This is the best tl;dr I could make, original reduced by 74%. (I'm a bot)
At the time, IRS Commissioner Charles Rettig said U.S. taxpayers should take the warning letters "Very seriously." Sean Ryan, CTO of Node40, a platform that helps people calculate digital currency-based taxes, believes all three letters make it clear that exchanging one cryptocurrency for another is a taxable event.
Bitcoin.com in June and he said that clarified tax guidance from the IRS was "Long overdue." The announcement in regards to the new IRS letters followed our interview with Ryan so we spoke to the tax expert again.
"As we know, the IRS hasn't answered several outstanding questions about the nuances of paying taxes on crypto. Yes, they've issued the 2014 memo but we all know it lacks clarity on certain points - chief among them is the like-kind rules. Section 1031 of the IRS code before the new tax law went into effect in 2018 could have been interpreted to allow for an exchange of one digital currency for another, like buying ETH for/with BTC - tax-deferred. There has been much debate about this among accountants and tax attorneys with valid arguments on both sides."
Following the tax agency's press release, an alleged former IRS agent told the Reddit community on the subreddit r/cryptocurrency that the letters are just a "Broad and very error-prone fishing expeditions." Unfortunately, there was no way the r/cryptocurrency forum visitors could confirm whether the person was really an IRS agent or someone just playing a hoax.
Tax attorneys are already advertising online to help crypto owners if they received one of the three IRS letters.
The law firm Frost & Associates LLC is now advertising to help those who are dealing with cryptocurrency tax audits and IRS Letter 6173, 6174, and 6174-A. "Cryptocurrency compliance investigations may also turn into larger, criminal tax investigations," Frost & Associates website details.
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