IRS Sees 758% Spike in Crypto Tax Letters

A sharp increase in IRS letters, signaling a 758% rise within two months, targets U.S. cryptocurrency investors’ tax compliance. David Kemmerer of CoinLedger highlights the surge as part of enhanced regulatory measures. This move indicates a shift towards stricter oversight in the cryptocurrency space, potentially impacting how investors manage digital assets.

The Internal Revenue Service (IRS) has increased its focus on cryptocurrency taxation, evidenced by a 758% rise in warning letters sent to U.S. investors over the past 60 days. CoinLedger CEO David Kemmerer has indicated this trend amid concerns over new tax reporting requirements for digital transactions. This increase emphasizes the importance of accurate reporting and compliance with tax obligations for crypto investors.

IRS Increases Crypto Tax Letters by 758% in Two Months

New IRS Form 1099-DA, set to take effect, will demand detailed reporting from brokers, including cost basis data, giving the IRS greater transparency into digital asset transactions. This may significantly impact how investors report and manage their holdings, stressing the need for proactive tax management.

Community feedback reflects confusion and concern among crypto investors, as many believed their taxation efforts were compliant. The surge in letters highlights a broader enforcement trend anticipating further actions as the 1099-DA form implementation approaches. David Kemmerer emphasizes that even compliant investors might face issues without accurate documentation.

“We’re seeing a wave of confusion and fear among everyday crypto investors, many of whom made their best effort to report taxes accurately. With 1099-DA on the horizon, this kind of enforcement is only going to accelerate. The IRS has more visibility into crypto than ever before, but without accurate cost basis data, even compliant investors can get mistakenly flagged.” – David Kemmerer, CoinLedger News

Upcoming IRS Form 1099-DA and Its Market Impact

Did you know? The IRS initiated a substantial crypto tax enforcement drive in 2019. Today’s increase in warning letters reflects the most intense effort yet, with Form 1099-DA reinforcing the IRS’s expanding visibility into the crypto market.

According to CoinMarketCap, Bitcoin (BTC) currently trades at $107,142.42 with a market cap of $2.13 trillion. In the past 60 days, Bitcoin’s price rose by 13.44%, maintaining a market dominance of 65.03%. The circulating supply is 19,884,300 out of a maximum supply of 21 million, showing a 29.98% increase over the past 90 days.

Experts from the Coincu research team anticipate that the more stringent regulatory framework, bolstered by the upcoming 1099-DA requirement, could reshape compliance strategies for U.S. crypto investors. This may lead to increased overhead costs for brokers and heightened diligence among traders and investors to avoid unnoticed reporting discrepancies.