IRVINE, Calif., Feb. 20, 2020 /PRNewswire/ -- Cryptocurrency is one of the hottest topics in IRS civil and criminal tax enforcement. The IRS has been very vocal about its willingness to criminally investigate and prosecute taxpayers who are willfully noncompliant in reporting such cryptocurrency income. This article explores considerations for taxpayers looking to come into "crypto-compliance".
The updated Form 1040 for 2019 now includes a question on Schedule 1 inquiring as to whether the taxpayer received, sold, sent, exchanged, or otherwise acquired a financial interest in virtual currency in 2019. It serves as a glaring notice to taxpayers that the IRS is holding them accountable to accurately and truthfully report cryptocurrency transactions.
The IRS has not been shy about using their toolbox of investigatory weapons to weed out those who are not truthfully reporting cryptocurrency transactions. In 2016, the IRS fought tooth and nail in federal court to demand records from Coinbase, a California-based virtual currency exchange. In that case, the IRS was not even looking for any one taxpayer, specifically. The Service simply issued a summons for a mass amount of data on Coinbase's customers. Other coin brokerages are thought to have also received John Doe Summonses.
The IRS Criminal Investigation unit has made it known that virtual currency tax enforcement is one of their top priorities for 2020 and beyond.
If you are under audit and have substantial unreported cryptocurrency transactions in your fact pattern, you are facing an eggshell audit and should hire a criminal tax defense attorney to represent you.