US Treasury, IRS consider crypto tax guidance a priority

US Treasury, IRS Consider Crypto Tax Guidance a Priority

The US Department of the Treasury and the Internal Revenue Service (IRS) have stated that providing guidance for cryptocurrency taxes is one of their top priorities.

Background on Cryptocurrency Tax Laws

Tax laws related to cryptocurrency have been a source of confusion for many investors since the emergence of the digital asset. The use of cryptocurrencies has grown exponentially in recent years, yet the US government has not provided sufficient guidance on how the tax code applies to these digital assets.

Aside from a general statement released in 2014 about how virtual currencies “should be taxed as property, not currency”, the government has mentioned few details or regulations on crypto taxes until now.

Treasury and IRS Aim to Clarify

In a statement issued on August 3, 2020, the Treasury Department and IRS announced that they are working to provide more clarity on taxation of cryptocurrencies.

The statement made clear the agencies’ intention to provide regulations on topics such as:

• Tax treatment of cryptocurrency transactions
• Reporting requirements
• Compliance with the Foreign Account Tax Compliance Act

Following this statement, the Financial Crimes Enforcement Network (FinCEN) announced a proposed rule that would require cryptocurrency exchanges to report transactions over $10,000 to the IRS.

Next Steps for Taxpayers

The government’s focus on cryptocurrencies has opened up the need for more comprehensive guidance in the future. In the meantime, taxpayers should keep accurate records of all cryptocurrency transactions and be prepared to pay taxes on any profits.

The IRS may take enforcement measures, such as audits, for any taxpayer who does not properly report cryptocurrency profits. It is important for taxpayers to work with a tax advisor if they are unsure of their obligations related to cryptocurrency taxes.

Taxpayers who know they should have reported cryptocurrency gains, but have not done so, should contact a tax attorney and consider applying for the IRS’ Offshore Voluntary Disclosure Program.

With the government’s commitment to clarify cryptocurrency taxes, taxpayers can look forward to a better understanding of their obligations. The United States Treasury Department and Internal Revenue Service (IRS) have jointly declared that they consider providing guidance on the taxation of cryptocurrency to be a top priority.

The joint announcement recognizes the increasing prevalence of cryptocurrencies and their underlying technology, blockchain, with their potential to revolutionize the financial markets. The Treasury and IRS consequently deem it vital to ensure that any economic activity involving cryptocurrency is appropriately reported in order to protect the proper functioning of the U.S. Tax system.

Although the IRS has already released guidanceUpdate for users of digital currencies, the Treasury and IRS acknowledge that this does not yet provide clarity for many current tax issues concerning digital assets. The joint announcement signals a commitment to expand guidance in a timely manner moving forward.

The Department of the Treasury and IRS will seek to develop guidance on topics such as miscellaneous income reporting, compliance with withholding and information reporting rules, and other areas. Additionally, they will continue to work with taxpayers to ensure they are aware of their obligations to report and pay taxes on cryptocurrency holdings and transactions.

This announcement marks a significant step toward creating greater clarity in an area that has not yet been fully addressed by either regulator or investor alike. This increased clarity should in turn provide certainty for businesses and individuals involved in cryptocurrency transactions and facilitate their participation in the legitimate economy. As such, the Treasury and IRS have welcomed any feedback from interested parties on the need for such guidance.

Overall, efforts by the U.S. Government to provide tangible guidance on cryptocurrency taxation are likely to lead to greater investor confidence and overall acceptance of digital assets.