US Tax Authority Prioritizes Issuing Guidance on Cryptocurrencies
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The United States Internal Revenue Service (IRS) has prioritized issuing tax guidance on cryptocurrencies, according to a May 16 letter.
The letter from the IRS comes in response to a request from 21 representatives in Congress, including Rep. Tom Emmer, to provide clarity on reporting taxes on cryptocurrency holdings. In the letter to the tax authority, the representatives then claimed that there is still “substantial ambiguity on a number of important questions about the federal taxation” of the emerging type of asset.
In the new addressed to Emmer, IRS Commissioner Charles Rettig stated that the agency “made it a priority” to issue relevant guidance. The instruction will specifically cover issues such as acceptable methods for calculation cost basis, cost basis assignment; and tax treatment of forks.
Rettig also notes in the letter that virtual currency is treated as a property and existing tax principles applicable to property transactions apply to cryptocurrency transactions as well. The commissioner further reveals that the IRS has been working with industry players to define areas where guidance is needed.
Emmer previously introduced three bills to support blockchain technology and cryptocurrencies. The bills would prompt the federal government to provide a “simple legal environment,” and restrict fines against individuals who report forked digital assets until the IRS presents formal guidance on the appropriate means of reporting. According to Emmer, “taxpayers can only comply with the law when the law is clear.”
In January, Emmer and Congressman Darren Soto submitted a bill entitled to “provide a safe harbor from licensing and registration for certain non-controlling blockchain developers and providers of blockchain services.” The bill would exempt companies providing non-custodial crypto services from certain state money transmitting laws.