IRS Warns Cryptocurrency Investors about the Under-Reported Gains
As per the reports, recently dozens of individuals have received notices of owing taxes on earnings from crypto holdings as they were not reported in 2018.
The head of the tax strategy at CoinTracker, Shehan Chandrasekera said that it has come to his attention as well that this year many crypto investors are receiving such notices from the IRS.
The amount that the users owe, according to the IRS and the furnished due dates for payment is been presented in the form of CP2000 letters. The CryptoTrader.tax said that the users never noticed these gains and even they don’t owe these funds.
Last year, same letters were sent to the crypto exchange users. At that time, the co-founder of Tax Bit, Justin Woodward, a software vendor said that the users received such notices since their exchanges outlined transactions to the IRS using form 1099-K.
All the transactions are displayed as generating revenues by this IRS form, even if the user incurred loss from any transaction.
As a consequence, an exchange might report a carelessly exaggerated tax burden for the user because the letters sent for the due taxes in 2019 were for the 2017 tax year. According to a blog post of Crypto Trader, the same issue is appearing this year.
The form CP2000 letters involve tax-related to cryptocurrency that setbacks all stem from the verity that Coinbase and many other exchanges use Form 1099 K to report transactions to the IRS, which is a big problem.
Users who have received CP2000 letters must calculate their gains and losses from crypto holdings and report those to the IRS.
In order to suppress this issue, exchanges would have to send 1099-B forms, which precisely mark gains as well as losses, to the IRS rather than the 1099-K forms.
Crypto Business World
CBW - External Analyst