The Information Reporting Program Advisory Committee (IRPAC) recently suggested International revenue service (IRS) to ameliorate its operations, precisely related to how it collects data about taxpayers.
The committee was formed even before the internet was the main user network. It is an outcome of the US federal government reorganization established to improve and modernize the IRS. The IRS is an outcome of the Omnibus Budget Reconciliation Act of 1989.
This year’s IRPAC public report is mainly of interest to cryptocurrency participants and advocates because the report suggests the IRS to be clear on how it deals with other cryptocurrencies and Bitcoin.
Addressing the Tax Consequences
The report goes on to discuss that in the past couple of years, there have been a lot of changes in the financial sector with the evolution of innovative technology. Simultaneously, with time, more people have started investing in the cryptocurrency. But with the popularity of the virtual currency, there also have been an increase in the questions about the applicable tax consequences implying to it.
Addressing the issue, IRS published a notice for 2014-21. According to it, the cryptocurrency is dealt as property for US federal tax purposes. While many acknowledge IRS for this, few tax and industry practitioners still ask about the other tax consequences of virtual currency transactions.
Since the past few years, the tax conditions regarding virtual currencies have been a subject of debate in the crypto world. It has become onerous for the users to act due to the occasional allegations on exchanges and unclear guidelines. The only problem is that the virtual currencies and their service providers are inspected by many agencies from IRS, FinCEN, Treasury and many others.
Growing Need for Clear Guidance on Crypto Conditions
The committee further used Coinbase case to clarify and provide more detailed information about crypto regulations at the IRS. This case proved that Coinbase has no legal solution to provide data to the IRS about the transactions over $20,000.
They believe that if the US residents had more clarity on the consequences of reporting their crypto assets and holdings, they would be more open in doing so. As per the result of the Coinbase case and the lack of clarity in it, users will opt for offshore exchanges to secure their holdings.
Therefore, IRPAC suggested IRS to provide clear guidance on the cryptocurrencies transactions and tax consequences. Although It is not mandatory for IRS to follow the committee guidance, historically it has used the suggestions to improve its business.
The individuals who want to invest in virtual currencies legally would only wish that IRS considers the recommendations of the committee and executes clearer rules in the future.