The IRS Crypto Clock is Ticking
Did you receive an IRS Virtual Currency Tax Letter last month? If so, the deadline for your reply is here.
Letter 6173 Next Steps
Taxpayers who received Letter 6173 “Reporting Virtual Currency Transactions” must reply or request an extension of time to reply by the “Respond By” date listed at the top of the letter. The IRS began sending out these letters on July 16, meaning that the 30 day window to reply begins on a rolling basis now through the end of August. Letter 6173 requires immediate action under one of the following scenarios:
Delinquent Returns: If you failed to file one or more income tax returns between tax years 2013 through 2017, file the delinquent returns and report your virtual currency transactions as soon as possible. For more information see www.irs.gov/filing.
Amended Returns: If you made a mistake on your income tax return, such as not reporting your virtual currency transactions or incorrectly calculating your income, gain, or loss; you can file an amended return. For more information, visit www.irs.gov/forms-pubs/about-form-1040.
Statement of Facts/Certification: If you believe you followed all tax and information reporting requirements relating to your virtual currency accounts, mail or eFax the following to the address or eFax number shown at the top of your letter:
- A statement of facts explaining your position. Include a complete history of previously reported income from your virtual currency transactions. Explain the actions you took to become compliant with U.S. reporting requirements and provide copies of previously filed documents that confirm your compliance.
- Your contact information, including your telephone number, complete address, and the address where you receive mail (if different).
- The following statements with your signature and date: “I, [fill in name], declare under penalties of perjury that I have examined this entire document, including all attachments and accompanying statements, and that the enclosed is true, correct, and complete. I also understand with respect to any submission that the IRS reserves the right to make further contacts with me and my representatives to clarify any written explanation or any other documents. Statements and documents sent under this option will be checked against information received from banks, financial advisors, and other sources for accuracy.”
Letter 6174 & 6174-A Next Steps
Taxpayers who received Letter 6174 were identified by the IRS as having one or more virtual currency accounts, but who may not have known the requirements for reporting transactions involving virtual currency.
In contrast, taxpayers who received Letter 6174-A were viewed by the IRS as having one or more virtual currency accounts, who may have not properly reported underlying transactions in those accounts for federal income tax purposes.
As applicable, replies to either Letter 6174 or 6174-A should be made immediately.
Note, since the IRS still has not issued updated tax guidance on cryptocurrencies, taxpayers who received Letter 6173 are certifying under penalty of perjury as to the accuracy of their tax calculations on virtual currency transactions where the rules for such calculations have not yet been formalized. At best, this is an uncomfortable position for a taxpayer to be placed in.
Lumina’s comprehensive crypto-native accounting platform is trusted by leading investment funds, enterprises, and professionals who demand an institutional-grade solution. Learn more at https://www.lumina.app.
Disclaimer: Lumina does not provide legal, tax, investment, or other professional advice. Please consult your own legal, tax, or accounting professionals for advice on compliance with applicable state and federal laws. This post is provided for informational purposes only, and is not intended to substitute for professional tax, accounting, audit, or legal advice. Information provided on Lumina is subject to change without notice.
