The IRS has begun sending out warning and action letters to suspected cryptocurrency holders similar to the 10,000+ letters they sent at this time last year (August 2019).
are two different variations that alert suspected crypto holders of their tax reporting requirements. Letters 6174 and 6173
The below images have been taken from
. As you can see, a number of individuals are receiving variations of these letters. Reddit 6174 Cryptocurrency Letter
The variations of letter 6174 are
no action letters, meaning they do not require a response. If you have met all the crypto tax filing obligations outlined in the letter, you have nothing to worry about. The letters are simply designed to educate the recipient.
If you have not met all of your filing requirements, you should do so and
that did not include your crypto-related gains, losses, and income. amend any prior years tax returns 6173 Cryptocurrency Letter
Letter 6173 is more serious, and it requires a response. You are required to respond to the letter by the date specified within. If you do not respond to the letter, your tax account will be examined by the IRS.
If you received Letter 6173, you have some options for responding:
Properly file the missing tax returning including your cryptocurrency transactions Amend your prior years tax return if you did not properly report your cryptocurrency transactions Or, if you believe you filed your cryptocurrency taxes correctly, respond to the IRS with a written letter explaining how you arrived at the income reported Crypto Taxes Overview
The IRS treats cryptocurrencies as property for tax purposes, not as currency. Just like other forms of property—stocks, bonds, real estate—you incur a tax reporting requirement when you sell, trade, or otherwise dispose of your cryptocurrency for more or less than you acquired it for.
For example, if you purchased 0.1 bitcoin for $2,000 in June of 2020 and then sold it two months later for $3,000, you would have $1,000 of
. This gain needs to be reported on your tax return, and depending on what tax bracket you fall under, you pay a certain percentage of tax on the gain. Rates fluctuate based on your tax bracket as well as depending on whether it was a short term vs. a long term gain. This applies for all cryptocurrencies. capital gain
Alternatively, if you sold your cryptocurrency for less than you acquired it for, you can write off that
to save money on your crypto taxes. capital loss
We discuss the detailed mechanics of crypto taxes in our blog post,
. The Complete Guide to Cryptocurrency Taxes Cryptocurrency Tax Software
CoinLedger is a
platform built to automate the entire crypto tax reporting process. Tens of thousands of crypto and bitcoin investors from all over the world use the platform today to handle their tax reporting. cryptocurrency tax software
By integrating with major exchanges and platforms, CoinLedger allows users to import their historical transactions directly into their account. Once this data is imported, users can generate
as well as an auto-filled Form 8949 with the click of a button. capital gains and losses reports
The tax reports that CoinLedger generates are based on your historical data and can be taken to your tax professional or imported directly into your preferred tax filing software like
or TurboTax TaxAct .
You can import all of your transactions and get a preview of your capital gains and losses completely for free with CoinLedger. Learn more about how it works here.
Disclaimer: This guide is provided for informational purposes only. It is not intended to substitute tax, audit, accounting, investment, financial, nor legal advice.