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IRS Sending Warning Letters to More Than 10,000 Cryptocurrency Holders

IRS has started sending letters to more than 10,000 cryptocurrency holders, warning they may have broken federal tax laws.

No specifics about the possible violations IRS was reviewing, but those holding digital currencies could be subject to a variety of taxes, especially on capital gains.

The IRS letters come as bitcoin, the world’s most popular cryptocurrency, has ridden a new wave of optimism in recent months. In mid-July, bitcoin topped $12,000, more than three times its value at the end of 2018. Investors, speculators and Facebook Inc. have extolled the potential of digital currencies.

At the same time, use by drug dealers and other nefarious actors has marred its reputation. The IRS has expressed worries about the ability of digital currencies to promote tax evasion.

Among the possible taxes: If an investor sells a cryptocurrency after holding it longer than a year, the profits are typically long-term capital gains.

The tax rate is 0%, 15%, or 20%, plus a 3.8% surtax in some cases, depending on the owner’s total income.

Sales of stock shares must generally be reported on Form 1099-B to the IRS by the brokerage firm.

Original Story at WSJ.

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