After sending warning letters to crypto traders for missing out on filing their returns for the 2017 financial year, the IRS has migrated to now sending CP2000 notices.
While the previous letters were just about warning crypto traders and didn’t require a response, this time traders have 30 days to respond.
While the previous letters were about the IRS threatening crypto traders into paying taxes, this time the CP2000 notices are taking a different turn.
Chandan Lodha, co-founder of CoinTracker a tax software provider.
He explained more about the CP2000 notices and said:
A CP2000 notice means the IRS is informing you that a report from a financial institution you used has some discrepancies. That is, the figure you filed as your taxes differ with what the institution provided. The IRS concludes the letter by informing you the taxpayer what you owe, and you have 30 days to respond.
Discrepancies Brought About Due To Exchanges Issuing 1099-K Forms
According to Justin Woodward, TaxBit co-founder and attorney, the differences in the tax returns have been brought about by the use of 1099-K forms. The latter is used by merchants to report their incomes, leading to all the transactions being reported as revenue. According to Woodward, because of how the exchanges report their transactions, it has led to the IRS issuing out the CP2000 letters. Moreover, not using 1099-B forms is also leading to the issuance of the CP2000 notices.
Besides the above, Woodward explained further saying:
Crypto traders receiving the CP2000 notices are those who their exchanges filed their 1099-K forms. However, the traders themselves didn’t file an IRS 8949 form in 2017. So the IRS is filtering through its list and sending these notices to traders.
While the above depicts the traders are going through, for Woodward his firm is in place to help crypto traders with filing their 8949 forms to clear the issues. His firm has already helped many of the traders caught up in the CP2000 notice wed by filing their 8949 forms and submitting them to the IRS. Although the IRS is high on its heels chasing after its revenue, it has not published new tax guidelines for the sector. The above depicts the situation on the ground and shows how confused crypto traders are when it comes to filing taxes.