Last week, the IRS began sending educational letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.
There are three versions of the letter, all of which aim to help these taxpayers understand their tax obligations and how to correct errors in reporting. Recipients are also directed to information on the IRS website that pertains to their situation, including forms, and schedules.
It is estimated that more than 10,000 taxpayers will receive these messages by the end of August.
More information about the tax status of virtual currency and how general federal tax principles apply to virtual currency transactions is available here. Further guidance will likely follow as the IRS continues to consider feedback from taxpayers and practitioners.