Internal Revenue Service Will Soon Issue Tax Guidance On Cryptocurrencies

News | May 21, 2019 By:

The United States Internal Revenue Service (IRS) will soon issue additional guidance on crypto taxation.

In April of this year, a bipartisan group of 21 Members of Congress, led by Rep. Tom Emmer, sent a letter to the IRS urging the agency “to issue needed guidance on the tax consequences and basic reporting requirements for taxpayers that use virtual currencies” in the United States.

In response, IRS Commissioner Charles P. Rettig said that that the agency “made it a priority” to issue relevant guidance. The commissioner acknowledged that there are “areas where needed and helpful additional guidance can be provided.”

“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,” Rettig said. “Specifically, your letter mentions (1) acceptable methods for calculation cost basis; (2) acceptable methods of cost basis assignment; and (3) tax treatment of forks. We have been considering these issues and intend to publish guidance addressing these and other issues soon.”

Commenting on Rettig’s letter, Rep. Emmer said that he is glad to hear of the IRS’ plans to issue guidance on this important issue.

“Taxpayers deserve clarity on several basic questions regarding federal taxation of these emerging exchanges of value,” Rep. Emmer said. “I look forward to seeing their forthcoming proposal, and working together to serve the American taxpayers.”

In 2014, the IRS issued guidance on how taxation should be applied to cryptocurrencies, which stated that cryptocurrency is treated as property and existing tax principles applicable to property transactions apply to crypto transactions. Notice 2014-21, however, does not address the tax treatment of forks, chain splits, airdrops, giveaways, or other similar activities that are unique to blockchain technology and cryptocurrencies.