The US Internal Revenue Service (IRS) began sending letters to thousands of Bitcoin and Altcoin owners in mid-July, who did not inform the authorities about cryptocurrency transactions. IRS letters contain instructions on how to pay taxes, interest and penalties.
IRS Commissioner Chuck Rettig stated:
“Taxpayers should take these letters very seriously and, if necessary, correct past declarations by paying taxes, interest and penalties.”
“Our goal is not only to comply with the law, but also to assist taxpayers so that they can fully understand and fulfill their obligations.”
As Bitcoinist previously reported, since 2017, the IRS has been asking Coinbase, the largest crypto exchange in the United States, for more than 14,000 customers who are US taxpayers.
Currently, the agency classifies Bitcoin and other cryptocurrencies as “digital currencies”. Thus, the purchase of Bitcoin is not a taxable event. However, the payment of a cryptocurrency for the purchase of a product or service is a taxable event.
The IRS notice of March 23, 2018 states:
“Digital currency transactions are taxable by law, as are transactions with any other property.”