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IRS: Thousands of virtual currency users ‘on notice’ to pay back taxes

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EAST PROVIDENCE, R.I. (WPRI) – The IRS is sending letters to more than 10,000 people nationwide who may have failed to pay taxes on virtual currency transactions.

The agency says individuals who don’t pay up could face civil and criminal penalties.

“These letters were issued to put people on notice, that, ‘Hey, we realize you’re using virtual currency. These transactions that you’re involved in could be taxable,'” explained Amy Hosney, an IRS criminal investigation special agent.

“We want people to know that IRS is taking it seriously and we’re going to be looking at these transactions in detail,” she told Call 12 for Action.

Bitcoin and other virtual currencies are taxed like property, according to the IRS. The agency said the list of people receiving letters was compiled through “various IRS compliance efforts.”

“It’s become a threat in a sense that it’s like a whole underground market,” Hosney said. “One of the first areas that we saw it was on the dark net, where individuals were purchasing drugs and identities that were stolen.”

Taxpayers who have failed to properly report virtual currency transactions should amend past returns and pay back taxes, interest and penalties, according to the IRS.

A word of caution

While the IRS is sending real letters to taxpayers about cryptocurrency transactions, scammers are sending fakes.

The IRS says some people have received letters from a fake bureau of tax enforcement threatening fake tax bills. There is no such agency and taxpayers should not hand over money or personal information.

Susan Campbell (scampbell@wpri.com) is the Call 12 for Action and Target 12 consumer investigator for WPRI 12 and Fox Providence. Follow her on Twitter and on Facebook.

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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