IRS warns 10,000 cryptocurrency holders they may have broken tax laws

the IRS warning more than 10,000 cryptocurrency holders that they may have broken federal tax laws a robert frank joins us with more on the news that I think really came out on Friday right Robert it did it came out on Friday and caused the instant reaction Saturday morning Bitcoin plunging Saturday following that announcement from the IRS that it was putting Bitcoin holders on notice about possible failure to pay taxes the currency down more than 5% before recovering mainly over the weekend but part of the concern is the tax liabilities the IRS plans to send what it calls educational letters to as many as 10,000 holders over the next month warning them of potential tax liabilities including of course any capital gains they may have acquired during the holding of Bitcoin there are three types of letters and one of them is pretty mild just ask them to review their returns the second a little stronger warning of possible non-compliance and the third says that for one or more tax years from 2013 to 2017 we have not received a return reporting your virtual currency transaction and that letter requires a response now the IRS won't comment this is the most interesting thing on how they received the names of Bitcoin holders since it's supposed to be all anonymous but last year coinbase that's the currency exchange notified about 13,000 customers that was releasing certain information after the IRS got a court order now the IRS arguing in that case there has been an explosion of billions of dollars of wealth in just a few years from Bitcoin with no reporting now the IRS launched a virtual currency compliance campaign last year to deal with non-payment of taxes and the agencies saying that virtual currency is an ongoing focus for IRS Criminal Investigation and the interesting thing about the IRS here is that they only put out a notice in 2014 telling Bitcoin holders that Bitcoin would be treated as a property which is taxable not as the currency which is not but they're now asking for information in returns before that in 2013 so a lot of Bitcoin holders here a little bit confused and probably not keeping tax records as they probably should have I mean it's so interesting that they were able to identify people given what you said it's the whole one of the appeals of Bitcoin is supposed to be anonymous it seems like an area that's ripe for tax fraud because of that very fact I I guess we didn't get an answer but I really wonder how the IRS is tracking that yeah and I think part of the panic is just the tax liability but Sarah to your point the bigger issue is hey wait we thought this was all anonymous we thought the beauty of Bitcoin is that no one knew who held it or how much and that the fact that the IRS could get that data on that many customers in the US that that I think is the bigger worry for Bitcoin holders they will I can imagine I can imagine some Bitcoin or crypto bulls Robert arguing it's one more step in institutionalizing this as a concept and that means it's good it could as a concept yes but as a currency no because remember the IRS has said look it's not a currency as far as we're concerned it is it is property and so I think if you're hoping that Bitcoin gets regulated as a currency at least with the IRS maybe not Commerce Department but at least the IRS has said no it's not a currency it's a property so that yes they're recognizing that people hold it and they're taxing it but they're not saying it's a currency you

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