By CCN.com: Cryptocurrency investors may soon have more clarity on how the IRS will tax their holdings now that the agency has said it is making that a priority.
The latest IRS acknowledgment of crypto taxation issues is in response to members of Congress. Last month, they fired off a list of demands to the agency, leading to a positive response.
Crypto players immediately took notice.
We Need IRS Guidance Now
Congressman Tom Emmer (R-MN) and his fellow co-chairs of the Congressional Blockchain Caucus wrote the IRS about issuing guidelines for “reporting virtual currency on tax day.”
In the letter, Rep. Emmer said the IRS “expressed their intent to publish guidance.”
The specific issues the lawmakers asked the tax agency to address are:
- “acceptable methods for calculating the cost basis of virtual currencies”
- “acceptable methods of cost basis assignment and lot relief for virtual currencies”
- “tax treatment of forks”
IRS Commissioner Charles Rettig responded:
“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.”
Shocking! IRS Leaves Crypto in Limbo
IRS Guidance Has Been ‘Unacceptable’
While initial guidance was provided, ambiguity surrounding how taxpayers should calculate and track the basis of their virtual currency holdings is unacceptable, Rep. Emmer added.
Citing a report from Coin Center, the Congressman charged that the 2014 guidance from the tax agency failed to address fundamental tax questions. Repeated requests to the agency for additional clarity have been made by a variety of entities to little avail.
Unclear guidelines and the occasional prosecution of unregulated exchanges have made it difficult for users to know how to act. As a result, few are willing to admit they hold crypto.
There need to be guidelines in place to “ensure the rules of the road are clear to taxpayers and businesses alike.”
IRS’ Version Of “Priority” Could Mean Anything
While Commissioner Rettig said providing clarity for crypto taxation is a priority, who really knows what that means?
In 2014, the IRS issued guidance which treats digital assets like property. Since then, no further direction has been provided. Emmer points out:
“Further, it has been over a decade since the IRS National Taxpayer Advocate identified, in its 2008 Annual Report, that the ambiguous tax treatment of virtual property and currency transactions was one of ‘the most serious problems encountered by taxpayers.'”
Last modified: March 4, 2021 2:33 PM