Coinbase users who have not been diligent in reporting their crypto holdings to the US Internal Revenue Service (IRS) may soon become direct targets of the authorities as warned by the Tax Law Offices of David W. Klasing.
Crypto Tax Reporting Negligence and The Remedy
According to the Tax consultants, many people who hold cryptocurrencies or are engaged in crypto-related activities ignore their tax obligations which may land them in trouble owing to increasing IRS interests.
“If you have failed to report holding Bitcoin or other virtual currencies on your past returns or filed an incomplete or misleading picture of your cryptocurrency holdings, the time to act to correct this is now,” the law firm said in a statement, adding that, “Once an audit or criminal tax investigation has begun, it will be too late to amend your returns.”
As a means to avoid the impending sanctions, the firm advised concerned cryptocurrency users to “take advantage of a voluntary disclosure program,” while taking note that Returns can be “safely amended only where small amounts of tax went unreported.”
Coinbase Customers on IRS Radar
The warning from the Tax Law Offices of David W. Klasing is directed primarily to Coinbase users following the recent revelation the exchange made in its transparency report. Per the reports, Coinbase noted that it got served a sum total of 1,914 government requests for customer’s data in the first half of 2020.
Of these subpoenas, the exchange detailed that about 1,113 of the subpoenas or 58% came from the United States of America alone. From this, the tax lawyers believe the IRS might have requested the data for the “express purpose of checking it against its own taxpayer data and looking for discrepancies where holdings on Coinbase have not been reported on taxpayers’ returns.”
Hopefully, the move will not result in a legal war between Coinbase users and the IRS as this precedence has been set before, with a Coinbase user suing the IRS over the seizure of crypto records.