The United States Internal Revenue Service (IRS) is working to step up its guidance on cryptocurrencies, viz a viz their tax implications.
According to new reports, however, the tax authority is looking to collaborate with third-party experts to help develop calculations of crypto-based transactions.
Help Needed to Clarify Transaction Calculations
Earlier this week, crypto tax software Crypto Trader published details of a letter that the IRS had sent to it. The company’s blog post also contained details of a Statement of Work, which the IRS sent with the letter.
In the letter, the IRS explained that it is soliciting outside counsel to help calculate crypto-holding taxpayers’ gains or losses on transactions. The tax agency added, “We are placing a few single-case contracts as pilots with a goal of publishing a solicitation and request for proposal for a larger multi-case contract.”
The Statement of Work provided additional details on the type of services that the IRS needs. The tax agency confirmed that it is seeking a partner that will provide several services. All of these will help it to aggregate, value, and compute the gains and losses incurred by individuals’ cryptocurrency transactions.
The IRS highlighted that these processes are usually quite simple. However, there are also cases where transactions become dispersed across several wallets and exchanges.
“Specialized technology and infrastructure is required to digest, contain, and analyze virtual currency data due to unique requirements such as but not limited to decimal place precision, varying field formats, and file formats,” the letter added.
The agency also claimed to be searching for help with data discrepancy analysis, report preparation, revisions, and error resolution services.
However, Crypto Trader explained that it wouldn’t be pursuing the contract. The firm confirmed that its commitment to helping its clients to report their tax obligations accurately. Still, given that it is hoping to serve its customers, one would think that Crypto Trader will be more inclined to help them improve on their tax reporting duties.
The IRS Continues to Push for Crypto Tax Inclusions
The IRS has made its fair share of progress in its mission to ensure crypto tax compliance across the board. Last October, the agency published tax guidance for crypto holders. At the time, it hoped to provide clarity for remitting taxes on transactions, airdrops, hard forks, and more.
In a letter, the Congress members asked for proper definitions of airdrops and hard forks. The letter pointed out that the IRS’ guidance had used some implausible, hypothetical examples to reference the taxable events. These led to massive confusion.
The Congress members also asked the agency to provide decisive action on tax reporting and withholding aspects – including the use of Form 1099 as well as the issue of retroactive enforcement.