The United States Internal Revenue Service (IRS) is developing domestic reporting rules for cryptocurrency taxation—assessing the pros and cons of different crypto tax models, according to a Treasury Department official on Thursday.
According to Senior Counsel for the Treasury Department’s Office of Tax Policy, Erika Nijenhaus at a blockchain-focused OECD event on Nov.19—the IRS faces a choice between a risk-focused approach to crypto taxation, similar to the international Common Reporting Standard, and another approach focuses on tax liabilities.
As reported by Bloomberg Law, speaking at the OECD’s 2020 Global Blockchain Policy Forum, Nijenhaus said:
“None of those are easy questions […] There are trade-offs among all of them and we are hard at work thinking about all of those issues.”
The Treasury’s Tax Policy Senior Counsel also highlighted that the burden each approach to crypto taxation puts on cryptocurrency parties like exchanges will bring a range of benefits, like enhanced regulatory compliance.
At the event, a major cryptocurrency exchange official, Lawrence Zlatkin, VP for tax at Coinbase rebutted these comments. He argued that the US should not create reporting rules that focus on transactions as large amounts of aggregate data will put an enormous burden on exchanges and may not necessarily be helpful for enforcing tax laws.
“You get tons of information, but more isn’t always better,” said Zlatkin who added that the United States tends to create rely on its own interpretation of global financial reporting rules with little regard to how they are applied elsewhere. The Coinbase VP argued that the lack of symmetry also tends to create pressure for exchanges.
According to Bloomberg Law, the Organization for Economic Cooperation and Development (OECD) plans on releasing its own crypto tax reporting framework by 2021, to ensure an adequate and effective level of reporting and exchange of information.
There have been increasing calls for clarity on crypto tax throughout the year and the IRS has been enhancing its means to investigate and pursue crypto tax issues. The further development of formal domestic reporting rules is the next stage in the Treasury’s formal regulation on the taxation process.
Image source: Shutterstock