IRS Sending Out Cryptocurrency Warning Letters
According to the IRS, cryptocurrency like Bitcoin is treated as property, not money. Notice 2014-21. Therefore, taxpayers who use it buy things or convert it to dollars are treated as having sold it, and have to recognize gain or loss based on what they receive when the dispose of it compared to what they paid for it.
In 2016, only 802 individual income tax returns reported cryptocurrency transactions out of the 132 million filed electronically. The IRS is clearly concerned about a lack of knowledge and/or intentional lack of compliance in this area. Late last month, it announced it is sending 10,000. . .