US IRS Seeks Cryptocurrency Tax Assessment Contractor to Produce Clearer Regulatory Framework

May 14, 2020 at 13:31 // News
Coin Idol
Cryptocurrency will be taxed

The United States tax authority, the Internal Revenue Service (IRS), is looking for an outside firm (contractor) to help with crypto asset tax calculations and produce a clear income statement.

The cryptocurrency tax software developer known as CryptoTrader.Tax unveiled the official documents of the IRS and the attached work description via an official blog on May 12.

Deep assessment of crypto business

The IRS noted in a memorandum that it was preparing to cooperate with external contractors to assess and calculate profits and losses caused by crypto-asset transactions.

The job description details the support needed by the IRS. Firms will support the taxpayer investigation of the IRS by counting, evaluating and calculating digital currency transaction gains and losses.

The tax authority further noted that although some tasks may be simple, transactions using different exchanges and digital/electronic wallets (e-wallets) can be a multifaceted task. It may entail and require special tools, technologies and infrastructure.

It also requested not only analysis of crypto asset transaction information, but also assistance in preparing reports, resolving data inconsistencies and errors, and correcting/checking reports. The contractor may also be asked to testify to attend remunerator meetings, support the IRS’s pilot work, and explain the calculations.

Trying to build taxation framework

The issue of cryptocurrency taxation has been pending for years now. Thus, the IRS has drafted and issued two related guiding principles (guidelines) to assist with the obligation to pay digital currency. The first guidance/regulation was released in 2014 and the second was later on issued in October 2019. The latter mainly focuses on hard forks and airdrops as they are difficult to tax.

Earlier this year, the authority also issued key points that digital currency holders must follow to pay their taxes safely and conveniently. As of now, the need for a clear taxation framework related to cryptocurrency is obvious. As plainly as it may seem, but governments do not want to lose profits to their state budgets. However, in this case, they need a proper procedure in order for taxation to be fair and reasonable. 

As the cryptocurrency industry grows, many countries have started exploring the possibility of developing a tax framework, for companies might face difficulties while working without it. Thus, as, a world blockchain news outlet has reported, Indian cryptocurrency exchanges demand a clear tax framework from the Reserve Bank of India because they experience scrutiny while working with financial institutions from traditional sectors.

Meanwhile, Singapore has also released some guidelines for cryptocurrency taxation, striving to bring clarity to the sector. The guideline mostly dealt with income tax payment and taxation of Initial Coin Offerings.

Currently, many countries are striving to develop a taxation framework that would be friendly for cryptocurrency-related activities as they realise the entire potential of the sector. The USA, however, has been trying to impose more strict regulations.  In March 2020, more than 10,000 cryptocurrency users (holders) were warned to act in accordance with the existing federal tax laws and pay, report taxes and income on crypto-asset transactions, and failure to do this would lead to serious penalties.

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