A Connecticut tax preparer allegedly included cryptocurrency losses on tax returns for people who never owned the assets, as part of a wider federal case involving false deductions and the alleged diversion of taxpayer refunds.
Authorities said on 22 October that Yuridia Trujillo, of Meriden, Connecticut, had prepared returns containing the alleged losses through her business, Yuri’s LLC. The indictment says she completed at least 4,335 tax returns covering the years from 2017 through 2024.
The filings allegedly included false information about retirement contributions, dependent care, businesses and rental properties. Trujillo is also accused of using Form 8888, which allows a taxpayer to divide a direct-deposit refund between as many as three bank accounts, to send parts of refunds to accounts controlled by herself and an associate.
A federal grand jury returned the indictment on 7 October and Trujillo was arrested two days later. She has been released on a $50,000 bond while awaiting trial.
Each charge of aiding and assisting in the preparation and presentation of a false income tax return carries a maximum sentence of three years in prison if there is a conviction. The allegations have not been proved, and Trujillo is presumed innocent unless found guilty beyond a reasonable doubt.
How cryptocurrency losses are reported
Cryptocurrency held as an investment can generate legitimate losses that offset capital gains under United States tax rules. A capital loss generally occurs when an asset is sold for less than its adjusted basis, normally its purchase price after any applicable adjustments.
If total capital losses are greater than capital gains, taxpayers can generally deduct up to $3,000 of the difference from other income. The limit is $1,500 for married taxpayers filing separately. Unused losses can be carried forward to future tax years under Internal Revenue Service rules.
Taxpayers are expected to retain records supporting reported transactions, including receipts, sales, exchanges and the dollar value of cryptocurrency at the relevant time. Most investment sales and exchanges are listed individually on Form 8949, with the resulting totals transferred to Schedule D, which records capital gains and deductible losses on a federal return.
Allegedly misstating the purchase price of an investment can also reduce a reported gain. In a separate Texas case, Austin bitcoin investor Frank Richard Ahlgren III admitted inflating the cost basis of bitcoin he sold in 2017.
The Justice Department said Ahlgren was sentenced to two years in prison on 12 December 2024 for false crypto tax reporting. He was also ordered to pay $1,095,031 in restitution to the United States.
New digital asset broker reporting rules finalised in 2024 give the IRS more information about covered transactions. Brokers must report gross proceeds from transactions in 2025 during 2026, while purchase-cost information for certain transactions in 2026 will be reported in 2027.
Authorities have also warned that fraudsters are mailing counterfeit IRS notices directing cryptocurrency holders to a fake compliance portal intended to obtain sensitive financial information.
