The U.S. Internal Revenue Service has announced that it will soon issue guidance on how digital currency transactions and investments should be reported when tax payers file their income tax return.
This was informed by IRS Commissioner Charles P. Rettig in reply to a letter by a bipartisan group of Congressmen.
21 lawmakers, led by Rep. Tom Emmer, sent a letter to Rettig last month as the deadline for American taxpayers to file their taxes was approaching.
The current guidance for taxpayers is to mention each and every cryptocurrency transaction executed as they are considered taxable.
IRS treats virtual currency as a commodity or property, and not as real currency, for federal tax purposes, so virtual currencies are also subject to capital gains laws.
Since 2014, no guidance has been issued by IRS on a number of basic reporting questions regarding federal taxation of these emerging exchanges of value.
It has been more than a decade since the IRS National Taxpayer Advocate identified in one of its annual reports that the ambiguous tax treatment of virtual property and currency transactions was one of "the most serious problems encountered by taxpayers."
In the letter sent to Rettig, the lawmakers said that there is still substantial ambiguity on a number of important questions about the federal taxation of virtual currencies.
While the 2014 guidance failed to address fundamental tax questions, ambiguity around basic questions of how taxpayers should calculate and track the basis of their virtual currency holdings remains.
in his response, the IRS Commissioner said, "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."
The letter outlined three areas that the IRS intends to publish guidelines for: acceptable methods for calculating cost basis, acceptable methods of cost basis assignment, and the tax treatment of forks.
Congressman Emmer said in a statement that taxpayers deserve clarity on several basic questions regarding federal taxation of emerging exchanges of value.
Emmer, who is a Republican member of the US House of Representatives for Minnesota's 6th District, is part of the Congressional Blockchain Caucus.
The Congressional group aims to solidify the reporting requirements and legal requirements associated with cryptocurrencies.
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