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The Treasury Department’s Inspector General just completed a review of the IRS’s virtual currency practices.

Bottom line, the report found that there has been little coordination within the IRS about ensuring virtual currency related tax compliance. The IG recommended that the IRS:

1) develop a coordinated virtual currency strategy that includes outcome goals, a description of how the agency intends to achieve those goals, and an action plan with a timeline for implementation; 2) provide updated guidance to reflect the necessary documentation requirements and tax treatments needed for the various uses of virtual currencies; and 3) revise third-party information reporting documents to identify the amounts of virtual currencies used in taxable transactions.

The IRS has generally accepted those recommendations, but noted that “guidance allocation decisions are based on available resources and other competing organizational and legislative priorities,” and that “based on the IRS’s current fiscal climate, the IRS is faced with competing funding priorities requiring a need-based prioritization of information technology expenditures. Consequently, the IRS does not consider modifying information reporting documents to capture virtual currency amounts as a priority at this time.” The message there seems to be that while it probably can improve its coordination on digital currency matters, there are other higher priority vectors for tax non-compliance.