US Tax Authorities Discusses Taxing Digital Currencies; Each Standard Method Has Trade-Offs


The world’s largest economy is looking for ways to increase revenues, including taxation of digital assets and cryptocurrencies. During a virtual interview at the OECD’s 2020 Global Blockchain Policy Forum, senior counsel at the Treasury Department, Erika Nijenhuis, stated the U.S is developing domestic reporting rules on taxing cryptocurrencies. In their quest to find the best models, the tax regulators are debating different tradeoffs that proposed tax models offer, including the risk factor approach and the direct reporting of tax from crypto transactions. The authorities are looking for a balance that will be efficient in collecting the tax proceeds. This ranges from checking the burden placed on the crypto-taxable parties such as crypto money transmitters and exchanges and how to enhance compliance across these firms. Nijenhuis said, “There are trade-offs among all of them, and we are hard at work thinking about all of those issues.” “None of those are easy questions.” The U.S. Internal Revenue Service (IRS) has been at the forefront of taxing crypto assets in calling for clarity on taxing these assets. Earlier in the month, David W. Klasing, a boutique Californian tax firm, reported that the IRS looked into Coinbase accounts to catch offenders who do not comply with the platform's reporting tax standards.

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