Earlier this year, the IRS had sent letters to 10,000 cryptocurrency holders. The Co-founder of Cointracker, Chandan Lodha, said that the refunds could signal that the tax agency is eager to demonstrate that those who pay taxes on their crypto will not be punished.
IRS warned crypto holders to get compliant
When IRS had sent letters to 10,000 individuals to file taxes on their crypto trades, it was suspected that the IRS got the details of the individuals from Coinbase. In 2017, the IRS had filed a lawsuit against Coinbase, and the exchange was ordered to hand over account information of over 13,000 cryptocurrency holders.
Many from the crypto community considered those letters as a warning from the IRS to get complaint. The letters suggested crypto holders file amended returns if they have failed to report correct transactions in the past.
Most of my clients who received these were early Coinbase users. They've gone out to some big fish, but also to some smaller holders too.
It seems as if this is a warning to everyone to get compliant as quick as you can while the IRS is still feeling somewhat forgiving 🙂
— Crypto Tax Girl (@CryptoTaxGirl) July 26, 2019
IRS officials say “like-kind” exemption does not apply to crypto transactions.
Suzanne Sinno, an attorney in the IRS Office of the Associate Chief Counsel, and Christopher Wrobel, an attorney in the Office of the Associate Chief Counsel (IRS) said that like-kind exemption does not apply to the cryptocurrency transactions. A like-kind exchange is a transaction that occurs between two similar assets and does not incur capital gains tax.