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Regulatory Series on Cryptocurrencies: IRS Sheds Light on Scope and Treatment of Cryptocurrency Taxation
Of late, the tax authorities, across the globe, have been constantly shedding light on crypto-taxation norms.
Recently, the British tax, payments and customs authority, Her Majesty’s Revenue and Customs (HMRC), has updated its cryptocurrency taxation guidelines for businesses and individuals. The U.K. government tax agency who administers taxes in conjunction with the fiscal policy making, have recently updated the tax guidance.
The U.S. Internal Revenue Service (IRS) has cleared the grey shaded area as to how the cryptocurrency transactions are to be treated for the tax assessment and their scope.
As part of a wider effort to assist taxpayers and to enforce the tax laws in a rapidly changing area, the Internal Revenue Service today issued two new pieces of guidance for taxpayers who engage in transactions involving virtual currency.
Thereby, the tax authority fortifies its scope of enforcement, many of crypto participants, be it traders/investors, be it crypto-exchanges, miners are keen on the conducive tax software to assist them, especially including the promotional airdrops.
In the recent past, the IRS has also divulged their association with nations’ agencies to fix tax evasion from cryptocurrency users. The troop of five-countries, come together, which is known as the Joint Chiefs of Global Tax Enforcement or J5, that includes the Canada Revenue Agency (CRA), the Dutch Fiscale Inlichtingen- en Opsporingsdienst (FIOD), the British HM Revenue and Customs (HMRC), the Australian Criminal Intelligence Commission (ACIC) & Australian Taxation Office (ATO), and the American Internal Revenue Service Criminal Investigation (IRS-CI).
The tax authority (IRS) is quite cognizant about some taxpayers dealing with digital currency transactions might have miscarried to report their income and pay the resulting tax or did not report their transactions properly. The IRS is actively addressing potential non-compliance in this area through a variety of efforts, ranging from taxpayer education to audits to criminal investigations.
IRS began mailing educational letters to more than 10,000 taxpayers who may have reported transactions involving virtual currency incorrectly or not at all. Taxpayers who did not report transactions involving virtual currency or who reported them incorrectly may, when appropriate, be liable for tax, penalties and interest.