Despite the growing interest in cryptocurrencies, the Internal Revenue Service has failed to update their tax guidelines regarding digital assets. On September 19th, five U.S. legislators sent a letter to the IRS that “strongly urged” the group to update their cryptocurrency tax guidelines. The five Republican representatives, David Schweikert, Lynn Jenkins, Darin LaHood, Brad Wenstrup, and Kevin Brady, included the following message:
“Since the emergence of virtual currencies, the IRS has struggled with how to treat virtual currencies for tax purposes and the amount of guidance necessary to assist taxpayers in understanding their tax obligations. In March 2014, the IRS began working to clarify tax issues related to virtual currencies by issuing guidance indicating that virtual currencies would be treated as property for tax purposes.”
According to the letter, however, the Treasury Inspector General for Tax Administration had reported that the IRS failed to detail a strategy as of September 2016.
Additionally, Republican representatives sent a letter to the IRS back in May, accusing the group of increasing cryptocurrency-related violations without producing an in-depth guide to educate taxpayers.
Suggested Reading : Learn more about the original cryptocurrency—Bitcoin.
Outdated Rulings
The IRS has been adamant in going after taxpayers for “cryptocurrency tax evasion”, while failing to inform those accused of the updated rulings, even to those who reported their crypto profits.
As of this writing, IRS cryptocurrency guidelines cover trading in 2014, when Bitcoin was nowhere near its current price. In fact, most altcoins weren’t around at the time either. Back then, users were meant to report digital asset gains as “property.”
Further into the letter, the legislators crack down on the IRS:
“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 currency guidance, what the IRS intends to cover in this guidance, and a timeline for its release.”
The group will work with the Government Accountability Office to ensure these changes, with a hard due date of October 17th this year.
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