The Government Accountability Office (GAO), a US Congress watchdog, said that Internal Revenue Service (IRS) can, but won’t, explain how taxes are collected on cryptocurrencies and cryptocurrency transactions in the US.
Responding to a request from Representative of Texas Kevin Brady, GAO, top auditing agency in the US government, published a report reviewing the IRS’s current policy and public guidelines on cryptocurrencies.
Crypto Tax Guidance Needed
The agency had three recommendations for the US tax collector, as well as an additional related recommendation for the U.S. Financial Crimes Enforcement Network (FinCEN), a U.S. division. Treasury Unit.
Notably, one of its recommendations was to explain that some of the latest IRS guidance is not binding or authoritative–and that suggestion was rejected by the department.
“Part of the 2019 guidance is not authoritative because it was not published in the Internal Revenue Bulletin (IRB). IRS has stated that only guidance published in the IRB is IRS’s authoritative interpretation of the law. IRS did not make clear to taxpayers that this part of the guidance is not authoritative and is subject to change,” the report said.
The 2019 guidance of the IRS addressed some questions regarding cryptocurrencies tax treatment, but ” prompted new concerns among virtual currency stakeholders,” the report said. Compliance with tax requirements can be daunting and the GAO study suggests that trading activity may be underreported due to a lack of clarification about what to disclose.
Reporting Requirements Need Clarification
Additionally, GAO also proposed that the IRS add a note stating that its 2019 FAQs are not binding guidelines; clarify reporting requirements for third parties; and clarify reporting requirements around FATCA.
Furthermore, the GAO also recommended that FinCEN share more information about the enforcement of foreign account reporting requirements under the BSA, in cooperation with the IRS.
“We continue to believe that including such a statement would provide more transparency and help taxpayers understand the nature of the information provided in the FAQs,” the GAO said.