From Cointelegraph · By Christina Comben
Crypto investors who failed to report trades in previous years may soon breathe a sigh of relief thanks to legislation currently advancing in the US Congress.
Section 502 of the Digital Asset Tax Certainty Act, H.R. 10357, would require the Treasury secretary to establish a Digital Asset Voluntary Disclosure Program within 12 months of the bill becoming law.
That would allow eligible taxpayers to correct any past digital asset tax violation by filing amended returns and paying the tax owed, along with interest and a program penalty.
The House Ways and Means Committee approved the bill by a 38-5 vote on Sept. 16, but it has not become law yet; it still has to pass the House and Senate and be signed by the president.
“It’s a big change that would help a lot of ordinary taxpayers, and it has gotten very little attention,” Andrew Gordon, executive director of Digital Asset Tax Action, tells Magazine.
A gap in the system
Crypto investors in the US are already grappling with the first filing season under the new 1099-DA broker reporting rules, which give the IRS greater visibility into crypto transactions.
Gordon says those rules should make reporting easier going forward, but they fail to address the years before coming into effect.
The House Ways and Means Committee approved the bill by a 38-5 vote. Source: Ways & Means
“A large share of investors didn’t report correctly over the years,” he says, and existing procedures don’t offer taxpayers who made “honest mistakes” a predictable way to resolve their liabilities.
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“Today, a crypto investor who learns they didn’t properly report their crypto or has not reported at all has no good way to fix it,” he says; investors can discover years later that they misunderstood the tax treatment of crypto-to-crypto trades or reporting activity across multiple platforms.
What taxpayers could get
The IRS’s existing Voluntary Disclosure Practice is aimed at taxpayers who willfully violated tax rules and face potential criminal exposure.
For taxpayers with errant reporting skills, they can currently correct their mistakes by filing amended returns, but the penalty treatment is not as predictable as provision 502’s proposed crypto-specific program.
Sharon Yip, a certified public accountant (CPA) and founder of Crypto Tax Advisors, says reporting errors among ordinary crypto investors are common.
In her firm’s experience, some clients did not report crypto because they believed no tax was due until they cashed out, while others relied on incomplete exchange records or incorrectly classified transactions.