A group of US Representatives has sent an open letter to the Internal Revenue Service (IRS) seeking provisional guidelines on how digital currency transactions and investments should be handled when tax payers file their income tax return.
In a letter to the Internal Revenue Service (IRS) Acting Commissioner David Kautter, House Ways and Means Committee Chairman Kevin Brady (R-TX) and four members of the Committee strongly urged that the IRS expeditiously issue more robust guidance clarifying taxpayers' obligations when using virtual currencies.
In addition, they asked the Government Accountability Office to undertake an audit on this matter.
Ways and Means Oversight Subcommittee Chairman Lynn Jenkins (R-KS), Rep. David Schweikert (R-AZ), Rep. Darin LaHood (R-IL), and Rep. Brad Wenstrup (R-OH) are the other signatories to the letter.
This is a follow-up to a letter that Brady sent to IRS last year raising questions about the enforcement actions it has taken against individuals who hold virtual currencies.
After more than a year of silence, the agency has issued no thorough guidance while continuing to expand its enforcement activities, putting taxpayers in strenuous situations with minimal direction from the agency.
"While the issues surrounding virtual currencies are complicated and ever evolving, a key component of the IRS's duties as the nation's tax administrator is to assist taxpayers in understanding what their tax obligations are and how they may best meet them," the lawmakers told the agency.
In July, the IRS's Large Business and International division announced five new compliance campaigns, one of which focuses on non-compliance related to virtual currencies. At the same time, the IRS also announced that it would not be providing leniency for taxpayers by allowing for a voluntary disclosure program to address tax non-compliance related to virtual currencies.
The current guidance for taxpayers is to file each and every transaction executed when using a cryptocurrency because each transaction is considered taxable. Cryptocurrencies are viewed as a commodity or property in the eyes of the IRS, so virtual currencies are also subject to capital gains laws. In the latest letter, the US lawmakers want the IRS to come up with some definitive guidelines that are less confusing than the current laws.
The representatives noted in the letter that the US Treasury Inspector General for Tax Administration reported in September 2016 that the IRS had yet to develop a comprehensive virtual currency tax strategy, citing a need for the IRS to update its initial guidance.
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