Can the IRS seize cryptocurrency to settle unpaid tax debts?

If you hold cryptocurrency (BTC, ETH, DOGE, Etc.) and owe money to the IRS, your crypto assets could be seized to satisfy outstanding tax debt. Tax Network USA can protect your cryptocurrency and resolve your tax matters.

Are Cryptocurrencies Classified as Property by the IRS?

The 2014 notice classifies Bitcoin and other cryptocurrencies as property from the perspective of federal tax law. Since the agency treats virtual currency as property, all transactions using virtual currency now have the same general tax principles applied to other property transactions.

Fast forward to 2021, the IRS seized $3.5 billion in cryptocurrency. This total accounted for 93% of the Criminal Investigation unit’s seizures that year. The IRS has been clear that the agency will continue to seize cryptocurrency to satisfy delinquent taxes.

If the IRS has threatened to seize your property, Tax Network USA can immediately protect you from any serious collection actions taken against you.

Tax forms on desk

How Does the IRS Obtain Data on Cryptocurrency Users?

The following are some of the ways the IRS can obtain information on your crypto holdings:

  • 1099-B & 1099-K: If you have received these forms, the IRS knows you have reportable crypto transactions. They leverage a matching mechanism integrated into the IRS Information Reporting Program (IRP) to track these transactions.
  • Subpoenas: The IRS will continue to issue subpoenas to crypto exchanges ordering disclosure on user’s accounts who hold unpaid balances with the IRS.
  • Schedule 1 questions: As of 2020, taxpayers must answer Schedule 1 virtual currency questions that seek to ascertain whether you received, sold, sent, exchanged, or acquired a financial interest in any virtual currency.

If the IRS has subpoenaed your exchange records or you have unfiled returns, Tax Network USA can help you properly report your cryptocurrency while using legal tax avoidance strategies.

Calculating Crypto Tax

What Are My Tax Relief Options If I Can’t Pay Off My Tax Debt?

If you owe the IRS, here are some solutions to find tax relief to avoid your crypto and other digital assets being seized:

  • Offer in Compromise (OIC): Is an agreement between a taxpayer and the IRS that settles a taxpayer’s tax liabilities for a lump sum payment. There are several factors taken into consideration during the Acceptance of an OIC. It is always recommended to have an attorney represent you during the process.
  • Hardship Status: Being placed on non-collectible status means that the IRS has agreed to stop attempts to collect back taxes. This happens after the IRS receives evidence that the taxpayer cannot pay the taxes owed. This status is usually temporary for individuals under the age of 51.
  • IRS Payment Plans (Installment Agreements): There are several different IRS payment plans. All have different repayment structures and fees. Most will require full financial disclosures.

Regardless of what resolution you believe is best for you, it is always best to have a tax lawyer represent you. Tax Network USA has resolved over $500 million in tax debt owed to the IRS

About The Author

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Senior Tax Analyst at Tax Network USA

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