Contact Us
+1 (940) 334-1008

Cryptocurrency Tax Notices

Cryptocurrency, the thrilling world of innovation and financial opportunities, holds a hidden challenge—tax obligations. As the Internal Revenue Service (IRS) sharpens its focus due to a staggering 75% non-compliance rate in cryptocurrency reporting, investors and enthusiasts find themselves navigating treacherous waters. In this guide, we unveil the complexities of tax notices, offering insights and steps […]

By hunain
06 Feb, 2024

Cryptocurrency, the thrilling world of innovation and financial opportunities, holds a hidden challenge—tax obligations. As the Internal Revenue Service (IRS) sharpens its focus due to a staggering 75% non-compliance rate in cryptocurrency reporting, investors and enthusiasts find themselves navigating treacherous waters. In this guide, we unveil the complexities of tax notices, offering insights and steps to ensure your compliance and peace of mind.

Understanding the Landscape of Cryptocurrency Tax Notices

Cryptocurrency tax notices revolve around underreporting or non-reporting assets. The three main notices—6173, 6174, and 6174A—each carry unique implications, requiring different responses.

1. 6173 Notice and 6174A Notice

These notices are primarily informational, informing you of on-chain cryptocurrency transactions. No immediate action is needed; they suggest filing amended returns if discrepancies arise.

2. 6174 Notice

Unlike the informational notices, a 6174 notice demands a timely response. Failure to address it promptly may lead to escalated tax notices, emphasizing the need for a careful review.

Step-by-Step Instructions to Responding Effectively to Cryptocurrency Tax Notices

When faced with a tax notice, take these steps to navigate the complexities and ensure compliance:

1. Contact Your CPA

Upon receiving a tax notice, your first move is to reach out to a Certified Public Accountant (CPA) experienced in cryptocurrency taxes. They guide you through the necessary steps.

2. Detailed Review with Your CPA

Collaborate with your CPA to review the notice thoroughly. Identify the type of notice and determine the appropriate response based on your circumstances.

3. Update Cryptocurrency Accounting

Adjust your cryptocurrency accounting based on the notice. Work closely with your CPA for accuracy, proper documentation, and diligence in reporting.

4. Amend Prior Year Tax Returns

After analyzing the notice, amend prior year tax returns or file delinquent returns. Bringing filings up to date is crucial to rectify any omissions related to cryptocurrency transactions.

5. Craft a Thoughtful Response

If a response is necessary, work with your CPA to craft a tailored and thoughtful reply. Responses vary based on circumstances, ensuring a professional and effective response.

The Educational Nature of Tax Notices

Not all tax notices are punitive; some serve an educational purpose. The IRS aims to increase overall tax compliance, sending letters to both compliant and potentially non-compliant taxpayers, and educating them about reporting obligations in the cryptocurrency space.

Related Posts

Feb 02. 2023

The Difference between CPAs and Accountants: A Comprehensive Guide

It's not uncommon to mix up the roles of Certified Public Accountants (CPAs) and Accountants. Although they may sound similar, the two professions are different in terms of their expertise, training, and the services they provide. In this article, we'll delve into the key differences between CPAs and accountants, and the specific things that a […]
Jun 09. 2023

Your Guide To Crypto Tax Calculation

Cryptocurrencies have gained significant popularity in recent years, with more individuals and businesses embracing digital currencies as a medium of exchange. The crypto market is expanding. Investors and traders must understand their taxation requirements. This article explains the need to calculate crypto tax on digital currencies. It also provides a detailed approach for correctly computing […]
Jul 13. 2023

Challenges & Solutions in Crypto Transactions

In this article, we will explore the challenges faced in auditing cryptocurrency transactions in 2023 and discuss potential solutions to overcome these obstacles.
Jul 13. 2023

Stay Ahead with Crypto Accounting Tools

In this article, we will discuss the significance of cryptocurrency accounting software and present a list of the top choices available in the market.
1 2 3 7
Reach us
+1 (940) 334-1008
hello@aurumfsg.com
5955 Alpha Rd, Suite#102, Unit#5114, Dallas, TX 75240
Join Our Newsletter

    * Will send you weekly updates for your better tool management.
    2023 | Aurum Financial Strategic Group
    All right reserved