The IRS has begun sending out educational letters to more than 10,000 cryptocurrency users reminding them that they need to be including their crypto capital gains and losses on their tax forms.

The users have been collected from various compliance measures, including the collection of records from Coinbase after their summons from the IRS in 2018 for 13,000 customer records.

The IRS letters will be referenced as 6173, 6174 or 6174-A, and strive to help taxpayers understand their tax and filing obligations and how to correct past errors.

This will include reference to previous guidance in Notice 2014-21 that clarified that cryptocurrencies was to be treated as property and so subject to capital gains.

It will also note that taxpayers may have a requirement to amend prior year tax returns to include any cryptocurrency transaction and report the capital gains or losses, which may increase their tax liability. This is especially true for the 2017 tax year that saw large increases in Bitcoin and other crypto prices and record annual gains.

Since Bitcoin and other cryptocurrencies are subject to capital gains, taxpayers are responsible for calculating and reporting their gains. There is no de minimis as with fiat currencies and so all transactions must be included. This is often a record-keeping burden on tax payers, as cost basis is not always known when crypto is moved between wallets.

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