The Internal Revenue Service announced Friday that it is sending informaonal leers to taxpayers who may have failed to report transacons involving virtual currency between 2013 and 2015. For a copy of the IRS announcement, click here. This is a connuaon of an IRS campaign regarding an issue the IRS is priorizing. Years between 2013 and 2015 are likely just the p of the iceberg.
The IRS eﬀorts in this area are not new. In 2016, the Service issued a “John Doe” summons to the popular virtual currency exchange Coinbase. For a copy of the court order enforcing the Summons, click here. John Doe summonses are used by the Service when they are seeking large amounts of non-speciﬁc informaon (i.e., they didn’t have a speciﬁc target, but knew that Coinbase probably had data relevant to virtual currency gains). Aer challenging the summons in federal court, Coinbase was ordered to comply and released the name, address, date of birth, tax idenﬁcaon number, and transacons of more than 10,000 account holders for the period of 2013 through 2015. Those account holders, and others, are now clearly at risk.
The leer campaign is the logical next step for the Service now that it has completed its reconnaissance. The campaign has been dubbed “educaonal” by the Service and is purportedly an aempt to help taxpayers report those transacons that might have not been reported previously. However, a few important points must be considered upon receipt of one of these leers: (1) Even taxpayers who voluntarily comply and report the transacons may sll be subject to interest and penales relang to such transacons; (2) Virtual currency is an ongoing focus area for IRS Criminal Invesgaon; (3) The IRS may be sending these leers to taxpayers who actually have been properly reporng; and (4) For some transacons, the statute of limitaons for the Service to assess addional tax might have already run.