Cryptocurrency investors beware — Uncle Sam wants his cut of your returns.
The Internal Revenue Service announced on Friday that had begun sending letters to taxpayers who trade virtual currency.
The agency warned that digital coin traders may have failed to report their investments properly — and they may owe money to the government as a result. The IRS began sending letters out last week, and expects to canvas more than 10,000 taxpayers by the end of August, it said.
“Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties,” IRS Commissioner Chuck Rettig said in a statement.
“The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations,” he added.
Those taxpayers in the IRS’s crosshairs had their names provided via “various ongoing IRS compliance efforts,” the agency said in its communique on Friday.
“The IRS will remain actively engaged in addressing non-compliance related to virtual currency transactions through a variety of efforts, ranging from taxpayer education to audits to criminal investigations,” the agency said.
Last year, Coinbase was ordered by a federal court to divulge thousands of accounts requested by the tax agency.
As the crypto market booms, virtual currency has become a focus for the IRS and other federal agencies looking to uncover criminal or illicit transactions.