Technological advances have made it a challenge for taxing authorities to pursue those they believe are hiding money in order to avoid paying taxes — until recently, that is. The IRS has worked diligently to find ways to track people who own cryptocurrency in order to make sure they pay taxes on it. For this reason, some cryptocurrency owners, including some here in Massachusetts, could find themselves facing allegations of tax crimes.
The IRS tends to err on the side of caution when it comes to accepting and verifying an individual’s income tax returns. Some Massachusetts residents are already far too familiar with this fact since they have already had dealings with the agency in the form of audits or accusations of wrongdoing. In the recent past, the IRS has forged alliances with other countries in order to learn how cryptocurrency flows.
As a result, no less than 10,000 taxpayers across the country received communications from the IRS indicating that they may have taxable cryptocurrency. The IRS cautions those individuals to make sure they disclose this source of income when they file their income tax returns. Income tax forms will now ask about virtual currency, and taxpayers must answer honestly in order to avoid criminal charges.
In fact, an agency representative recently announced that another round of letters could go into the mail soon based on additional information. Tax crimes such as tax fraud and evasion have been around since the inception of the IRS, but as technology continues to improve, the agency is working diligently to keep up. For this reason, Massachusetts taxpayers may want to gain an understanding of the tax laws in order to make sure they do not violate them, especially if they own cryptocurrency.