U.S IRS Developed Comprehensive Cryptocurrency Tax Framework
The deadline to file tax in the United States is fast approaching. But still, the Internal Revenue Agency (IRA) does not have a comprehensive cryptocurrency tax framework in place. This has prompted 21 lawmakers to write, again, to the IRS requesting for a simpler way for traders to declare their crypto tax.
Why They Need Clarifications
As per the argument presented by the lawmakers, crypto traders face difficulties when filing their tax since the IRS does not have a uniform gauge for all virtual currencies. The revenue authority provided information on cryptocurrency tax five years ago in 2014. The lawmakers are requesting that these laws be updated to reflect the current market status.
Representative Darren Soto, Warren Davidson, Tom Emmer, Ted Budd, and David Schweikert, are among the lawmakers who signed the latest letter to the Internal Revenue Agency. This is the second letter the lawmakers are sending in a span of more than six months.
The letter noted that cryptocurrency taxation in the United States still has some grey areas that need to be ironed out. Part of the things the lawmakers need clarification on include:
“Acceptable methods for calculating the cost basis of virtual currencies. Which specific methods does the IRS consider to constitute a ‘reasonable manner that is consistently applied,’ as required by Notice 2014-21.”
Additionally, the letter requests the IRS to provide guidelines on cost basis assignment methods for virtual currencies. What identifying information, if any, should the taxpayer include when trading cryptocurrencies?
The IRS is also required to provide guidelines on how crypto-focused taxpayers should treat tax on hard forks.
While the letter to the IRS seems like it has captured all the lawmakers’ requests, the lawmakers expressly stated that those were a few of the points they would need the IRS to clarify.
Generally, the representatives are seeking to have the Internal Revenue Authority develop a robust framework that will clarify what taxpayers who deal in cryptocurrencies are obligated to. The IRS has approximately 30 days to respond to the letter.
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