IRS starts sending warning letters to over 10K cryptocurrency holders

The IRS is sending letters to more than 10,000 people who may have failed to report and pay taxes on income related to cryptocurrency transactions.

“Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties,” IRS Commissioner Chuck Rettig said in a statement Friday. “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics.”

{mosads}The IRS said it began sending the letters last week and will continue through the end of August. Taxpayers will receive one of three versions of the “educational letter,” which strives “to help taxpayers understand their tax and filing obligations and how to correct past errors,” according to the IRS.

One version of the letter asks taxpayers to sign a statement under penalty of perjury that says they have complied with tax regulations, The Wall Street Journal reported.

Coinbase, a site used to buy and sell bitcoin, has provided the IRS with data, under federal order, from approximately 13,000 accounts. An IRS spokesperson declined to tell the Wall Street Journal whether the letters were associated with that data, which was provided to the agency in March.

The letters are part of a larger IRS effort to educate taxpayers on their responsibilities if they choose to use cryptocurrency, or virtual currency, according to the agency. The IRS announced a Virtual Currency Compliance campaign last year to target tax filings on cryptocurrency “through outreach and examinations of taxpayers.”