Magazine article American Banker

Watchdog Urges IRS to Strengthen Virtual Currency Policy

Magazine article American Banker

Watchdog Urges IRS to Strengthen Virtual Currency Policy

Article excerpt

Byline: Lalita Clozel

WASHINGTON -- The Internal Revenue Service's internal watchdog Tuesday called on the agency to develop a concerted strategy to address the possible use of virtual currencies in tax evasion or money-laundering schemes.

"None of the IRS operating divisions have developed any type of compliance initiatives or guidelines for conducting examinations or investigations specific to tax noncompliance related to virtual currency," the IRS inspector general said in a report. "IRS management needs to develop an overall strategy to address taxpayer use of virtual currencies as property and as currency."

The watchdog also recommended that the IRS improve coordination on virtual currency work within the agency. In response, the IRS agreed to improve coordination and "develop the appropriate strategy for addressing" tax fraud tied to the use of virtual currency.

The watchdog did acknowledge a number of measures the IRS has taken in recent years to address the rise of virtual currency.

In December 2013, the agency created an internal team dedicated to virtual currency. Initially, the group was focused on investigating tax evasion schemes perpetrated with bitcoin, but last year its mandate was expanded to "meet and share knowledge on virtual currency." Also, in 2014, the IRS published guidance that specified that virtual currency is taxable like property.

But the IG said the agency has made little progress addressing tax compliance risks associated with bitcoin. …

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