On 12 February 2020, the U.S. Government Accountability Office (“GAO”) released “Virtual Currencies: Additional Information Reporting and Clarified Guidance Could Improve Tax Compliance” (Link). The GAO is an independent, nonpartisan agency that examines for Congress how taxpayer dollars are spent and provides Congress and federal agencies with objective, reliable information to help the government save money and work more efficiently.
Inter alia, GAO recommended the U.S. Internal Revenue Service (“IRS”) to clarify the application of reporting requirements under FATCA to virtual currency. Without information about how to interpret and apply FATCA requirements to situations involving virtual currency, taxpayers will not know whether they are required to report virtual currency held outside the United States. As a result, they may be underreporting, depriving IRS of data needed to address offshore tax evasion, or overreporting by filing forms that are not required. As we have previously reported, such overreporting creates unnecessary burdens, including financial costs, for taxpayers.