way to do so) Thus, I heard they don't take that as

backup material anymore.

IF the wicked letter you sign and send tax forms only to...then I'm golden...of course those letters are the most likely to get

audited because you flag them with the  6173 and they are the ones that are looked at by hand on if they want to dive in or not.

Again, I assume, they JUST want the tax forms you filed, not the other massive info and calcs you did to get those figures.

Just the tax forms, I'd still freak, but at least I'd save a lot of work converting all this into pdf form, etc,  my notes and calcs and equip lists (mining), etc  Would suck!

into that form. Again, the wicked one 6173

https://dontmesswithtaxes.typepad.com/IRS%20Virtual%20Currency%20Letter%20l6173--2019-06-00.pdf

Thanks, again, probably just tax forms but hell, it is the IRS, who the hell really knows?

Brad

similar situation, but my understanding of the ebay/paypal case was it mainly only affected people who got 1099s ($20k+ gross income) and didn't properly report their taxes.

in this case, i don't think there's a single exchange out there (except perhaps the CFTC-regulated ones like ledgerX or CME) that sends 1099s.

This reminds me of what happened with eBay a few years back when they started to send IRS info from people who had sales over a certain threshold.

Basically people were making a living selling items on eBay and assumed it was tax free and got away with it for years until they started to crack down.

Most likely it's the same situation with crypto now.

seems that way. a tax lawyer wrote an article about these letters. this is what he had to say:


by all appearances, much of this is from the US v coinbase case. all the articles say "10 thousand taxpayers" or more. the coinbase data dump would cover that alone. makes sense given that the letters are so generic.

it seems like they want to put a scare into anyone whose name and taxpayer ID came up on their radar, allowing people to amend returns and pay up before they start coming after people with enforcement actions.

reserved

The IRS announced it is sending compliance letters on Taxes paid for crypto to 10,000 folk in the USA.

There are 3 types of letters, only one needs to be signed and/or sent back with tax info.

They are as follows

6174-A   https://dontmesswithtaxes.typepad.com/IRS%20Virtual%20Currency%20Letter%20l6174-a--2019-06-00.pdf

6174      https://dontmesswithtaxes.typepad.com/IRS%20Virtual%20Currency%20Letter%20l6174--2019-06-00.pdf   

These two above are warning letters IRS is aware of your crypto and/or BTC usage. No reply needed. See above.

6173         You need to sign and send tax information for this last one. See below.

https://dontmesswithtaxes.typepad.com/IRS%20Virtual%20Currency%20Letter%20l6173--2019-06-00.pdf

Here is the article below with the above IRS links to pdf's of the letters as well.

https://www.dontmesswithtaxes.com/2019/07/crypto-currency-owners-getting-irs-payment-letters.html

The only confusion I have is on the 3rd letter if you got that one, does it JUST want your tax returns per se, or all info that you used
to get the stuff on your tax returns?

(sorry clueless just double-checking, I think it is just a sign and return with copies of your tax returns)

The 6173 above it the ONE you DO have to reply to with above info.

Anyway, that is my only question on this 6173, I assume it is just the tax returns themselves and you'd not have to put in all the equip/sold action

, etc. But just to clarify for me, post below if you know the answer to the above.

Looks like a 'giant' fishing expedition on the IRS's part. Myself, in the bad old days of 2013 my banker, finding out I did the 'evil' bitcoin called the SEC

on me, it was resolved with me showing them my CPA made Tax Return (revised) for 2014 IRS Guidelines on Crypto.

So myself, I'm sure I'm getting some kinda letter, in that I seem to be, since then on the 'tag' and release program from the SEC look-see.

Hopefully, it won't be the option 6173 with a letter of explanation of what the hell I did from 2013 to 2018.

Some of the choices I made of a 'dubious' nature back then (BFL, dubious equipment, etc) would suck. Not to mention my memory of how it all

shook out to get to the completed tax form would also suck, assuming they want some kinda coherent timeline to

whatever, if nothing else me and the CPA filed from 2013 onward, hard to get us for fraud, cluelessness yeah, but we tried to get it right.

Bitcoin/Crypto always drama.

Anyway, someone points out if it would just be the tax returns and signature for the 6173 form above, that would be a relief rather than every

scrap of paper and hand calculation I had to do from back in the day.

I'll let folk know when (not if) I get my letter.

Brad