- Congressmen had made demands for information
- IRS says the matter is on its priority list
- IRS hasn’t issued clear guidelines yet
American cryptocurrency investors could soon get more clarity on how the country’s tax authority will tax their holdings. IRS has said it is making the issue a matter of priority.
The positive acknowledgment by the United States Internal Revenue Service (IRS) was given in a May 16, 2019 response to members of Congress who had fired a list of demands to the agency. The IRS said it had prioritized issuing tax guidance on cryptocurrencies, but the agency has a history of moving at a snail’s pace.
Come Clear On Acceptable Methods
Congressman Tom Emmer together with his fellow co-chairs of the Congress Blockchain Caucus had written to IRS regarding giving guidelines on “reporting virtual currency on tax day.” In response, Rep Tom Emmer said that IRS had expressed their intent on publishing guidance following the demand for answers by the lawmakers.
The Reps had asked IRS to come clear on the acceptable methods for calculating the cost basis of virtual currencies, acceptable methods of cost basis assignment and lot relief for virtual currencies and tax treatment of forks. In response, IRS commissioner Charles Rettig stated:
“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.”
Few People Were Willing To Admit
Congressman Tom Emmer had in his letter to IRS cited a Coin Center report that said the 2014 guidance from the agency did not address fundamental questions on taxation. Sadly, though, he said repeated requests for the agency to provide additional clarity by several entities had not borne fruit.
The unclear guidelines and the occasional prosecution of unregulated exchanges, he said, had made it difficult for crypto users to know how to act, meaning that very few people will admit they hold any crypto. Emmer asked that clear guidelines are put in place to “ensure the rules of the road are clear to taxpayers and businesses alike.” Emmer’s letter pointed 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.”
Lack of Clear Guidance
The United States government classifies cryptocurrencies and digital tokens as commodities meaning that they are subject to capital gains tax laws. However, there are still a lot of grey areas for those who have gains and losses to report from their cryptocurrency investments.
Apart from the short memo issued in 2014, the IRS has issued no clear guidance on the subject, although the cryptocurrency market cap keeps growing. According to Emmer, “taxpayers can only comply with the law when the law is clear.”