Denmark's tax authority, the Skattestyrelsen, has been sending letters to cryptocurrency users it suspects of tax avoidance, demanding a range of information about their trading activities.

In the letters, the Skattestyrelsen further asks recipients to amend previous tax returns based on their crypto activities and warns of penalties for non-compliance, according to a blog post from crypto tax startup Koinly.

The agency received permission to obtain data on the Danish users of three exchanges earlier this year, Koinly said, ultimately collecting information on around 20,000 individuals.

In the letters, crypto users are asked to provide information such as profits and losses for the 2016-2018 income period, including for crypto-to-crypto trades. Respondents must further provide the rates at the time of the trades and the purpose of the transactions. Other required information includes proof of wallets created, bank statements and a statement of current crypto holdings.

“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,” Koinly founder Robin Singh said.

In the blog post, Koinly said traders should take the letters seriously and respond with the required information.

"This is just the first step in the fight against tax evasion and more serious actions are likely to be taken against investors in the future so it is a good idea to get your affairs in order as early as possible," the firm said.

The action by the Skattestyrelsen echoes that of the U.S. Internal Revenue Service (IRS), which in August sent similar letters to crypto traders it believed had misreported trading income. Recipients had 30 days to respond, but were able to disagree with the assessment.

Since then, in October, the IRS updated the primary income tax form for individuals to include a question about cryptocurrencies. The agency also provided its first crypto tax guidance for five years in the same month.

HM Revenue & Customs, the U.K.'s tax authority, was also said to be pressuring crypto exchanges to provide customers’ names and transaction histories in a bid to catch tax evaders this summer.

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