IRS urged to provide more guidance on cryptocurrency taxation

Posted on 2019-05-06

Members of the United States Congress have written to the Internal Revenue Service (IRS) Commissioner, Charles Rettig, to ask that taxpayers are given “more clarity” around reporting requirements for cryptocurrency investors. IRS guidance on virtual currencies has not been updated since 2014, and the congressmen are asking for “more robust guidance clarifying taxpayers’ obligations when using virtual currencies.”

The letter, sent to Rettig on April 11 and signed by 21 bipartisan members of congress, says that “there is still substantial ambiguity on a number of important questions about the federal taxation of virtual currencies,” and asks for further specific guidance on three areas:

acceptable methods for calculating the cost basis of virtual currencies, fitting the IRS definition of a method as “a reasonable manner that is consistently applied”;

acceptable methods of cost basis assignment and lot relief for virtual currencies; and

the tax treatment of forks for taxpayers that use virtual currencies, such as the 2017 hard fork of the bitcoin blockchain.

The letter follows the April 9 reintroduction of legislation by Warren Davidson, a member of the House Financial Services Committee, providing clarity on some tax and securities laws around cryptocurrencies.

The Token Taxonomy Act of 2019 would apply several new tax provisions to virtual currencies used as a medium of exchange, including expanding like-kind exchanges, currently limited by the Tax Cuts and Jobs Act 2017 to exchanges of real property, to include cryptocurrencies.

The Bill would also ask the Department of the Treasury to issue regulations around reporting information required for virtual currency transactions, as well as clarifying state rulings around blockchain.

However, says law firm Steptoe, such guidance will have to be implemented in a way that takes into account the unique issues endemic in blockchain transactions, if it is to create a fully administrable system.

The signatories of Congress’ letter to the IRS have asked that the body outline how the requested guidance might look in a written response by May 15.

Source: Step.org