In 2014 the IRS made clear that bitcoin and similar cryptocurrencies are not money for tax purposes; they are property. As such, they have a tax basis, and the transfer of cryptocurrency for value may generate taxable gain or loss. It's not clear that the cryptocurrency owners have been complying with the tax laws.

The IRS obtained a court order for the customer data held by Coinbase, a cryptocurrency exchange. Data was provided on all customers who had transactions worth $20,000 or more from 2013 through 2015. About 13,000 customer accounts were documented.

That data may have been the source for a series of warning letters that the IRS began sending to some 10,000 cryptocurrency owners in July. Three versions of the letter were made public. The mildest one outlines the tax requirements for owning and exchanging cryptocurrency. The most severe asks the recipients to declare under penalty of perjury that they are in compliance with all tax law requirements.

IRS Commissioner Chuck Rettig said, "Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency."

(August 2019)
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