What has happened?
A group of US Congressmen has called on the Internal Revenue Service (IRS) to issue updated guidance on the tax obligations when using virtual currencies.
What does this mean?
In a letter to IRS Acting Commissioner David Kautter, Congress representatives, Kevin Brady, Lynn Jenkins, David Schweikert, Darin LaHood and Brad Wenstrup said that the IRS has "struggled" with how to treat virtual currencies for tax purposes since their emergence.
Four years ago, the IRS released preliminary guidance, which clarified that virtual currencies would be treated as property for tax purposes, but the group argued that more information is needed now and that the agency has had "more than adequate time" to do so.
According to the letter, instead of updating its advice, the IRS has focused on enforcement actions around the preliminary guidance.
For example, the IRS sought the records of about half a million Americans who held virtual currencies between 2013 and 2015 and also spent time reminding taxpayers of the consequences of non-compliance with the original guidance.
"We therefore strongly urge the IRS to expeditiously issue more robust guidance clarifying taxpayers' obligations when using vi1tual currencies," the letter said.
Saying that the Congressmen understood the need to take enforcement actions to ensure that people comply with the tax obligations, the letter went on to say:
"In this case, we are concerned that the IRS is seeking to enforce guidance that does not adequately advise taxpayers of their tax obligations when using virtual currencies."
They also argued that, in their view, it is a "key component" of the IRS's duties to make sure that taxpayers understand their obligations and how to meet them.
"A failure to put forth adequate guidance severely hinders taxpayers' ability to do so."
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