IRS issued Crypto-Warning Letters: Violation of Taxpayer’s Rights




Last July, almost a year ago, IRS (Internal Revenue Service) of the United States declared sending warning letters (called soft letters) to cryptocurrency owners who are suspected of not paying their taxes. The letter would be including an advisory note to advise them for paying taxes.

However, according to the subsidiary of IRS, the Tax Payer Advocate Service, there is a drawback of these soft letters, i.e., it has made impairments with the taxpayers’ rights and privacy. The Subsidiary of the IRS emphasized that the biggest violation of the rights of Taxpayers occurs in the IRS letter 6173 in the Taxpayer Bill.

Now, the United States government has restrained the users and operations of digital currency (Bitcoin). In 2019, the IRS, Tax Agency of the U.S., reported that the agency would be investigating those taxpayers who did not pay the taxes and are involved in supposedly owning the virtual assets such as BTC (Bitcoin).

On July 26, 2019, the IRS Commissioner Chuck Rettig made an announcement and described that the IRS had collected more than 10,000 taxpayer names by compliance disciplines. At the end of August 2019, the 10,000 taxpayers were listed, and we sent them three different types of soft letters.

Chuck Rettig, the Commissioner of IRS, declared that “all the taxpayers who received the letters should take them seriously and review their tax filings, and when possible, revise the past returns and pay taxes.” He added that “the IRS, by special use of data analytics, is expanding our efforts to deal with the virtual or digital currency.”

However, On June 29, a member of the Taxpayer Advocate Service agency named Erin M. Collins published a report, which perceives that the soft letters of virtual currency violate the rights of Taxpayers. The Collins report especially targets the Letter 6173 warnings that it is threatening U.S. taxpayers’ rights and privacy.

The Taxpayer Advocate Service expressed that “it is the status of National Taxpayer Advocate that these rude calls disrupt taxpayers’ rights. The position of the taxpayers, outside the examination process, must not be shown or communicated in any soft letters.” The letter summoned “Objectives Report to Congress 2021” more notes:

What is troubling about soft Letter 6173 is that the letter especially directs taxpayers who accept they are submissive and confronts extreme burdens on them without an examination’s security. The IRS has declared that Letter 6173 is not a sort of examination. So, the IRS is not obligated to obey the examination directions or give taxpayers the rights supported by the examination.

However, the soft letter 6173 was unable to inform the believers of compliant taxpayers properly and told them that it is not part of an examination.

Collins and the Taxpayer Advocate Service intend to solve this circumstance by 2021, the fiscal year. The firm plans for operating to remove burdens inflicted on taxpayers who consider that they are compliant. The Taxpayer Advocate Service is leading to work in combination with the IRS to remove taxpayers’ burdens to protect their rights.

About the author, Awais Rasheed

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