US Congress Seeks IRS Help on Regulating Taxes of Cryptocurrencies

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The US Congress recently requested additional guidance from the Internal Revenue Service (IRS) on the tax regulations of cryptocurrencies such as Bitcoin.

With the growth of cryptocurrencies worldwide, many central banks and regulators have been focusing their attention towards digital tokens as these currencies are seen to be one of the next trends of the financial market. With this, US Congress has already made a move regarding the tax implications of these investments.

“According to the Treasury Inspector General for Tax Administration, the IRS did not have a strategy for properly dealing with digital currencies. According to the letter by the co-chairs of TIGTA on June 2, 2017, the IRS was urged to take into consideration the recommendations that TIGTA made for the IRS.”

Aggressive tax regulations

This isn’t the first time that the congressional group has reached out to the IRS in order to create a better system for tax regulations surrounding Bitcoin and other cryptocurrencies. In late 2016, the Treasury Inspector General criticized the IRS for not enacting regulations that would curb and prevent cases of tax evasion among Bitcoin investors.

According to a report by Finance Magnates, the IRS decided to file a petition against the federal court wherein they can obtain the records of Coinbase customers. The IRS was criticized by the Treasury Department for not coming up with strategies on how to properly deal with discrepancy cases.

Downside

With improper tax guidelines, investors are having a hard time avoiding trouble due to the uncertainty surrounding existing regulations.

The biggest problem that regulators are facing would be the amounts to be taxed. Tax regulators are having trouble determining the amounts to tax as not all investors recognize gains.

Another follow up problem would be to determine how much of the gains are taxable.

Possible solution

With the growing number of Bitcoin and cryptocurrency investors, the IRS will have to put in more effort into monitoring taxes as they concern gains.

Possible solutions given, according to Perry Woodin, the CEO of Blockchain development company Node40, is to first update the tax guidelines to specify cryptocurrencies and digital tokens in its rules and then use a special software that is able to track amounts and corresponding investors.