IRS Commissioner: New Crypto Tax Reporting Standards ‘Absolutely’ Will Help Close Tax Gap

During the hearing, Senator Rob Portman said: “We are working on a cryptocurrency bill that will define cryptocurrency for tax purposes and try to provide appropriate reporting rules.”

Public data shows that the latest net tax shortfall is estimated to be about $400 billion for 2011-2013 after enforcement actions and delayed payments.

Rettig said the new crypto tax reporting standards will “absolutely” help close the tax gap, or the amount of taxes that have not yet been paid to the IRS.

Rettig said a lot of the problem is visibility. He pointed to the crypto question at the top of Form 1040 as a meaningful change so far. The IRS Form 1040, the individual income tax return, moved the question about taxpayers' cryptocurrency holdings from Schedule A to the front page of the main form, where they are most visible.

According to Rettig, the cryptocurrency space is evolving so rapidly that Portman’s bill has many areas that must be touched upon.

The bill appears to be in the early stages of development. However, Portman did say during the hearing that the goal is to make the legislation bipartisan in scope, appealing to both Republicans and Democrats.

Portman is not the first to try to set crypto tax standards in Congress. In 2020, members of the Blockchain Caucus introduced the Virtual Currency Tax Fairness Act of 2020, which seeks to establish a minimal tax exemption for those with earnings under $200. Very similar to the 2017 Tax Exemption Act, however, neither piece of legislation gained traction.