U.S. Legislators Urge IRS To Update Tax Guidelines For Bitcoin And Cryptocurrencies

A number of U.S. legislators representing the Republican party have called on the Internal Revenue Service (IRS) of the United States to update its guidelines on how taxes should be paid on profits from Bitcoin and other cryptocurrencies.

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A number of U.S. legislators representing the Republican party have called on the Internal Revenue Service (IRS) of the United States to update its guidelines on how taxes should be paid on profits from Bitcoin and other cryptocurrencies.

Republican legislators call for a clear taxpayer guideline

The crypto industry has enjoyed sporadic growth over the last couple of months, with greater interests arising not only from individual investors but also from companies and financial institutions.

The Internal Revenue Service is still to release update the guidelines for taxes relating to the nascent industry.

In an open letter published on September 19th, five U.S. legislators strongly urged the IRS to update their cryptocurrency tax guidelines.

The letter was published on the website of the House Ways and Means Committee and signed by David Schweikert, Lynn Jenkins, Darin LaHood, Brad Wenstrup, and Kevin Brady.

The letter calls on the IRS to issue a comprehensive, updated guidance on federal tax obligations associated with digital assets dispositions.

Criticism of the IRS

The letter opens with a reference to a letter sent to the IRS last year, which was sent to the IRS to address the issues of enforcing crypto-related violations without creating a comprehensive strategy to manage digital assets.

This week’s letter criticizes the IRS for doing little to provide guidelines for taxpayers through the process of paying capital gains taxes on their cryptocurrency investments. An excerpt from the letter reads:

 “More than a year after our initial letter, the IRS continues to expand its enforcement activities without issuing any further guidance for taxpayers. 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.”

Enforcement over guidance

In the letter, the legislators note that the IRS has focused more on enforcing crypto-related tax evasions (citing examples of the time Coinbase was taken to court) than it has on creating guidelines for tax payments.

The legislators argue that, since the inception cryptocurrencies, the IRS has had a hard time formulating a taxation strategy to accommodate cryptocurrencies.

The letter points back to 2014 when the IRS said that cryptocurrencies would be taxed as properties, something the IRS Commissioner at the time called “preliminary guidance”.

However, the lawmakers claim that the IRS has not issued any additional guidance to help taxpayers better understand their tax obligations.

The legislators note that there are concerned that the IRS is failing to adequately advise taxpayers of their reporting obligations, thus, neglecting one of its primary duties as a government organization.

Deadline

The legislators argue that the agency has had more than enough time to issue a robust guidance to clarify taxpayers on the obligations.

The legislators conclude the letter with a request that the IRS provides the Committed additional information to the issues addressed before October 17, 2018.

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