The U.S. Internal Revenue Service (IRS) on Friday said it was sending thousands of letters to taxpayers who failed to report virtual currency transactions, saying they may owe taxes.
“Taxpayers who do not properly report the income tax consequences of virtual currency transactions are, when appropriate, liable for tax, penalties and interest,” the agency said in a statement. Over 10,000 letters to taxpayers will be sent by the IRS. The IRS has said that it considers cryptocurrencies such as bitcoin property for federal tax purposes, meaning any profits or losses from their sale should generally be reported as capital gains or losses. In some cases, the IRS says taxpayers could be subject to criminal prosecution.
Last year, popular trading platform Coinbase alerted 13,000 customers that it was complying with a court order to provide the IRS with information on accounts worth at least $20,000 from the years 2013 to 2015. The IRS treats all virtual currencies , including bitcoin, ethereum and XRP, as property under U.S. tax law. The cryptocurrency tax issue has gained more attention recently in light of Facebook’s proposed digital currency Libra.