The United States Internal Revenue Service (IRS) is responding to the long-standing questions of crypto investors on how to file in taxes on returns made from cryptocurrencies. This, according to a U.S tax attorney is coming later than expected.
Tax Attorney Belives Tax Collectors Are Playing Catch Up
In an interview session with Bloomberg, Shartsis Friese tax attorney, Dashiell Shapiro said that the United States tax collectors, in an attempt to clear the air on a long-standing issue of how tax payments relating crypto income can be made, are several years late. According to Dashiell,
The IRS is playing a catch-up here. The last time they issued a guideline was in 2014. And now the crypto currency market has turned into a $200 billion market. So, investors have been demanding greater clarity and guidelines on how to propose their cryptocurrency transaction and IRS is responding to this demand but doing so several years too late according to many.
Crypto Exchanges Waiting For Guidance From IRS
According to Dashiell, many people, particularly investors involved with cryptocurrencies have been demanding a clear set of guidelines for many years. IRS responding to the requests at this time only gave time for the crypto industry to become bigger, and getting existing investors to comply with the new guidelines will require an enormous amount of energy and time.
Dashiell further explained that exchanges are reacting to this development by waiting for guidelines from IRS and the IRS is in turn waiting for guidelines from Congress. As IRS believe it is not in their duty to tell crypto exchanges what to do, Congress may have to step in to say that crypto exchanges have to report trades like stock exchanges do.
The New Guidelines on Crypto Airdrops and Forks
According to Dashiell, the new guidelines have been designed to inform investors about when they have to pay taxes especially when new crypto assets are acquired, either by means of trading the previously owned assets or any other means. According to Dashiell,
“The new guideline says if you own bitcoin in your wallet today and magically in your account tomorrow you own bitcoin cash, that may be a moment when you have a taxable income”
The new set of guidelines also poses problems particular to airdrops and network forks. According to the guidelines, when investors receive the forked coins in the event that a hard fork occurs, tax must be paid on the corresponding income of the new cryptocurrencies. This also applies to when coins are distributed via airdrops.
“One unfortunate consequence of this guidance is that third parties can now create tax reporting obligations for you by simply forking a network whose coins you own, or foisting on you an unwanted air drop,” Jerry Brito, executive director of advocacy group Coin Center, said in a statement.
This new guidelines raise questions about what income really is and reveals that the IRS is still confused about crypto. However, Dashiell feels positively about the development.
“Definitely better late than never,” he says.
Do you think the IRS has been successful in bringing about clarity to taxation around crypto? Share your views with us in the comments below!