The Internal Revenue Service (IRS) has been called to task over its lax monitoring of digital currency transactions in the United States.
According to the Treasury Inspector General for Tax Administration (TIGTA), the agency isn’t doing enough when it comes to addressing income streams produced via cryptocurrency, particularly bitcoin. This, in turn, creates a risk that taxable sales involving digital currencies may go undetected.
In a newly released report, TIGTA pointed out the existence of “little evidence of coordination” between different parts of the IRS on policing virtual currency transactions.
“None of the IRS operating divisions have developed any type of compliance initiatives or guidelines for conducting examinations or investigations specific to noncompliance related to virtual currencies. In addition, it does not appear that any of the actions already taken by the IRS to address virtual currency tax noncompliance were coordinated to ensure that the IRS maintains a strategic approach to the tax implications of virtual currencies,” the report stated.
Despite their booming popularity, digital currencies still occupy a relatively small sector in the world economy, and it hasn’t been long since regulators and tax agencies all over the world have started to take action. In the United States, the IRS came up with a guidance in 2014, in which it determined that bitcoin and other cryptocurrency should be treated as property for tax purposes. However, the agency has yet to supplement that guidance with details that will help taxpayers track their cost basis in their digital currencies.
“The public may not understand that each purchase of consumer goods with a virtual currency could result in a reportable tax transaction,” the report said.
TIGTA recommended the IRS to do the following: First, the agency needs to develop a coordinated virtual currency strategy. Then, it must provide updated guidance to reflect the necessary documentation requirements and tax treatments for virtual currency transactions. Lastly, IRS needs to revise third-party information reporting documents to identify the amount of digital currencies used in taxable transactions.
Current bitcoin price and trade volume
The price of bitcoin dropped to $714.48 early Friday morning, with a trade volume of $2.48 million.