Advisory Council Wants Taxes Paid In Crypto
The IRS advisory council is calling for crypto to be used in the payment of taxes. They propose that this should happen for federal taxes. According to the council, it will help the agency enforce its tax collection in the US.
The move to use crypto for taxation is part of various recommendations made by the panel at the request of the agency. The IRS wanted advice on how it can focus on taxpayers that use or invest in crypto.
It was noted that the use of virtual currencies by taxpayers had led to various issues especially the ones to do with tax compliance. There were concerns for the taxpayers that were cited by the panel. These concerns include the lack of understanding on how virtual currency is taxed. Besides that, it was quite difficult to calculate gain/loss from the cryptocurrencies.
Other Ways To Use Crypto
Besides letting crypto be used for tax payment, the panel wanted the IRS to assist software companies to get data on crypto products. This way, they could help users understand how to pay taxes, thus leading to better compliance.
The IRS also wanted to adopt a coordinated approach on the tax implication of crypto in the various units inside the agency. There was also a call for the IRS to include the cryptocurrency and related words on more of their forms.
The IRS Crypto Page
The web page on crypto in the agency’s site has various issues. The council said that it was not comprehensive and was hard to track using the IRS search box. Besides that, the report noted that there were some serious omissions in the cryptocurrency page need to be added.
Some Of The Issues
On the page, it was noted that the IRS new release reminding taxpayers that crypto transactions were reportable was not present. The recommendations came about when Coinbase made a request to the panel.
Clarity On Crypto Taxation
This is not the first time the IRS is being urged to provide better clarity on crypto payments. In September 2018, the House Ways and Means Committee sent a letter to the IRS. The letter urged the IRS to increase clarity on crypto payment.
Thus far, the IRS appears to be using rules that they created in 2014 on taxation of those who hold crypto assets. In those guidelines, crypto assets were classified as property and not currency. Thus, they would be taxed as such.
The letter to the IRS noted that the rules were meant to be temporary. However, they seem to have stayed the same four years later. In some cases, those old rules were even being used to punish those who flaunt taxation rules.
Holding Up The System
The letter claimed that these old rules were causing issues in the system as well. It claimed that even the American Bar Association needed more clarity to be able to carry out their roles. Most people are happy about this letter. They hope it will bring clarity to the sector.