The Treasury Inspector General for Tax Administration (TIGTA) recently issued a report on the IRS' strategy for addressing income produced through virtual currencies, such as bitcoin, litecoin, and dogecoin. Use of virtual currency has grown in recent years, due in part to service benefits such as faster turnaround and lower transaction fees, and in part due to the relative anonymity of the parties involved in such transactions.
The Virtual Currency Issue Team established by the IRS has apparently done little to coordinate efforts to spot potential taxpayer noncompliance through virtual currency transactions. In addition, although the IRS solicited comments from the public regarding Notice 2014-21, it did not respond to clarify how taxpayers can comply with related tax reporting requirements.
"It is imperative that the IRS ensures that those who engage in activities using virtual currencies comply with all of their tax obligations," said TIGTA representative, J. Russell George. TIGTA has recommended that the IRS develop a coordinated virtual currency strategy, provide updated guidance on the tax treatment and required documentation for these transactions, and revise third-party information reporting documents to include specifics on virtual currencies used in taxable transactions.
To read TIGTA's press release on virtual currency compliance, click here.
To read TIGTA's full report, click here.