IRS Letter 6174-A: Uncle Sam is Officially on the Hunt for People Not Properly Reporting Crypto Transactions


Not to be those people…but we told you so.

Cryptocurrency Tax Letter 6174-A: IRS on the Hunt for Virtual Currency Revenue

The Internal Revenue Service is on the hunt for taxpayers who haven’t “properly” reported cryptocurrency transactions. The agency sent out “Letter 6174-A” — and it’s a chance for virtual currency holders to get their token tax house in order.

It begins:

Why we’re writing to you We have information that you have or had one or more accounts containing virtual currency but may not have properly reported your transactions involving virtual currency, which include cryptocurrency and non-crypto virtual currencies.

What you need to do After reviewing the information below, if you believe you didn’t accurately report your virtual currency transactions on a federal income tax return, you should file amended returns or delinquent returns if you didn’t file a return for one or more taxable years. If you do not accurately report your virtual currency transactions, you may be subject to future civil and criminal enforcement activity. For more information, visit www.irs.gov/filing.

The notice goes on to remind holders that cryptocurrencies — Bitcoin, Ether, alt-coins — are considered property and must be treated as such for tax filing purposes.

If you’ve received this letter, then you’re on the IRS’ radar and may need to take action.

Luckily, the IRS is giving people time to make corrections on their own. The letter says there’s no need to respond, but advises recipients to file amended or delinquent returns.

If you were sent IRS Letter 6174-A, get in touch with a cryptocurrency tax lawyer immediately!

If you were sent IRS Letter 6174-A, get in touch with a cryptocurrency tax lawyer immediately!

How to Report Cryptocurrency Transactions on Your Taxes

Reporting virtual currency transactions — regardless if you’ve received a payee statement for the transaction or not — is a must. That goes for both domestic and foreign transactions.

In Letter 6174-A, the IRS also delineates schedules for the remittance of crypto-related gains.

Schedule C: Independent Contractors Paid in Virtual Currency

  • Must report gross income derived from virtual currency payments based on the fair market value, in US dollars, at the time of receipt.
  • Income is subject to the self-employment tax.

Schedule D: Trading Virtual Currencies and Using It as Payment Tender

  • Any party that accepted, exchanged, or received cryptocurrency to pay for a product or service must report the gain via schedule D.
  • Amounts are based on the fair market value, in US dollars, at the time of receipt.
  • Parties that conduct transactions on exchanges and wallet platforms are responsible for keeping track and reporting gains and losses.

Schedule E: Supplemental Income Gains

  • Taxpayers that derive supplemental income from rental properties, estates, trusts, royalties, interest payments, partnerships, or corporations, in the form of virtual currency, must report said gains using Schedule E.
  • Amounts are based on the fair market value, in US dollars, at the time of receipt.
  • Some taxpayers in this category may also need to fill out Form 8582, Passive Activity Loss Limitations.

Extra Credit Reading: IRS Documentation on Cryptocurrency Tax Structures

Notice 2014-21

URL: www.irs.gov/pub/irs-drop/n-14-21.pdf

Content: Notice 2014-21 explains how the IRS treats virtual currency transactions as property transactions.

Connect with Cryptocurrency Tax Lawyer About Letter 6174-A

The Gordon Law Group is one of the few law firms in the country with a dedicated cryptocurrency tax law division. We’ve been rooted in the industry since its inception and have helped hundreds of businesses and individuals clear up virtual currency tax matters.

We know how the system works and what to say and do so our clients arrive at the best possible outcome.

The time has come where you must handle outstanding crypto tax issues, and we’re here to guide you through it.

Get in touch today to begin the conversation. The first consultation is on us. We work with individuals across the United States and around the world.

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