US tax collectors urge owners of virtual currencies to pay back taxes, file amended returns

WASHINGTON: The US Internal Revenue Service on Friday said it was sending thousands of letters to taxpayers who failed to report virtual currency transactions, saying they may owe taxes.

The IRS said it planned to send over 10,000 letters to taxpayers in an effort that began earlier in July and will continue through August.

"Taxpayers who do not properly report the income tax consequences of virtual currency transactions are, when appropriate, liable for tax, penalties and interest," the agency said in a statement.

"Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties."

In July 2018, the IRS announced that it would begin a series of compliance campaigns on US taxpayers to "collect tax on worldwide income from all sources," including transactions involving virtual currency.

The IRS has said that it considers cryptocurrencies such as bitcoin property for federal tax purposes, meaning any profits or losses from their sale should generally be reported as capital gains or losses.