Ohio senator wants clarity for crypto tax reporting in proposed bill

A Republican lawmaker from Ohio is preparing legislation that would reportedly be aimed at preventing U.S. citizens from evading taxes on their crypto earnings.

In an interview with CNBC’s Squawk Box today, Senator Rob Portman said he hoped to introduce a bill with bipartisan support after the next congressional recess which would address the problem of many crypto users in the U.S. not paying taxes. The senator said lawmakers “don’t have the final bill yet” and were “still pulling in information” on the subject. However, he claimed both Republicans and Democrats were interested in pursuing closing the tax gap with respect to crypto.

"The idea is to have better information reporting on cryptocurrency, and to define it better for tax purposes," said Portmand. “There is [...] a trillion-dollar tax gap right now. Some of that tax gap is attributable to the cryptocurrency issue.”

According to data from the Internal Revenue Service, or IRS, in October, 83.6% of taxes were paid "voluntarily and on time" from 2011 to 2013. During this period, the U.S. government lost an average of roughly $400 billion a year.

Portman mentioned the proposed bill in a hearing with the Senate Finance Committee hearing last Tuesday, in which he addressed IRS Commissioner Charles Rettig. The commissioner said providing appropriate reporting rules for crypto would "absolutely" help in closing the tax gap. 

At the time, Rettig cited his role in adding a question to the 2019 tax return forms in which filers were asked whether they received, sold, sent or exchanged any financial interest in cryptocurrencies. He added that certain aspects of the crypto world were “not visible by design,” including nonfungible tokens.

Other U.S. lawmakers have attempted to set standards for reporting crypto on taxes since the technology became a more prominent part of portfolios. Last year, two House members introduced the Virtual Currency Tax Fairness Act of 2020, a bill aimed at establishing an exemption for crypto expenditures that qualify as personal transactions.