Millennials are at the greatest risk of any group for harsh IRS measures that could crush their early investing career. Crypto tax amnesty is requested by the IRS, allowing time for crypto owners behind in filing and paying their taxes to comply and avoid prison time.
Are you a Millennial crypto investor and unfamiliar with how a crypto tax amnesty program could keep you in good standing with the IRS?
By providing scant directions on taxing cryptocurrencies, the IRS has trapped an estimated 40% to 50% of the Millennial generation in fraudulent tax returns that fail to report all crypto income. In effect, the IRS has criminalized 40-50% of all Millennials!
We need a crypto tax amnesty program to help these young investors get back into compliance with their crypto taxes.
My wish for all U.S. cryptocurrency owners is that the IRS will come out with a crypto tax amnesty program. This would allow crypto owners who failed to report their crypto income in prior years to come forward, get compliant, get clean, and not suffer harsh penalties, including the potential of prison time.
In this article, I want to lay out the urgency of my wish and what you can do if the IRS fails to release a crypto tax amnesty program.
Jason Morton at Cointelegraph shared a very compelling argument about the need for a crypto tax amnesty program. Still, I'd like to add my perspective on that topic without boring you with statistics.
Based on recent data, we can see that roughly 40 to 50 % of the entire Millennial generation is non-compliant in reporting cryptocurrency. We also know this is the generation that has the most ownership of cryptocurrency. Millennials are also the ones that were the least financially educated and were inexperienced in investing. They may not have known that they had tax liabilities.
Millennials need a crypto tax amnesty program. Here’s why and how the slippery slope of non-compliance happens.
In your first year of reporting your cryptocurrency, you didn't know you were supposed to do it. Your accountant didn't ask you, TurboTax didn't ask you any questions, and the people at H&R Block seemed oblivious. You didn’t know you even had to report your cryptocurrency gains and, even if you did, you didn't know how to calculate them. So you just didn't.
A year passes. Then in the second year, you learned that you should report your cryptocurrency gains and losses, but you didn’t know how to fix the prior year. Plus, you may not have the money to pay the prior year’s taxes, which you didn't report. You're now afraid if you report this year, then the IRS is going to figure out that you didn't report last year.
This is very common. And so you don’t file the second year. However, now rather than being unintentional, it's intentional. This enters into the fraud area because you knowingly are filing a false tax return by leaving out your crypto gains.
As each subsequent year passes, that fraud progresses into full-blown tax evasion. And now there could be more and more things about your life that you're trying to hide.
I have talked to many clients like this. One comes to my mind right now.
A past client and crypto owner had a lot of crypto gains and had some problems reporting it. He also didn't file his crypto taxes that year. In fact, he didn't file his taxes at all. That was past in 2015. Then came the years 2016, 2017, 2018, and 2019. In fact, he got so far behind and so afraid, he never filed his taxes ever again.
The problem is that he would like to be current. He doesn't want to be a tax evader, but he feels that they'll ask questions about all the years if he reports one year. And, it would crush him financially in such a way that he would never recover if he did report. This client has a legitimate fear. They want to be compliant, but the price is too high.
This is another reason why we need a crypto tax amnesty program.
My company, CryptoTaxAudit, has successfully filed hundreds of tax amnesty applications, including for taxpayers living outside the United States who haven't reported. These are usually handled as non-criminal cases, especially if taxpayers didn't know they had to report their crypto income. We use the streamlined foreign offshore program to help file these applications. We’ve filed over 1,000 streamlined foreign offshore program applications, and we have a 100% success rate.
We have had tremendous success with filing for amnesty.
Clients love the program because all you have to do is file your last three years. Or, you can amend and re-file as needed. Also, you need to file your last six years of foreign financial bank filings (FBAR filings), and provide a reasonable cause explanation. This is where you are explaining how you got into the pickle that you're in.
The good news is that the IRS wants to accept this. They want you to get current.
Under this program, you pay any taxes owed in prior years. There are no penalties, which can be significant, and there are no interest penalties. IRS penalties have been a tremendous source of people getting hurt, so this is a wonderful program.
If the IRS announced a crypto amnesty program just for this case, I think it would be quite exciting. If they could also extend like-kind exchange rules for people taking advantage of a crypto tax amnesty package, that would be equally exciting. Like-kind exchanges are a legitimate way for most crypto people to solve things. It's a great way to put the tax liabilities off into the future when people can pay.
Will the IRS create an amnesty program for crypto tax issues? I don't know. Everyone should contact their representative to make this case. To make it easier, I’ve created a website to help you do it, called The Crypto Tax Amnesty Initiative. It explains the dilemma and provides the links you need to easily send your representatives in Congress a note asking for their help.
If the IRS fails to do that, let me lay out an affordable strategy for people to get back into compliance if they want to comply.
I recommend a two-step step approach if the IRS doesn’t help with an amnesty program.
First, as you prepare your next tax return, I recommend that you file your tax return in a completely honest manner. Report all your gains. Declare everything. Make this the year that you start filing honest tax returns that have integrity, if you’re a non-filer or haven’t fully disclosed your crypto gains.
Second, what about previous years? Well, seeing how the IRS is going back and auditing people who file amended returns, they are creating a lot of jeopardy in trying to correct those past returns.
My suggestion is that you schedule a complimentary call with CryptoTaxAudit to review your options.
We have a service where we watch your IRS accounts and see when the IRS puts an audit flag on an account. This is part of our Audit Defense membership benefits.
The IRS’ supercomputers will flag an account for audit. We see that happen regularly. Usually within six months, the IRS will then send you an audit letter. If we monitor your account and see that happen, that gives us (and you) six months to review and revise your tax returns. Our professionals can help.
We can calculate your crypto gains. We can submit an amended tax return so that it’s fixed before an IRS audit happens. These two steps alone save you 20% to 40% on accuracy penalties and other late payment fees.
This is a fantastic alternative to continuing to hide or continuing to be fearful. As you start to file with compliance, as you go one year after another, then eventually, the statute of limitations will start to protect you. Eventually, the IRS won’t be able to go back and audit you back when you weren’t filing correctly. Time will start to protect you.
To use this strategy, you need the heads up. You need Audit Defense monitoring. This way, we’ll notify you if the IRS is on your tail and give you advance notice to take action.
My hope is that the IRS will create and announce a crypto tax amnesty program that can help bring 50% of the younger generation into tax compliance. There is too much noncompliance for the IRS to continue to allow this to happen without helping. Beating young people with fines and penalties is not the way to nurture support for a “voluntary” tax system.
DISCLAIMER: Opinions and perspectives of the author, host, and guests. It should not be construed as U.S. taxpayer advice. There are often multiple interpretations of tax law. Various strategies may be suited to specific individuals and for particular situations. Seek out professional tax, legal, or financial advice from CryptoTaxAudit or from other reputable companies.Back to blog
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