U.S. lawmakers have recently created buzz by calling upon the Internal Revenue Service (IRS) in an open letter, to further clarify crypto taxation guidelines and make it more comprehensive in nature.
This letter has been adressed to the acting IRS commissioner David Kautter. The Congress members who have sent it out are David Schweikert, Darin LaHood, and Brad Wenstrup, Kevin Brady and Lynn Jenkins. They are all members of the Committee on Ways and Means.
It had been previously brought to the IRS’s attention that their agency has not been able to provide a clear cut crypto taxation strategy. The letter opens by reminding them of that previous nudge that they had received from the Congress regarding the above, which was not as effective as they expected it to be. The lawmakers hence claim,
“the IRS [has] continue[d] to expand its enforcement activities [but] without issuing any further guidance for taxpayers.”
It is quite evident that the Lawmakers have a problem with IRS’s unequal distribution of importance on enforcement and clarifying the guidelines themselves. It seems that the IRS is too focused on enforcement without actually taking the time out to formulate a proper understanding of the existing framework. Having issues the initial rules almost 4 years ago, the IRS has clearly had enough time to build on them. However, the Lawmakers claim, that they have been unable to do so. The law clearly said that crypto could be considered as taxt property in the US.
Back in September 2016, the Treasury Inspector General for Tax Administration had accused the IRS’s crypto tax strategy as being incomplete. They were asked to update the laws but it has not happened yet. However, the lawmakers feel that:
“Despite the issuance of only preliminary guidance on this issue [back in March 2014], the IRS has made enforcement of this guidance a priority, undertaking robust enforcement actions on a number of fronts.”
A very bold movie by IRS that got people talking, was when they demanded Coinbase’s records, which contain data related to American users of the popular crypto exchange and wallet service. A legal battle thus ensued between both the parties.
The Lawmakers express their discontent over IRS’s over emphasis on enforcement and failure to provide clarity to taxpayers.
We’ll have to patiently wait and see what the IRS does to quell the situation.