Following the release of the controversial crypto tax guidance by the Internal Revenue Service (IRS) the commissioner of the service Charles Rettig says taxpayers have no reason to be confused about filing cryptocurrency taxes. The commissioner was speaking at a Philadelphia conference by the tax section of the American Bar Association as reported by Blombergtax.
Who’s not sure of the taxability of crypto? I have this, I have this. It’s not in the return,” he said Oct. 28, noting that the IRS recently issued guidance on the topic. “We’re very concerned with the volume of some things that are not in the returns.
The tax guidance was released for the first time since 2014 to give further clarity to the one released that year. It was however full of confusion as experts say it did not clearly discuss how taxes apply to airdrops and hard forks. The process of crypto tax filing in the United States is therefore still unclear from the latest guidance release which came in mid October.
One thin Rettig wants to make clear is that IRS is ready to fully clampdown on tax evasion in the cryptocurrency space. The service had in June this year written letters to some 10,000 tax defaulters, reminding them of their tax obligations prior to the release of the guidance. Also recently, the service revealed through its lawyer that it will be focusing on information reporting in filing taxes in its next guidance release.
The information filing which is to include strategies to include crypto holdings on foreign exchanges still points back to ensuring that all cryptocurrency holders file taxes regardless of where such crypto assets are held. This is evident that the U.S is serious in generating income from the cryptocurrency industry.
This may attract some critical attention though as the same United States does not seem interested in encouraging crypto or blockchain innovation as evidenced by the fight against Libra. The U.S also does not have a clear regulatory framework for the cryptocurrency and blockchain industry which is responsible for the slow pace of growth in the country.
Despite the IRS effort at improving tax compliance, it may never maximize the tax potential in the crypto industry unless it creates an enabling environment for it to flourish. What do you think about the IRS war against tax evasion?