IRS Seeks Third-Party Contractors To Help With Crypto Taxation The United States Internal Revenue Service has been very active recently in regard to
IRS Seeks Third-Party Contractors To Help With Crypto Taxation
The United States Internal Revenue Service has been very active recently in regard to cryptocurrency taxation. The agency has issued multiple guidelines about how Americans need to calculate their tax obligations. Since the very beginning, taxation has been a major headache both for the public as well as for the government. However, as time passed by, greater clarity has emerged. The IRS is also now open to third-party contractors for help with crypto taxation.
There are also multiple companies that have been set up especially to deal with this issue. Since crypto is cutting edge technology, there is a need for advanced technological solutions. Traders and investors alike can accumulate highly unmanageable levels of transactions. It can be impossible to manually calculate taxes. The ever-changing crypto prices make matters even more complicated.
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As such, many companies have begun offering automated crypto accounting and taxation services. Some of them are as easy as connecting your exchange or private wallet. The IRS seems to have been wooed by the same.
IRS Solicits Contractors
Recently, a crypto tax software firm CryptoTrader.Tax claimed that the IRS has approached them for help. They shared the details of a letter that they allegedly received from the IRS on May 12. Some of the excerpts from the letter are available on CryptoTraders’ blog. One expert, in particular, is of note.
“The Internal Revenue Service is engaging outside contractors to assist our Revenue Agents in calculating taxpayers’ gains or losses as a result of their transactions involving virtual currency. We are placing a few single-case contracts as pilots. The goal is of publishing a solicitation and request for a proposal for a larger multi-case contract.”
The excerpts of the letter don’t specify the nature of the assistance required. However, the Statement of Work by CryptoTrader.Tax sheds some light on this. They say that the IRS requires help in a number of essential and wide-ranging matters.
In particular, the IRS wants their support to aggregate, value, and compute the gains/losses incurred by people. The specific activity in this regard is cryptocurrency transactions. This is important as some users’ transactions can span multiple exchanges and wallets. The IRS is also looking for specialized technology and infrastructure to analyze crypto data. This is because the different file formats, field formats, decimal place precision in crypto make things complicated.
In addition to all of this, the tax agency is also looking for legal help. The third-party contractors could be asked to assist them with trial preparations. They could even be asked to testify at trials as summary witnesses. This is a huge range of requirements and support for any company.
CryptoTrader.Tax has said that they don’t intend to assist the IRS. They have indicated that they want to be a customer-first business. This means they will emphasize on assisting individuals’ tax obligations directly. It might be a smart decision on their part. Dealing with the IRS could take away a lot of resources for them. They could spend all of that to grow their company manifold.