Congressional Committee Urges The IRS To Clarify Crypto Tax Guidancebr>
The US House’s Committee on Ways and Means has called on the Internal Revenue Service (IRS) to publish comprehensive guidelines on how cryptocurrency investments and transactions should be handled when US citizens file their taxes.
In an open letter sent to acting IRS commissioner David Kautter, congressional representatives Kevin Brady, Lynn Jenkins, Darin LaHood, David Schweikert and Brad Wenstrup urged the IRS to issue updated guidance, providing additional clarity for taxpayers seeking to better understand and comply with their tax obligations when using cryptocurrencies.
“On May 17, 2017, we wrote to the IRS to raise questions about the enforcement actions being taken against those holding virtual currencies and the lack of a comprehensive virtual currency strategy,” the letter said. “More than a year after our initial letter, the IRS continues to expand its enforcement activities without issuing any further guidance for taxpayers.”
The letter argued that since the inception of cryptocurrencies, the agency has struggled with how to treat crypto assets for tax purposes and the amount of guidance necessary to assist taxpayers in understanding their tax obligations. While the IRS issued preliminary guidance in 2014 indicating that cryptocurrencies would be treated as property for tax purposes, the agency had yet to develop a comprehensive crypto tax strategy.
“Despite the issuance of only preliminary guidance on this issue, the IRS has made enforcement of this guidance a priority, undertaking robust enforcement actions on a number of fronts,” the letter said, citing the IRS’ decision to summon records from American users of crypto exchange Coinbase who held virtual currencies between 2013 and 2015.
The committee said that they appreciate the IRS’s need to undertake enforcement actions to ensure that taxpayers generally meet their tax obligations, but they are concerned that the agency is seeking to enforce guidance that does not adequately advise taxpayers of their tax obligations when using virtual cunencies. The committee argued that the agency’s main duty is to assist taxpayers in understanding what their tax obligations are and how they may best meet them. Its failure to introduce a more robust taxation framework “severely hinders taxpayers’ ability” to do so.
“The IRS has had four years to work through these issues since its preliminary guidance was issued, providing more than adequate time for the IRS to thoughtfully consider what additional information is needed,” the letter said. We therefore strongly urge the IRS to expeditiously issue more robust guidance clarifying taxpayers’ obligations when using virtual currencies. We also ask that you provide a written response outlining where the IRS is in its efforts to issue updated virtual cunency guidance, what the IRS intends to cover in this guidance, and a timeline for its release.”