Convertible virtual currencies have been around for a while now, and there are likely numerous Connecticut residents who have some in their financial portfolios. In 2014, the Internal Revenue Service released a statement saying all CVC-related transactions need to be reported when filing taxes. Up until now, the IRS has been relatively lax on enforcing this rule, but that is changing. It is said that the IRS will be purposefully targeting CVC users to ensure they are meeting their full tax liability.
Some people like to buy CVC and save it for a rainy day. Other people like to use it as their currency of choice. Any time a CVC is used in a sale, purchase or trade, the transaction has to be recorded and reported to the IRS. For people who use this currency regularly, that may seem like a significant imposition.
If the IRS believes a CVC user is failing in his or her duty to report his or her CVC usage, it can take the matter to court. However, the IRS generally will allow people to meet their tax obligations first before going that far. According to a recent report, the IRS plans to notify roughly 10,000 taxpayers of the need to report and pay taxes on their CVC transactions. About one-third of the letters state that the IRS knows about transactions not reported, while the remaining letters simply say that there is a question about transactions possibly missing from tax returns. Those notified will only have so long to respond before the IRS takes legal action.
Connecticut residents who find themselves being questioned about their CVC usage do not have to face the IRS alone. An experienced tax law attorney can be at one’s side, helping to resolve the matter as quickly as possible. Those who are not on the IRS’ radar about their CVC usage and who have questions about how to report virtual currency on their taxes can also seek legal guidance in order to ensure their filings are free from error.