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PILLA TALKS TAXES - Featured Article
_________________________________________ 

VIRTUAL CURRENCY OWNERS CAN'T HIDE

IRS Already Has Thousands of Names

by Daniel J Pilla  

 

For years I’ve been arguing with the owners of crypto-currency, such as Bitcoin, also known as virtual currency, over: 1) whether gains derived from trading in such a currency are taxable, and 2) whether, in any event, the IRS can find out whether one traded in virtual currency. 

As to question 2, the IRS did find out because the agency served summons on various virtual currency clearing houses as part of their ongoing compliance initiative. As a result, starting the last week if July, the IRS will be sending letters to virtual currency owners who potentially failed to report income and pay the tax from virtual currency transactions or did not report their transactions properly. 

According to the IRS, “By the end of August, more than 10,000 taxpayers will receive these letters.” See: IRS News Release IR-2019-132 (July 26, 2019). IRS Commissioner Chuck Rettig warns that “Taxpayers should take these letters very seriously.” A copy of IRS Letter 6173 is attached following this article. 

As to question 1, as far as the IRS is concerned, virtual currency is property and is to be treated like any other property for tax purposes. That is, if you buy virtual currency for X dollars, and sell it for X-plus, the profit is taxable income. In 2014, the IRS issued Notice 2014-21, addressing the virtual current issue. Question 1 of the Frequently Asked Questions addressed in the notice reads: 

Q-1: How is virtual currency treated for federal tax purposes? A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. 

I said repeatedly that the IRS would not look the other way on this issue. As far as the agency is concerned, any “accession to wealth” is taxable, and profit from trading in such currency is no exception. Now is the time to get help if you misreported for failed to report virtual currency trades.

 

This is  an article from the July 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

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ARTICLES FOUND IN THE LATEST 

PILLA TALKS TAXES ISSUES:

JULY 2019

HOW TO AVOID AN ASSESSMENT
OF THE TRUST FUND RECOVERY PENALTY
    Excerpt Dan's upcoming new book

 

DEMOCRAT CANDIDATES TARGET TRUMP'S TAX LAW
    Result? Middle Class Tax Hikes!

 

STATE WORKER RECLASSIFICATIONS
CAN BE APPLIED RETROACTIVELY
    Ninth Circuit Opens the Doors for Massive Liabilities

 

VIRTUAL CURRENCY OWNERS CAN'T HIDE
IRS Already Has Thousands of Names

  

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

  



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