The Internal Revenue Service (IRS) is taking steps to ensure proper tax compliance among U.S. taxpayers with cryptocurrency holdings. In its pursuit of enhanced digital asset tax compliance, the IRS is looking for third-party contractors who can provide innovative solutions.
These contractors will play a crucial role in aggregating, valuing, and calculating gains and losses from individuals’ cryptocurrency transactions. Additionally, they may be required to testify in court, explaining the calculations derived from the underlying data.
Strengthening Tax Compliance:
The IRS recognizes the growing significance of cryptocurrencies and their potential impact on tax revenues. To address this emerging landscape, the agency seeks assistance from qualified third-party contractors. By engaging external expertise, the IRS aims to ensure that taxpayers accurately report and pay taxes on their cryptocurrency holdings. This initiative reflects the agency’s commitment to keeping pace with technological advancements in the financial sector.
Exploring Potential Solutions:
In its search for effective tools to enhance digital asset tax compliance, the IRS is inviting companies to propose solutions. These solutions should encompass a wide range of cryptocurrencies, including stablecoins and non-fungible tokens (NFTs). By leveraging innovative technologies and methodologies, the contractors can aid in streamlining the assessment of taxpayers’ cryptocurrency transactions. This proactive approach by the IRS demonstrates its dedication to adapt to the evolving nature of digital currencies.
Aggregation, Valuation, and Computation:
The primary responsibilities of the third-party contractors involve aggregating, valuing, and computing gains and losses associated with cryptocurrency transactions. With numerous transactions taking place in the crypto space, it becomes crucial to accurately assess the tax implications. The contractors will utilize specialized tools and systems to ensure meticulous calculations, enabling the IRS to enforce tax regulations effectively. Their expertise will contribute to maintaining fairness and transparency in the taxation of cryptocurrency activities.
Collaboration and Traceability:
Recognizing the complexities of the crypto space, the IRS has been actively collaborating with external entities to strengthen its oversight capabilities. Notably, the agency has engaged contractors like Chainalysis to trace transactions and link supposedly anonymous wallets to known investors. Such collaboration enhances the IRS’s ability to identify potential tax evasion or illicit activities involving cryptocurrencies. By leveraging advanced investigative techniques, the agency aims to maintain the integrity of the tax system while fostering a secure environment for legitimate cryptocurrency users.
Funding Expansion and Expert Hiring:
The agency seeks to allocate resources towards expanding its capacity and hiring external experts. These experts will provide specialized knowledge and skills necessary to navigate the complexities of the crypto landscape. By investing in human capital and technological infrastructure, the IRS aims to stay ahead of emerging challenges and ensure robust tax compliance within the cryptocurrency domain.
