Virtual currency in prior years - Amend?

Hey all,

New client with a virtual currency issue.

Has had virtual currency since 2017. Has not included VC on tax returns until 2021. Client used a service to calculate the gains from the virtual currency. He gave me the 2021 8949 generated by the company, and I asked him about prior years because there were long term gains on there, but nothing on the 2020 return. Thats when I learned he has had VC for several years.

My dilemma is the following... The yearly gain / loss is minor each year. Around $400 in gain in 2017, $200 loss in 2018, and $100 gain in 2019.

He has considerably sized returns, and it would take a lot of work to recreate these returns so I could amend them, just to add these minor amounts. 2018 wouldn't even cause an income issue.

I am of the opinion to tell him we shouldn't amend these returns (my fees would be significantly more than any savings that the losses generated), but I don't want to cause an issue because he did not "report" the VC.

Also, as far as I see, there is no failure to report penalty for VC (like an FBAR would have), just the difference is tax.

Any opinions on this issue?

Tell him what's involved and what the cost is and then leave it up to him to decide. Do it in writing.

My concern would be allegations of fraud. The statute of limitations never close on a fraudulently filed tax return. You should examine that exposure, particularly if the affected returns are large and complex.

This is a good read regarding your obligations: https://www.thetaxadviser.com/issues/20 ... t2012.html

Hey all,

New client with a virtual currency issue.

Has had virtual currency since 2017. Has not included VC on tax returns until 2021. Client used a service to calculate the gains from the virtual currency. He gave me the 2021 8949 generated by the company, and I asked him about prior years because there were long term gains on there, but nothing on the 2020 return. Thats when I learned he has had VC for several years.

My dilemma is the following... The yearly gain / loss is minor each year. Around $400 in gain in 2017, $200 loss in 2018, and $100 gain in 2019.

He has considerably sized returns, and it would take a lot of work to recreate these returns so I could amend them, just to add these minor amounts. 2018 wouldn't even cause an income issue.

I am of the opinion to tell him we shouldn't amend these returns (my fees would be significantly more than any savings that the losses generated), but I don't want to cause an issue because he did not "report" the VC.

Also, as far as I see, there is no failure to report penalty for VC (like an FBAR would have), just the difference is tax.

Any opinions on this issue?

based on the above, I would move on. Not even a close call.

ditto

That's for the input all. I can see both sides of the coin on this one, hence why I threw the question out here.

I did discuss the issue with the client, weighed the pros and cons, and decided not to file the the previous returns.

I can see both sides of the coin on this one ..... Really? I thought the currency was virtual.

I can see both sides of the coin on this one ..... Really? I thought the currency was virtual.

Darn...nice!