IRS Set to Introduce Clear-cut Cryptocurrency Tax Rules
The IRS appears to have listened to concerns raised by various parties concerning clear cryptocurrency guidelines. As Coincenter reports, the tax administrator responded to a letter by a bi-partisan group of the U.S. Congress, stating that it has made cryptocurrency tax guidance a priority and would release an upgrade soon.
IRS Readies Supplementary Cryptocurrency Tax Laws
Commissioner of the Internal Revenue Services (IRS), Charles P. Retting, responded to a letter by a bi-partisan group comprising 21 members of the United States Congress and led by Thomas Emmer.
The U.S. Congressmen back in April 2019 requested that the IRS provided better guidelines regarding payment of taxes on virtual currencies. According to the bipartisan group, taxpayers were still confused about how to calculate tax involving cryptocurrencies to avoid running afoul of the law and additional guidance was overdue.
In reply to the letter, part of the statement from the IRS reads:
“I share your belief that taxpayers deserve clarity on basic issues related to the taxation of virtual currency transactions and have made it a priority of the IRS to issue guidance. Specifically, your letter mentions (1) acceptable methods for calculation cost basis; (2) acceptable methods of cost basis assignment; and (3) tax treatment of forks. We have been considering these issues and intend to publish guidance addressing these and other issues soon”.
Furthermore, the tax agency noted that bitcoin and other virtual currencies have developed since its 2014 tax guidance. The move by the tax agency also coincides with the current boom in Bitcoin price, which some analysts think is “timely.”
Cryptocurrency Tax Guidelines
The IRS released the Notice 2014-21, which recognized bitcoin and other digital currencies as property, and are therefore subject to capital gain tax laws.
Cryptocurrency and tax experts, however, felt that the 2014 notice was ambiguous, as it did not answer pertinent questions on how cryptocurrency holders could calculate tax payments.
Many stakeholders in the country say the current tax guidelines for virtual currencies make the reporting process tedious. Back in April 2019, Coincenter published a document highlighting six important considerations for the IRS concerning bitcoin taxation.
Despite the lack of clear-cut guidelines, the tax agency has, on several occasions, warned U.S. crypto owners of the stiff penalties attached to indictments relating to cryptocurrency tax evasion.