Bitcoin’s price drop could see US investors who declare their crypto investments to the Internal Revenue Service (IRS) trigger a tax loss by selling, trading, or spending their BTC. As a result, the IRS may look into the person’s finances.

This, if the agency first hears about the taxpayers’ crypto investments to trigger a loss, which would raise questions as to whether the investor declared crypto-related earnings last year, when bitcoin’s price surged over 1,100%.

Speaking to CNBC Sarah-Jane Morin, a partner at national law firm Morgan Lewis & Bockius, noted that if she was in these investors’ shoes, she would look into past transactions to assess whether there were gains. Morin added:

If I had gains, and I was not willing to go back and amend my return, I might not do anything that would trigger a loss. But you should just be reporting it correctly so you're not playing audit lottery.

The IRS has made it clear bitcoin and other cryptocurrencies are on its radar, as it reminded investors crypto transactions are taxable earlier this year. Per the news outlet, the agency sees cryptocurrencies as property for tax purposes. This means that whenever a cryptocurrency is used to pay for goods and services, bought, or sold, the difference between the value it has then and when it was initially bought is seen as a gain or a loss.

A gain realized from less than a year, CNBC added, is taxed as ordinary income, while gains from BTC held for longer periods are taxed as long-term gains. Taxes rates for this type of income can range between 0% and 20%. Losses, likely to be declared by those who held crypto this year, can be used against gains from “any qualifying asset.” If the investors’ losses surpass its gains, up to $3,000 can be used to offset ordinary income.

 Most Don’t Report Crypto Investments

Per CNBC, the IRS found that between 2013 and 2015 only about 800 taxpayers claimed bitcoin gains each year. During said period, bitcoin’s price rose from little over $10 to well over $400.

Last year, when the flagship cryptocurrency saw its price surge to $20,000 in mid-December, most investors likely gained, although it isn’t clear how many reported their investments to the agency.

The IRS hasn’t updated its 2014 guidance for the tax treatment of cryptocurrencies, although it has made it clear those who don’t disclose their crypto dealing may suffer consequences that range from “penalties and interest to prison time.”

According to Morin, most people treat BTC as a currency, and as such aren’t always tracking the difference its value has every time they use it.

A lot of people treat bitcoin as cash, or the same as [mobile payment service] Apple Pay. If they exchange it for another cryptocurrency or use it at, say,, they'd have to compare the fair market value of it that day versus their cost basis. They're not always tracking that kind of information.

Per her words, some crypto users don’t know whether they gained or lost, so they don’t report. She noted the IRS would, however, prefer to see them comply with their best effort “instead of just throwing up your hands and saying it’s too hard.”