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Despite Lack of Clarity, Cryptocurrency Investors Must Still Strictly Comply with Federal Tax Laws in 2020

Articles/News, Hot Topics

Posted on May 5, 2020 |

For cryptocurrency investors, the challenges of understanding how the Internal Revenue Code (IRC) applies to cryptocurrency transactions do not provide an excuse for non-compliance. As a result, as federal Tax Day approaches, individual and corporate taxpayers must ensure that they have a clear understanding of what they need to report on their federal returns. Contact Boston tax attorney Kevin E. Thorn today to get the answers you need and discuss your specific situation in greater detail. Please note that the Internal Revenue Service is actively conducting audits and sending IRS cryptocurrency audit letters in this area.

IRS Acknowledges that Cryptocurrency Investors’ Obligations are Unclear, But Still Intends to Pursue Violators

This is true even though the Internal Revenue Service (IRS) has acknowledged that its guidance has been insufficient to provide a clear roadmap for taxpayers who are seeking to comply with the law. As Forbes.com reported in February:

“[T]he Government Accountability Office (GAO) [recently] noted how the IRS could do better than both its 2014 and 2019 tax guidance. The GAO noted overall that the . . . IRS could do more to help taxpayers comply . . . and in its recommendations, also noted the IRS should make it clear that some of its 2019 guidance is not authoritative. The IRS disagreed with this recommendation; however, it did agree with the GAO that reporting obligations are still unclear that may result in virtual currency transactions going unreported.”

Mistakes on Returns Due July 15, 2020 Could Lead to Audits, Investigations and Penalties for Cryptocurrency Investors

Despite this lack of clarity, U.S. taxpayers must still accurately report and pay their federal income tax obligations related to cryptocurrency transactions when they file their returns on or before July 15, 2020. The IRS sent warning letters to thousands of cryptocurrency owners in mid-2019, and it has not changed its stance on enforcement since that time. Taxpayers who fail to accurately report their cryptocurrency-related tax obligations will be at risk for audits, investigations and penalties; and, as a result, those who have concerns should consult with a Boston tax attorney prior to filing their federal returns.

For more information about federal income taxes on cryptocurrencies, you can read: Cryptocurrency Taxes: The Ultimate Guide to Tax Consequences for Boston Taxpayers.

Contact Boston Tax Attorney Kevin E. Thorn, Managing Partner of Thorn Law Group

If you have questions or concerns about your cryptocurrency-related federal income tax obligations, we encourage you to contact us to arrange a confidential consultation with Boston tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group. Call 617-692-2989 to schedule an appointment, email ket@thornlawgroup.com or contact us online to tell us how we can reach you and a member of our firm will be in touch shortly.

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