Report: Denmark's Tax Agency Is Sending Tax Compliance Letters to Crypto Users

Denmark-based cryptocurrency users have begun receiving letters from the Danish tax agency, Skattestyrelsen, requesting that traders provide a full background of all their cryptocurrency transactions, sources informed Cointelegraph on Dec. 10.In its letters, Skat specifically asked crypto users to provide information about profits and losses for fiscal years 2016 to 2018, according to FIFO principles.

Disclosure of crypto exchange services usedIn terms of crypto exchange services, Skat requested that crypto consumers revealed the confirmation of their trading activity in the form of a screenshot featuring the individual's name and an agreement on the creation of an account.

In addition to that, Skat wants to examine crypto consumers' account statements from their bank accounts for the aforementioned period.

"Many of our Danish users have received these letters, Skat is asking for a full breakdown of all their transactions and asking them to fix all past reports as well. Filing tax on cryptocurrency trades is a difficult task as crypto traders usually hold several exchange accounts & wallets and freely transfer crypto between them, so there's no easy way to figure out what the capital gains are for any particular trade."

Skat's first steps towards crypto user taxationSkat turned its focus to crypto consumers late last year when it confirmed that it was "Identifying" 2,700 individuals it said owed taxes on Bitcoin gains.

In January 2019, the country's Tax Council authorized Skat to obtain information on all trades of cryptocurrencies across three domestic crypto exchanges.

At the time, the tax agency planned to make the first adjustments to tax treatment for specific cases based on the newly-acquired information before summer 2019.The amendments were set to include whether individual traders' or businesses' trades need to be included in their declared taxable income.

Following the U.S. IRS practiceSkat thus might follow the United States Internal Revenue Service's lead. The IRS sent letters to 10,000 crypto investors to clarify crypto tax filing requirements and, in certain cases, compel them to pay back taxes.

At the time, the IRS said that it asked some of the crypto investors to amend their tax filings, while compelling others to pay back taxes and/or interest and penalties.

In October, the IRS added a question on crypto ownership to the standard 1040 income tax form for the coming tax season.