In the wake of the continuing push from banks across the United States to get crypto products to their investors and the push in universities to create crypto-based classes and majors, top US lawmakers are urging the Internal Revenue Service (IRS) to supply crypto tax guidance. They are calling for lawmakers to release a comprehensive structure for how taxpayers should report the capital gains they make on investments in cryptocurrencies. Currently, no such guidance exists.
Since cryptocurrencies really hit the market, back in 2014, the IRS has focused solely on enforcement. In 2014, they released some preliminary rules around cryptocurrencies, but have released no guidance. About a year ago, the group sent an initial letter to the IRS to address their concern that the agency was ramping up enforcement of cryptocurrency-related violations. Primarily, their concern was around that fact that they did not help taxpayers with their tax strategy.
In a more recent letter to IRS commissioner, dated September 19th, several Republican representatives called on the agency to create the guidance, saying that they have more than enough time to work to develop these rules and determine what individuals can expect to be taxed on capital gains with crypto assets. The statement officially read, “We, therefore, write again today to strongly urge the IRS to issue updated guidance, providing additional clarity for taxpayers seeking to better understand and comply with their tax obligations when using virtual currencies.” The statement went on to say,
“We are concerned that the IRS is seeking to enforce guidelines that do not adequately advise taxpayers of their tax obligations when using virtual currencies.”
The biggest argument posed by lawmakers is that because there is no guidance, everyday Americans may be severely misrepresenting their tax obligations from virtual currencies. Under current IRS guidelines, it is important for individuals to calculate the capital gain they get on all investments or assets throughout a given year so that those capital gains can be taxed. However, with no guidance, many are not reporting their crypto capital gains correctly or, possibly, at all.
Coin Center, a crypto think tank, avidly works to educate policymakers and the media about cryptocurrencies. Furthermore, they engage in policy research to develop smart regulatory approaches to the questions raised by blockchain technology and advocate for solutions which further enable the cryptocurrency network. They are glad to see Congress taking action. According to communications director Neeraj Agrawal,
“We are glad to see Congress take action – there are clearly many open questions surrounding taxation of cryptocurrencies. It’s promising to see members of Congress step up to call for a more welcoming environment for these new technologies.”
In total, five Republicans have published the bill on the House Ways and Means Committee website. The representatives are Kevin Brady (R-TX), David Schweikert (R-AZ), Lynn Johnson (R-KS), Darin LaHood (R-IL), and Brad Wenstrup (R-OH).