Tax season is one of the most dreaded times of the year for many, and when the added confusion of filing crypto returns is thrown into to the mix, things can get even stickier. News.Bitcoin.com recently talked with Clinton Donnelly of Donnelly Tax Law, a service that specializes in crypto returns. The U.S. Treasury-licensed Enrolled Agent shared some of his opinions and insights regarding crypto audits and what triggers them, as well as an example from a client.
Unclear Guidance Won’t Stop Audits
The IRS announcement that thousands of tax warning letters would be issued to United States crypto holders last summer elicited calls for greater clarification and guidelines, but it hasn’t stopped the Internal Revenue Service audit train from steaming forward. The presence of a new crypto question on 2019’s Schedule 1 form has individuals concerned about reporting their crypto assets correctly more than ever, and according to experts, this is for good reason.
“That is massive” says Enrolled Agent Clinton Donnelly of Donnelly Tax Law. “This question in the 2019 return … it forces every taxpayer in the United States to make a decision whether or not they’re going to be honest or not on this question, because its a yes or no and when you sign the tax return … it’s in small print, it says ‘under penalty of perjury I have reviewed this return and it’s true, complete and correct,’ so failing to check the box is incomplete.” He emphasizes:
It’s a yes or no … it’s kind of like coming out of the closets … Anybody who was a trader in ’19,