House Ways and Means Chair Kevin Brady. (Photo: AP) House Ways and Means Chair Kevin Brady. (Photo: AP)

House Ways and Means Committee Chairman Kevin Brady, R-Texas, called on the IRS Wednesday to update its taxpayer guidance on virtual currencies, as lawmakers question the enforcement actions taken by the IRS against individuals holding such currencies.

“While the issues surrounding virtual currencies are complicated and ever evolving, a key component of the IRS’ duties as the nation’s tax administrator is to assist taxpayers in understanding what their tax obligations are and how they may best meet them,” wrote Brady in his letter to IRS Acting Commissioner David Kautter.

“A failure to put forth adequate guidance severely hinders taxpayers’ ability to do so. The IRS has had four years to work through these issues since its preliminary guidance was issued, providing more than adequate time for the IRS to thoughtfully consider what additional information is needed.”

Brady noted that the Wednesday letter follows a letter he along with other lawmakers sent in May 2017 to the agency raising questions about the enforcement actions the IRS has taken against individuals holding virtual currencies.

“Since the emergence of virtual currencies, the IRS has struggled with how to treat virtual currencies for tax purposes and the amount of guidance necessary to assist taxpayers in understanding their tax obligations,” Brady wrote in the Wednesday letter.

In March 2014, the IRS began working to clarify tax issues related to virtual currencies by issuing guidance indicating that virtual currencies would be treated as property for tax purposes.

“However, in September 2016, the Treasury Inspector General for Tax Administration reported that the IRS had yet to develop a comprehensive virtual currency tax strategy, citing a need for the IRS to update its initial guidance to reflect the various uses of virtual currencies,” Brady wrote.

The letter also notes that in July 2018, the IRS’ Large Business and International division announced five new compliance campaigns, one of which focuses on noncompliance related to virtual currencies.

“At the same time, the IRS also announced that it would not be providing leniency for taxpayers by allowing for a voluntary disclosure program to address tax noncompliance related to virtual currencies,” Brady wrote.

Brady “strongly urged the IRS to expeditiously issue more robust guidance clarifying taxpayers’ obligations when using virtual currencies,” asking Kautter to provide a written response outlining where the IRS is in its efforts to issue updated virtual currency guidance, what the IRS intends to cover in its guidance, and a timeline for its release.

He said the Ways and Means Committee will also be asking the Government Accountability Office to undertake an audit of the matter.

— Check out Advisors Say Yes to ETFs, No to Crypto: FPA on ThinkAdvisor.