Taxpayers should be allowed to pay federal taxes with virtual currencies, the Internal Revenue Service Advisory Council urged today.
Letting payments be made with digital currencies could help the agency strengthen its collection enforcement, the panel asserted in a report.
The push to allow virtual currencies be allowed for tax payments is the highlight of a series of recommendations the panel made at the request of the agency for advice on how to focus guidance on taxpayers who use or invest in these new forms of money,
The report asserted increased taxpayer use of virtual currencies has generated numerous tax issues and potential tax compliance.
Concerns for taxpayers cited by the panel include a lack of understanding regarding the taxability of virtual currency transactions and how to calculate basis of gain/loss from virtual currency transactions, the authors said.
In addition to letting cryptocurrencies be used to pay taxes, the panel urged the IRS to help tax preparation software companies incorporate more information on virtual currencies in their products to educate users and encourage compliance.
On another issue, the group called on the IRS to coordinate an approach to the tax implications of virtual currencies among the multiple units within the agency.
The panel also advised the IRS to include references to “virtual currency” and “cryptocurrency” on more forms.
Looking at the IRS virtual currencies web page, the group comp complained the page isn’t comprehensive and it is hard to find on the IRS home page search box.
Additionally, the report said some serious omissions in the virtual currencies web page need to be fixed.
The panel pointed out the page doesn’t include the IRS news release reminding taxpayers that their virtual currency transactions may be reportable and the agency’s Large Business and International Division’s announcement of its virtual currency campaign.
A request by the largest crypto exchange, Coinbase, led to the panel making the recommendations.