Like many crypto traders, you may have experienced a great deal of uncertainty about the future.
And, that uncertainty may have caused you to fast-track your earned wealth with some speculative crypto trading.
You may have also thought that by not reporting all your gains, you could keep that extra money in your pocket to stay wealthier.
Does any of that sound familiar?
If it does, you are not alone.
According to industry surveys, an estimated 46% of crypto traders didn’t even report their cryptos on their tax returns.
They believe the IRS won’t find them.
And it’s unfortunate, but they are wrong.
This post and my e-book Why Crypto Traders Are the Low-Hanging Fruit for the IRS have both been written for crypto traders to help them realize that hiding is not a successful strategy.
Tell me why crypto traders are the low-hanging fruit for the IRS.
Let’s begin by dissecting this.
The IRS views crypto traders as the easiest goal for them to target.
Why is that?
crypto trader
[Noun]
A trader, who is exchanging one cryptocurrency for another, buying and selling coins, and exchanging fiat money into crypto.
low-hanging fruit
[Noun]
The most easily achieved of a set of tasks, measures, goals, etc.
Because many crypto traders have hidden their income and a snowball effect began from there.
It’s hard getting back into compliance once you have hidden income.
You risk continuing to expose those errors each time you file with the IRS.
But I’m here to tell you. It’s not entirely your fault and that there are solutions.
Maybe you were afraid and didn’t know how to file, or perhaps you didn’t know where to turn for help?
Bookmark my e-book Why Crypto Traders Are Low-Hanging Fruit for the IRS to learn more and protect yourself.
IRS Crypto Crackdown On Crypto Traders
On July 26, 2019, the IRS began sending out educational letters to 10,000 taxpayers they suspected to be crypto traders who hadn’t reported cryptos properly. (1)
The letter recipients with whom I’ve spoken shared some interesting characteristics.
All of them had significant gains in 2017 with crypto assets worth over $1,000,000 in late 2017/early 2018.
They all had used one or more foreign exchanges.
One of the traders had only started purchasing cryptos in 2017 and not earlier.
None of them had filed a form 8824 (like-kind exchange) or form 8949 to report their crypto-to-crypto trades.
If they filed a 8949, it was only for crypto-to-fiat trades.
None of the traders had filed anti-money laundering forms FBAR or 8938.
If this sounds like you and you have immediate questions or concerns, please don’t worry.
We can help. Make an appointment at Donnelly Tax Law today to schedule a 30-minute consultation.
Or you can review our affordable crypto tax tools.
Most significantly, members of our CryptoTaxAudit will receive year-round defense against the IRS if you receive one of these audit letters while our member of our program.
This membership means that we defend you in an examination of your IRS crypto activity.
READ MORE: Avoiding the IRS Crackdown
How do crypto traders stay in virtual currency compliance if they get a Crypto IRS letter?
The first thing is, don’t panic.
But, urgent action should be taken.
I anticipated these letters in my e-book, Why Crypto Traders are Low-Hanging Fruit for the IRS.
Read this book to help you diagnose your situation.
There’s time to fix your exposure and avoid penalties, but you must be decisive.
You can also still get tax amnesty, or if you want to do it yourself, we have the Crypto Tax Fixer Package.
Otherwise, schedule a call on my calendar as soon as possible. We will not turn you away.
I have a team of people ready to fix your situation, but we need to start soon.
Start protecting yourself with
Remember to follow me on Twitter.
Footnotes:
- https://www.irs.gov/newsroom/irs-has-begun-send-ing-letters-to-virtual-currency-owners-advising-them-to-pay-back-taxes-file-amended-returns-part-of-agencys-larger-efforts
Samples of the three types of letters are listed in this IRS announcement.
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