In recent months, the Internal Revenue Service (IRS) has significantly increased its scrutiny of cryptocurrency investors. The volume of warning letters sent by the IRS surged by 758% over the past two months, as reported by Reuters on May 16, 2024.
These letters alert recipients about potential discrepancies in their tax filings related to cryptocurrency holdings. Some letters serve as educational reminders, while others require amended returns or explanations.
Starting January 1, 2025, brokers must report digital asset sales on Form 1099-DA. This will expand in 2026 to include gain or loss and basis information. Experts advise cryptocurrency holders to take these IRS warning letters seriously, as per the Financial Times.