Crypto Tax Uncertainty in the US
Written 24th May, 2019
In response to the frequent requests to provide more clarity on reporting taxes on cryptocurrency, the IRS has published a letter claiming that they will ‘prioritize issuing tax guidance’. More specifically, the letter states that emphasis will be placed on “(1) acceptable methods for calculating cost basis; (2) acceptable methods of cost basis assignment; and (3) tax treatment of forks” when considering the content of the soon-to-be published guidance. Also included in this letter is both a re-affirmation that virtual currency is seen as a property, and a recognition of the constant evolution of virtual currency as a medium of exchange and investment. The letter seems to be simply serving as an assurance that the IRS is considering how virtual currency in all its forms should be treated, despite the current state of uncertainty.
A Difference in Opinion
A possible reason for the delay in publishing any guidance is the mixed opinions as to the acceptance of virtual currency. Congressman Brad Sherman (D-CA) recently called for a ban on cryptocurrencies, claiming that they diminish the power of the United States’ sovereign currency. Others, such as the 2020 presidential candidate, Andrew Yang, is a strong advocate as he stated that “blockchain needs to be a big part of our future”. Eric Swalwell, another 2020 presidential candidate, is also in favor of cryptocurrency stating that “blockchain can change the world, if we let it”. Other 2020 presidential candidates, such as senator Elizabeth Warren, remains a cryptic. Others, such as current President Donald Trump, remain silent on their views of virtual currency.
Bills and Acts
As the mixed reviews of the involvement that virtual currency should play in the United States and its government continue, there are many bills being brought forth in attempts to better regulate cryptocurrency. Of course, there is the new Token Taxonomy Act, which will “create a tax exemption for exchanges of one virtual currency for another” and to “create a de minimis exemption from taxation for gains realized from the sale or exchange of virtual currency for other than cash”. There are also three other bills introduced by representative Tom Emmer (R-MN): “Resolution Supporting Digital Currencies and Blockchain Technology”, the “Blockchain Regulatory Certainty Act”, and the “Safe Harbor for Taxpayers with Forked Assets Act”. Essentially, these three bills would cause the federal government to provide a “simple legal environment” until the IRS provides published guidance (see above) as “taxpayers can only comply with the law when the law is clear”.
