It’s no secret that the U.S. cryptocurrency community has been frustrated by the internal Revenue Service (IRS), but apparently that frustration also extends to U.S. lawmakers. Five members on the Congressional Ways and Means Committee sent an open letter to David Kautter, acting IRS commissioner, urging him to clarify the agency’s guidance on cryptocurrency taxation.
This is not the first time that lawmakers have asked for more information regarding cryptocurrency and taxes. In May of last year, lawmakers had communicated with commissioners and assumed “additional guidance” would be forthcoming. But it wasn’t, further frustrating lawmakers and the cryptocurrency community who wants clear regulatory and taxation frameworks for digital currencies.
Professional Organizations and Traditional Investment Firms Also Want Clarity On Cryptocurrency Tax Matters
The lawmakers are not alone;the letter references groups such as the Association of International Certified Professional Accountants, as well as the American Bar Association. They not only urge the IRS to issue some guidance, but also to outline a “timeline for its release”, and even goes so far as to ask the Government Accountability Office to intervene.
The level of frustration is understandable. Many cryptocurrency investors and traders believe that clarified regulations would prompt a migration towards cryptocurrency, transforming the space into a trillion dollar industry, , thereby increasing the liquidity and legitimacy of the cryptocurrency space.
Recently, Fidelity Investments, the world’s fourth-largest asset manager, stated that it plans to offer several blockchain-based products. Considering that Fideltiy Investments, a leading global finance player, has trillions under management, it’s conceivable that competition will follow in their footsteps by entering the cryptocurrency sector. Of course, without clear regulation, this is less likely.
Industry luminaries and regulators have been debating the issues since March 2014, when the IRS declared that cryptocurrency would be taxed as property, not as a currency. Lawmakers are quick to point out that it has been over four years since this stance — which should have been ample time for the IRS to develop a comprehensive, asset- and tax-clarifying regulatory framework.
Another point of frustration: The IRS seems much more intent on cracking down on cryptocurrency investments rather than clarifying their stance. Lawmakers are concerned that the agency is much more focused on enforcing, rather than informing, how cryptocurrency should be taxed.
Consumer Credit and Cryptocurrency
Certain sectors of the cryptocurrency community understand that this has been ongoing for some time, and with good reason. They point to credit score findings, such as that of Qualtrics and Credit Karma, as an example. For context, Qualtrics is a credit score startup and research firm that interviewed thousands of subjects. It found that over half disclosed some cryptocurrency gains. This directly contrasts with Credit Karma’s report that less than 100 people reported any cryptocurrency transactions. This data would suggest that investors widely under-report cryptocurrency gains and losses in general.
The IRS certainly realizes this, which is why, in December 2016, the commission requested that a popular U.S. cryptocurrency exchange, Coinbase, hand over data on half a million cryptocurrency traders and investors. Coinbase enjoyed a partial victory in that a judge reduced the number of affected records.. At the time, the IRS made it clear that it was most interested in accounts with at least $20,000. Ultimately, Coinbase turned over the customer information.
Signatories contend that lack of clear regulation makes it difficult for American citizens to comply with the law. As such, the IRS’ crypto tax evasion crackdown efforts are alarming . The letter also requests that the agency provide this additional guidance no later than October 17, 2018.
Connect With A Cryptocurrency Lawyer
The Gordon Law Group regularly works with cryptocurrency investors, ICOs, and blockchain businesses. We help with everything from tax matters to contract negotiations. If you have questions about the above issue, or any related crypto issue, please don’t hesitate to contact us! We look forward to answering your questions and crafting compliant solutions for your exact situation.