The IRS recently announced that they will be sending letters to 10,000 taxpayers regarding missing cryptocurrency transactions from their returns. There are three notices being sent out, most typically CP-2000-series notices. These are the same type of notices being sent out to persons who leave off stock trading.
Many ordinary persons that invested and lightly traded various types of coins since 2017 were misled by various online blogs (as well as their own judgement) that nothing is required to be reported to the IRS unless the coin is sold for “fiat,” or back into ‘legitimate’ currency, such as USD. This was false.
If you are trading corn for wheat, cows for chickens, gold for silver, or Ripple for Litecoin, you must report this sale on form 8949, same as if you were actively trading stocks in the stock market. The principle of like-kind exchange does not apply here.
None of this is professional advice, however, we do recommend that you employ someone with experience for guidance if you have left off crypto trading from your return. We have already been approached since June with several persons that have been contacted by the IRS regarding this matter and have helped them reach a resolution with the IRS.
It is better to amend your return prior to the IRS flagging it, as additional “substantial” or “material understatement” penalties are assessed by the IRS in instances where the IRS catch the missing transaction first.
Please feel free to contact us below for assistance in this matter. We generally work 100% online and have clients in all 50 states (with IRS registration and express state permission for all 50 states).