The U.S. Internal Revenue Service (IRS) sent letters to crypto holders demanding to repay large debts to the state.
This is the notification of the CP2000 form – it is provided for cases where the IRS identifies discrepancies between the information provided by taxpayers and its own data. The receipt of such letters was reported by some users of the cryptocurrency exchange Coinbase.
One of CryptoTrader.Tax’s clients said the IRS accused him of underpaying his 2018 income and demanded to pay $127,000 in taxes and fines. According to the agency, he did not include his investments in cryptocurrency in the declaration.
The statement noted that over the past two days, they have been contacted by dozens of people who have received the same notice from the service.
The company suggests that it is nothing more than a problem caused by Coinbase. They use form 1099-K instead of 1099 or 1099-B.
David Kemmerer who is CEO of CryptoTrader.Tax noted that 1099-K was not intended for cryptocurrency exchanges. It was designed for platforms where payments are made directly from third-party merchants such as Uber, Lyft or Etsy.
A similar incident in the UAE
The UAE revenue service reacted the same way when trading first became possible in their country too. It was a relatively new thing as UAE’s religion prohibits speculation, so adding something as speculative as CFDs was definitely something new to the country. After some time CFD trading in the United Arab Emirates has become a very popular activity.
These letters from the revenue service were common for UAE investors and we can see some parallels to the United States.
Not the first time the IRS does this
We should also note that this is not the first time cryptocurrency traders have received messages from the IRS. In July 2019, the service demanded to report the income from operations with digital assets, and a month later – to specify the exact amount of unpaid funds in the budget.
We can recall that in the first transparency report Coinbase reported requests for user data from the IRS in order to find discrepancies with their information.
What does the IRS do?
The IRS is an office that is part of the U.S. Treasury Department and one of the world’s most effective tax management organizations. In the fiscal year of 2012, the IRS collected revenue of more than $2.5 trillion and processed more than 237 million tax returns.
The IRS spent 48 cents for every $100 collected in fiscal 2012.
To provide America’s taxpayers with the highest quality of service, helping them understand and fulfil their tax obligations, and apply tax laws fairly to all is the main mission of the IRS.
In the United States, Congress enacts laws and requires taxpayers to comply with these laws.
The role of the taxpayer is to understand and fulfil its tax obligations.
The role of the IRS is also to help most law-abiding taxpayers comply with tax laws and to ensure that taxes are rightly owed to a minority of taxpayers who are unwilling to comply with the law.
Legal powers
The IRS is created to perform the duties assigned to the Secretary of the Treasury under Section 7801 of the U.S. Internal Revenue Code. The Minister is given all the authority to comply with and enforce tax laws, as well as the authority to establish the IRS to oversee compliance with these laws. The IRS was created on the basis of this legislative grant.
Section 7803 of the Tax Code provides for the appointment of the Director of the IRS to organize the enforcement and enforcement of tax laws. Charles Rettig is the current Chairman of the IRS.
