Internal Revenue Service (IRS) Commissioner Charles Rettig says reporting requirements for cryptocurrency could be a significant help in closing the tax gap.
Rettig's comments came during a Senate Finance Committee hearing Tuesday. During the hearing, Sen. Rob Portman (R-OH) sought Rettig's feedback on the subject, saying he's drafting a bill that would establish crypto tax reporting requirements.
"We're working on a cryptocurrency bill that would define cryptocurrency for tax purposes and try to provide appropriate reporting rules," said Portman.
Rettig said standard crypto reporting rules would "absolutely" help in closing the tax gap, or the amount of U.S. taxes owed that have yet to be paid to the IRS. The most recent tax gap estimate covered the years 2011, 2012 and 2013, accounting for a net gap of nearly $400 billion after enforcement actions and late payments.
Much of the problem, Rettig said, is visibility. He referenced the crypto question at the top of Form 1040 as a meaningful change so far. The crypto space is developing so quickly that there are a number of areas Portman's bill would have to touch on, according to Rettig.
"We could give you a lot of guidance with areas we see in respect to the crypto world, it's replicating itself constantly," he said.
Portman's bill appears to be in the early stages of development. However, Portman did say during the hearing that the intention is for the legislation to be bipartisan in scope, drawing input from both Republicans and Democrats.
Portman wouldn't be the first to attempt to set crypto tax standards in Congress. In 2020, members of the Blockchain Caucus introduced the Virtual Currency Tax Fairness Act of 2020, which sought a de minimus exemption for gains of less than $200. That measure closely resembled a 2017 tax exemption bill, though ultimately neither piece of legislation gained traction.