The Internal Revenue Service (IRS) is taking another stab at ensuring adequate provisions for cryptocurrencies in the United States tax infrastructure.
After the IRS worked to provide effective tax guidance for crypto assets in 2019, the agency seems ready to feed off that hot streak and improve its policies to accommodate this new financial innovation. Now, it’s asking for help from the experts as it tackles the problem.
Time for Forward-Thinking Discussions on Tax Compliance
Earlier today, Bloomberg Tax reported that the tax agency has sent out invitation letters to several cryptocurrency advocates and companies operating in the space to a special summit in Washington D.C. on March 3. As the report explained, part of the topics on the agency will center around how to balance the function of taxpayer service with the enforcement of regulatory compliance obligations.
The summit will also reportedly include discussions on regulatory compliance for crypto-holding, individuals and firms, the right way to prepare tax returns, updates to the technology in the space, and the various tax compliance issues that crypto exchanges and other asset custodians could encounter. The discussions will be split into 90-minute panels, which will feature speakers from both the private sector and the government.
“Panelists will share their views and engage with the audience, which will include IRS personnel from across the spectrum of tax administration, and individuals from other bureaus or offices within the Department of Treasury,” the invitation letter reportedly reads.
Regulations Could be Coming Soon
As stated earlier, the IRS made some significant progress in the area of providing effective crypto guidance last year. In October, the agency published guidelines for tax reporting viz a viz crypto airdrops and hard forks. However, while the ruling was initially praised as a step in the right direction for the crypto space in its fight for increased regulatory acceptance, several loopholes in the ruling started to become more evident.
Addressing them, several members of the United States Congress wrote to the tax authority last December, asking it to provide additional clarity to the document to aid the execution of its precepts. Amongst other things, the letter pointed out that the IRS’ guidance wasn’t clear on points that could trigger a taxable offense. As a result, the receiver of a crypto fork or airdrop could end up getting taxed without even being aware.
The letter also pointed out a lack of guidance within the ruling concerning crypto-based finance, including crypto-based income, futures trading, and interests earned from the deposit of digital assets. The legislators also asked the IRS to take decisive action on tax reporting and withholding aspects, such as the use of Form 1099.
The IRS isn’t the only body looking to improve its tax regime for cryptocurrencies. Last week, Treasury Secretary Steve Mnuchin appeared before the Senate Financial Services Committee, where he confirmed that the Financial Crimes Enforcement Network (FinCEN), a branch of the Treasury Department, is working on drafting operating guidelines for crypto use across the country.
In part, he said,
“We’re about to roll out some significant new requirements at FinCEN [Financial Crimes Enforcement Network]. We want to make sure that technology moves forward, but on the other hand, we want to make sure that cryptocurrencies aren’t used for the equivalent of old Swiss secret number bank accounts.”
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