A California tax firm, the Tax Law Office of David W. Klasing published a release today that warned cryptocurrency holders about an uptick in enforcement activity from United States Internal Revenue Service (IRS) against the cryptocurrency exchange Coinbase users who do not properly report their taxes and meet with other tax compliances. According to the firm:
…Many people who hold cryptocurrency still do not realize, or simply ignore, their tax and reporting requirements and can end up facing serious civil and criminal trouble down the line
The firm’s dual-licensed tax lawyers and capital allowance specialists said that they have been tracking an increase in this IRS enforcement activity. The firm also urged investors to act now and further said:
If you have failed to report holding Bitcoin or other virtual currencies on your past returns or filed an incomplete or misleading picture of your cryptocurrency holdings, the time to act to correct this is now. Once an audit or criminal tax investigation has begun, it will be too late to amend your returns or take advantage of a voluntary disclosure program.
Last month, Coinbase published a “transparency report” that revealed how it has received 1,914 “legitimate government” requests this year. These requests mainly came in the form of subpoenas and sometimes included search warrants and court orders. About 90% of these “transparency” requests were sent from the US, the UK, and Germany, and others, with agencies in the US sending a bulk of it with 1,113 requests or 60% of the total.
According to the firm though, the Coinbase report should “serve as a major wake-up call” to the exchange’s users who have failed to report cryptocurrency held in “this or another exchange” in years past. The firm pointed out the data in the report that showed that the IRS, and its Criminal Investigation Unit, has been one of the top receivers of information from Coinbase, alongside the FBI and CIA.
This data makes it clear that the IRS is requesting information from Coinbase for the express purpose of checking it against its own taxpayer data and looking for discrepancies where holdings on Coinbase have not been reported on taxpayers’ returns.
