IRS Notices Sent to Virtual Currency Traders

On July 26, 2019, the Internal Revenue Service (“IRS”) published a release announcing that it has begun to send notices to virtual currency traders that potentially failed to: (i) report income and pay the resulting tax from virtual currency transactions; or (ii) properly report their virtual currency transactions. In its release, the IRS noted that, by the end of August 2019, more than 10,000 notices will be issued to relevant taxpayers, the names of whom were obtained through various ongoing IRS compliance efforts.

Regarding this initiative, IRS Commissioner Chuck Rettig urged taxpayers to take the notices very seriously, to review their tax filings and, when appropriate, amend past returns and pay back taxes, interest and penalties. Commissioner Rettig also stated that “[t]he IRS is expanding [its] efforts involving virtual currency, including increased use of data analytics,” as virtual currency is an ongoing focus area for IRS Criminal Investigation.

Last year, the IRS announced a Virtual Currency Compliance campaign (the “Campaign”) to address tax noncompliance related to the use of virtual currencies through education, outreach and taxpayer examinations. As part of the Campaign, the IRS stated it will continue to consider and solicit taxpayer and practitioner feedback, as the IRS anticipates issuing additional legal guidance in this area in the near future.