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The U.S Internal Revenue Service is in the market for third-party contractors to assist it evaluate digital currency traders’ tax payments. It sent emails to several taxation firms, seeking outside contractors who will assist the revenue agents in calculating the gains and losses made by the traders.

The agency has been struggling to keep up with the digital currency industry as it seeks to enforce taxation obligations for the traders. In its latest effort, it sent emails to select firms soliciting third-party contractors to aid in its auditing of digital currency returns.

“The Internal Revenue Service is engaging outside contractors to assist our Revenue Agents in calculating taxpayers’ gains or losses as a result of their transactions involving virtual currency. We are placing a few single-case contracts as pilots with a goal of publishing a solicitation and request for proposal for a larger multi-case contract,” read part of the May 12 email as revealed in a blog post by CryptoTrader.Tax. The firm was one of several digital currency taxation firms that the IRS emailed.

CryptoTrader.Tax made it clear that it wouldn’t be pursuing the opportunity. “Our full focus is on serving our customers and making the cryptocurrency tax reporting process as seamless as possible,” the company stated.

The contractor will be expected to “ingest all data provided by the IRS, as well as any attendant or related data the contractor collects through their system,” the attached Statement of Work reads. This will help them in data discrepancy analysis, for which they will be required to write a report. Together with the IRS, the contractor will work to resolve data inconsistencies through requesting additional data from the taxpayer and any other necessary method.

The contractor will be tasked with combing through hundreds of thousands of digital currency transactions. They will rely on public on-chain and private off-chain data, API keys provided by exchanges and wallets, data from merchants’ electronic payment services, paper documentation from taxpayers and more.

In cases where the IRS has to meet with the taxpayers, the contractor will be expected to consult with the agency. The role will also extend to testifying at trials as a summary witness.

This is the latest effort by the taxman to close in on digital currency traders. In 2019, the IRS made a number of strides, including sending thousands of letters to digital currency traders whom it believed hadn’t fulfilled their legal obligation to pay their taxes. In October, the agency gave its first update on digital currency taxation since 2014. However, this sector remains an unfamiliar territory for many digital currency holders and the IRS still has a long way to go.

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