The IRS isn’t happy that you aren’t reporting your crypto earnings

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Ah, cryptocurrency. Vocal advocates said it was un-taxable, private, unable to be regulated, able to bound country borders in a single transaction. “They,” whoever they were, were wrong. If you misreported your cryptocurrency gains on your taxes, the IRS is coming for what it’s owed.

That’s according to CoinDesk, who reports that the IRS is sending out “educational letters” to cryptocurrency holders advising them about possible owed taxes.

The IRS is going after your misreported crypto trades

The IRS treats cryptocurrency differently depending on if you’re using it primarily for trading, as if it was stocks or bonds, or if you use it as currency, as if you’re using it in place of legal tender (fiat) in a store. Either way, if you make money off crypto the IRS is going to want its cut, but it seems many crypto holders aren’t reporting things properly on their tax returns.

• CoinDesk saw some of the letters sent out, one of the taxpayers ended up owing nearly $3,900 for 2017 – $3,600 in taxes and another $200+ in interest
• The IRS said it has sent these letters to over 10,000 taxpayers that it identified as potentially owing taxes on their HODLed cryptocurrency holdings

While these letters are more to educate the taxpayers of their possible obligations, they’ll still have to provide documentation proving why they’re not liable to pay the alleged taxes.

Forewarned is forearmed, as they say, so if you’re new to the weird world of cryptocurrency, it’s worth checking up on your tax obligations. You wouldn’t want to get a whopping tax bill through the mail…

What do you think? Surprised the IRS is coming for your crypto earnings? Let us know down below in the comments or carry the discussion over to our Twitter or Facebook.

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Joe Rice-Jones

Maker, meme-r, and unabashed geek with nearly half a decade of blogging experience at KnowTechie, SlashGear and XDA Developers. If it runs on electricity (or even if it doesn't), Joe probably has one around his office somewhere, with particular focus in gadgetry and handheld gaming. Shoot him an email at joe@knowtechie.com.