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The Internal Revenue Service should clarify that its 2019 guidance on virtual currency is not authoritative, increase financial institution reporting of virtual currency, and address with Treasury's Financial Crimes Enforcement Network (FinCEN) how foreign asset reporting laws apply to virtual currency, the Government Accountability Office said.
In a just-released report, GAO states that information reporting by third parties, such as financial institutions, on virtual currency "is limited, making it difficult for taxpayers to comply and for IRS to address tax compliance risks."
Further, many virtual currency transactions likely go unreported to the IRS on information returns, "due in part to unclear requirements and reporting thresholds that limit the number of virtual currency users subject to third-party reporting," GAO said.
IRS issued guidance in 2014 and 2019 that addresses some questions taxpayers and practitioners have raised, for instance, that virtual currency is treated as property for tax purposes and that using virtual currency can produce taxable capital gains.
