A cryptocurrency advocacy group is putting pressure on the IRS to release guidance, several weeks after the agency said to expect it soon.
To date, the Internal Revenue Service has published one piece of guidance—Notice 2014-21—to help taxpayers and their advisers determine their liabilities stemming from cryptocurrency transactions. Lawmakers, as well as crypto investors, have been seeking additional guidance for the last several years to address what they say are unanswered questions in the initial rules. Without that direction, they worry that even people who are trying their best to be compliant with the tax laws could run afoul.
The call to action from the advocacy group, Coin Center, comes more than a month after IRS Commissioner Charles Rettig said at a May 30 conference that guidance would be coming “very soon"—possibly within 30 days. That mark has passed, and Coin Center said it is tired of waiting.
“Following the commissioner’s public statement that guidance would be coming ‘within the next 30 days,’ we were hopeful that we would have more clarity on these issues by now,” the group said in a July 9 blog post. “That we do not is disappointing.”
Even with the lack of guidance, IRS and Justice Department officials have indicated at recent conferences that the agency is ramping up efforts to crack down on individuals who haven’t paid appropriate taxes on their cryptocurrency transactions.
“It’s been quite worrying to see—against the backdrop of inaction on the guidance front—a lot of emanations from the IRS about ramping up enforcement efforts against people who have failed to comply with that guidance that doesn’t currently exist,” said James Foust, senior research fellow at Coin Center.
Since Rettig’s comments, the IRS hasn’t given an updated timeline. The agency had no immediate comment.
Coin Center isn’t the only one that’s been putting pressure on the IRS to release new guidance.
A bipartisan group of 21 lawmakers—including Congressional Blockchain Caucus co-chairs Tom Emmer (R-Minn.) and Bill Foster (D-Ill.)—wrote to the agency in April requesting more guidelines on the tax consequences and basic reporting requirements of cryptocurrency users.
Rettig responded in a May letter that he too believed more clarity was necessary. He outlined three areas the agency intended to address, including the treatment of hard forks. A hard fork occurs when there is a change to the software of a cryptocurrency, like bitcoin, that creates two separate versions of the blockchain—bitcoin versus bitcoin cash.
The IRS also plans to address calculation and assignment of cost basis, Rettig said.
Emmer reintroduced a bill July 9 that would temporarily shield taxpayers with income from cryptocurrency hard forks from penalties until the IRS issues new guidance. He introduced a similar measure (H.R. 6973) in September 2018.
“Taxpayers suffering from the uncertainty of tax guidance are being unfairly punished for investing in an emerging technology,” Emmer said in a July 9 news release.
Cryptocurrency users have been waiting a decade for clarity on these issues, Foust said. Bitcoin, the first decentralized cryptocurrency, was created in 2009.
“Taxpayers, who are in good faith doing their best to comply with the tax obligations that stem from transactions involving cryptocurrencies, just don’t have answers to some of the really basic fundamental questions,” he said.