IRS Cryptocurrency Tax Summit Amidst Tightening Enforcement
The IRS continues to gather information on how to tackle Bitcoin's impact on taxes
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The IRS is hosting a summit to discuss the tax implications of crypto early this March. Meaningful clarification on Bitcoin’s treatment, however, is not expected as the agency continues to leave tax issues around the asset unanswered.
Crypto Tax Summit in March
In an effort to crackdown on tax evasion in the crypto industry, the main revenue service of the United States is looking to meet with industry leaders. The IRS is set to hold a summit at its Washington, DC headquarters, where important topics regarding taxing the crypto industry will be discussed, according to a report from Bloomberg Tax.
The agency has reportedly invited multiple cryptocurrency companies and advocates to attend the summit and participate in the discussions on how the agency can “balance taxpayer service with regulatory enforcement.”
According to the copy of the invitation obtained by Bloomberg, the summit will include four 90-minute panels on various topics, including technology updates, issues for cryptocurrency exchanges, tax return preparation, and regulatory guidance and compliance.
Kristin Smith, executive director of the Blockchain Association advocacy group, said that the summit has been in the making for at least a month, with the IRS reaching out to industry participants at the beginning of the year. The summit, she said, could be used as an opportunity for the IRS to learn more about the ecosystem in order to regulate it better.
Increased Eye on Enforcement
Over the 2019 tax year the IRS has increased its scrutiny of cryptocurrency users. Starting June last year, the IRS reportedly mass mailed targeted letters to those suspected of “misreporting” cryptocurrency transactions.
These notices are intended to “put taxpayers on alert” that they plan to start focusing on a certain area of noncompliance.
Other taxpayers reported full-on audits of cryptocurrency use. These audits may request recipients to list all blockchain addresses they control, records of all transactions related to these accounts—and even earnings from hardforks, faucets, and tipping.
As more people begin to use Bitcoin for its privacy-protecting qualities, the IRS is likely to respond with novel approaches to identifying and tracing transactions. Those caught evading taxes with cryptocurrency may face steep penalties.
No Clarification on Stance on Bitcoin
It is still unknown which companies and “advocates” have been invited to the summit. There have been no official announcements about the summit either, neither from the companies nor from the IRS. The only acknowledgment of the summit came from an unidentified IRS spokesperson, who confirmed to Bloomberg Tax that the event is indeed taking place.
The event invitation was extremely vague, according to Bloomberg Tax. Panelists from the private sector and the government “will share their views and engage with the audience, which will include IRS personnel from across the spectrum of tax administration, and individuals from other bureaus or offices within the Department of Treasury.”
However, despite the optimistic sentiment in the invitation, few expect the IRS to use the event as a learning opportunity. The news about the crypto-focused summit comes just days after the agency declined to clarify its stance on cryptocurrencies.
Despite publishing updated guidance regarding cryptocurrencies in October last year, many issues such as capital gains on micro transactions and earnings from unwanted airdrops remained unsolved.
The Government Accountability Office, a government agency watchdog in the U.S., introduced several recommendations on how to improve the agency’s guidance, but the IRS has so far declined to adopt them and clarify its stance on the new asset class.