Regulatory Series on Cryptocurrencies: A glimpse at Crypto-taxation, IRS urges for tax guidance for crypto-assets on high priority

The investors in crypto-community likely to have better clarity as to how the IRS is going to levy tax on their holdings, the authority has claimed they are considering it as a high priority.

The latest IRS acknowledgment of crypto taxation issues is in response to members of Congress. Last month, they fired off a list of demands to the agency, leading to a positive response.

Congressman Tom Emmer (R-MN) and his fellow co-chairs of the Congressional Blockchain Caucus wrote the IRS about issuing guidelines for “reporting virtual currency on tax day.”

In the letter, Rep. Emmer said the IRS “expressed their intent to publish guidance.”

The precise matters, the lawmakers asked the tax authority are:

• “acceptable methods of cost basis assignment and lot relief for virtual currencies”
• “tax treatment of forks”
•  “acceptable methods for calculating the cost basis of virtual currencies”

Ernst & Young recently acquired technology assets and related patents of the Crypto-Asset Accounting and Tax (CAAT), the technology developed by Elevated Consciousness. It is reported that CAAT would enable its members firms of the accounting giant as well as their clients to better assess the risk associated with the reporting of taxable income for crypto assets. The CAAT to fetch information about crypto-transactions from predominant exchanges, consolidate data from various sources, which in turn generate reports, such as, Internal Revenue Service (IRS) tax returns exclusively pertaining to crypto-transactions. EY reckons a significant growth in the number of clients owning crypto assets.

The revenues derived out of crypto-transactions are to be categorized under capitals gains and income and that would be reported into Form 1040 Schedule D of the US taxation.

Furthermore, EY also wanted to extend their services in audit in the segment by announcing“Blockchain Analyzer” back in April 2018. They intended to assist enterprises in examining blockchain solutions. Particularly, with a view to collate, conserve and consolidate data from numerous distributed ledgers.

IRS Commissioner Charles Rettig responded: “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.”

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