IRS to Publish Crypto Tax Guidance for These Three Areas
The U.S. Internal Revenue Service aims to publish a new guidance on taxing cryptocurrency transactions “soon,” according to IRS Commissioner Charles P. Rettig.
He was responding to Congressman Tom Emmer’s bipartisan letter, led along with his fellow co-chairs of the Congressional Blockchain Caucus calling on the IRS to issue guidelines for reporting virtual currency.
In his response, Rettig outlined three areas that the IRS intends to publish guidelines for:
- acceptable methods for calculating cost basis,
- acceptable methods of cost basis assignment,
- and the tax treatment of forks.
“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,” the Commissioner said.
It would be the first tax guidance for cryptocurrency since 2014, when the IRS issued guidance which treats digital assets like property.
As reported in April, crypto-focused research and advocacy institution Coin Centre outlined six questions that the IRS needs to answer about taxing cryptocurrency transactions:
- How should taxpayers distinguish between convertible and non-convertible virtual currency, and what is the significance of that distinction for tax purposes?
- How should taxpayers calculate the fair market value of virtual currency?
- How can taxpayers determine the cost basis of virtual currency dispositions?
- How should taxpayers substantiate the value of cryptocurrency donations?
- How should taxpayers account for tokens they receive from a network fork or airdrop?
- How should taxpayers account for cryptocurrency when filing information returns?