Brady Calls on IRS to Update Virtual Currencies Guidance
Today, House Ways and Means Committee Chairman Kevin Brady (R-TX) led a letter to the Internal Revenue Service (IRS) calling on the agency to issue more robust guidance for taxpayers regarding virtual currencies.
This letter follows a letter sent to the agency in May 2017 from Chairman Brady, then-Oversight Subcommittee Chairman Vern Buchanan (R-FL), and Senate Finance Committee Chairman Orrin Hatch (R-UT) raising questions about the enforcement actions the IRS has taken against individuals who hold virtual currencies.
After over a year of silence, the agency has issued no thorough guidance while continuing to expand its enforcement activities, putting taxpayers in strenuous situations with minimal direction from the agency.
Joining Chairman Brady on today's letter are Ways and Means Oversight Subcommittee Chairman Lynn Jenkins (R-KS), Rep. David Schweikert (R-AZ), Rep. Darin LaHood (R-IL), and Rep. Brad Wenstrup (R-OH).
The lawmakers wrote to the agency:
"While the issues surrounding virtual currencies are complicated and ever evolving, a key component of the IRS's duties as the nation's tax administrator is to assist taxpayers in understanding what their tax obligations are and how they may best meet them. A failure to put forth adequate guidance severely hinders taxpayers' ability to do so. The IRS has had four years to work through these issues since its preliminary guidance was issued, providing more than adequate time for the IRS to thoughtfully consider what additional information is needed."
"We therefore strongly urge the IRS to expeditiously issue more robust guidance clarifying taxpayers' obligations when using virtual currencies. In addition, we will be asking the Government Accountability Office to undertake an audit on this matter."
Background: In 2014 the IRS issued guidance on virtual currencies in the form of Frequently Asked Questions, which the IRS Commissioner would later refer to as "preliminary guidance." Since then the agency has provided no updates or additional guidance, despite various calls from Congress and advocacy groups to do so. During that same timeframe, the IRS has undertaken significant enforcement actions towards taxpayers who use virtual currencies.
In November 2016 the IRS used its John Doe Summons authority to seek the records of approximately 500,000 Americans who held virtual currencies between 2013 and 2015. In its court filings, the agency provided minimal evidence supporting the need for such a wide range of records, drawing questions from the Ways and Means Oversight Subcommittee. In July 2018, the IRS's Large Business and International division announced five new compliance campaigns, one of which focuses on non-compliance related to virtual currencies. At the same time, the IRS also announced that it would not be providing leniency for taxpayers by allowing for a voluntary disclosure program to address tax non-compliance related to virtual currencies.