AICPA advocates on Wayfair burden, virtual currency taxation

The AICPA addressed two separate tax issues at important forums on March 3, advocating for small businesses in the wake of the Wayfair decision and discussing the taxation of virtual currency in separate events.

Jamie Yesnowitz, J.D., chair of the AICPA State and Local Taxes Technical Resource Panel and a member of the Tax Executive Committee testified before the Committee on Small Business, Subcommittee on Economic Growth, Tax, and Capital Access.

The hearing, “South Dakota v. Wayfair, Inc.: Online Sales Taxes and Their Impact on Main Street,” focused on the regulatory and financial burden placed on small business as a result of a 2018 Supreme Court decision that radically changed sales tax collection rules.

Yesnowitz’s testimony called for a reasonable balance between the states’ rights to tax income and sales within their borders and the needs of individuals and businesses to operate efficiently in the economic climate. On the AICPA’s behalf, Yesnowitz requested a simple and reasonable economic threshold, applicable to income and sales taxes, applied in a consistent manner across the states, and the simplification of sales tax treatment of marketplace facilitators and sellers.

On the same day, Amy Wang, CPA, senior manager for the AICPA Tax Policy & Advocacy team, discussed the taxation of virtual currency at the IRS’s Virtual Currency Summit. This invitation-only event hosted four panels — technology updates, issues for digital currency exchanges, tax return preparation, and regulatory guidance and compliance — to address ways the IRS can balance taxpayer service with regulatory enforcement. The summit offered the opportunity for audience members and panelists to ask questions, receive clarification, and make recommendations to IRS officials.

Tax authorities in the United States and abroad are attempting to address virtual currency tax evasion; however, virtual currencies do not fall neatly into existing tax laws. Virtual currency reporting can be very complex, and the IRS regulations and frequently asked questions (FAQs) released in December lacked clarity, according to the panelists. Wang’s presentation focused on the main points in the AICPA’s most recent virtual currency comment letter and answered questions the IRS asked panelists to address. The AICPA’s letter also called for additional guidance to provide more clarity on virtual currency reporting, a sentiment echoed by each of the panelists throughout the summit.

Wang spoke about Rev. Rul. 2019-24; the new question about virtual currency on the 2019 Form 1040, Schedule 1, Additional Income and Adjustments to Income; FAQs and other forms of guidance; and prior AICPA recommendations not included in the new IRS guidance. Among several recommendations, the AICPA requested the IRS provide clarity on the definition of “financial interest” and binding guidance on the appropriate accounting method for virtual currencies. The AICPA also recommends the IRS emphasize any changes made to the FAQs and that the FAQs be moved to the IRS Internal Revenue Bulletin.

In other advocacy news:

TIC voices private company concerns: The AICPA Private Companies Practice Section Technical Issues Committee (TIC) has been very active advocating for private companies and their stakeholders. Read about their work on lease standards.

Recommendation on GASB proposal: The AICPA State and Local Governments Expert Panel and Technical Issues Committee expressed their views and made recommendations on GASB’s recent proposed Implementation Guidance update for 2020.

Taxpayer First Act input: The AICPA offered collective input, with nine other stakeholder groups, on the Taxpayer First Act, P.L. 116-25. As the IRS attempts to redesign the organization, the AICPA recommends a new Practitioner Services Division as an integral part of the Service’s modernization.

— Nekose Wills is manager–Advocacy Communications for the AICPA. To comment on this article or to suggest an idea for another article, contact Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com), the JofA’s editorial director.