Once an IRS investigation or audit is opened, it's too late to make amends, warn tax lawyers.
The Tax Law Office of David W. Klasing, a boutique California tax firm, has issued a public release warning investors that the United States Internal Revenue Service is getting serious with Coinbase users.
The firm's dual-licensed tax lawyers and capital allowance specialists say they have been tracking an increase in IRS enforcement activity against Coinbase users who fail to comply with their tax and reporting requirements.
Evaders can "end up facing serious civil and criminal trouble down the line," the firm warns in its news release on Nov. 11, adding:
“If you have failed to report holding Bitcoin or other virtual currencies on your past returns or filed an incomplete or misleading picture of your cryptocurrency holdings, the time to act to correct this is now. Once an audit or criminal tax investigation has begun, it will be too late to amend your returns or take advantage of a voluntary disclosure program.”
Coinbase released a transparency report this October, which the law firm says should “serve as a major wake-up call” to the exchange's users. That report showed clearly that both the IRS and its Criminal Investigation Unit, as well as the FBI and CIA, were filing information requests with the exchange.
“This data [in the October report] makes it clear that the IRS is requesting information from Coinbase for the express purpose of checking it against its own taxpayer data and looking for discrepancies where holdings on Coinbase have not been reported on taxpayers' returns.”
As previously reported, U.S. courts have thus far upheld the IRS's authority in summoning comprehensive data and financial records as part of their investigations into individual Coinbase users' tax liabilities.