The IRS has focused on cryptocurrency in recent months after issuing no guidance in the area in five years. The IRS sent letters to more than 10,000 holders of cryptocurrency earlier this year warning that they may be subject to penalties for skirting taxes on their virtual investments.
“We want to help taxpayers understand the reporting requirements as well as take steps to ensure fair enforcement of the tax laws for those who don’t follow the rules,” IRS Commissioner Chuck Rettig said in a statement.
The IRS in 2014 classified all virtual currencies as property for tax purposes, meaning the assets -- much like a home -- can be sold at a profit and trigger tax implications.
Clients Worried
Jason Tyra, a certified public accountant in Dallas focused on cryptocurrency, said he expects to see more people seeking tax help on their investments. The IRS is showing more interest in enforcing cryptocurrency rules, which likely means more audits, he said.
“I’m just waiting for the other shoe to drop here,” Tyra said. “I think we’ve been advising clients correctly, so I’m not really worried about it, but clients are very worried.”
The rules just begin to answer the broad range of questions that cryptocurrency investors face when trying to pay taxes on an asset that’s rapidly changing as technology advances. The guidance won’t close the door on future questions, said Dashiell C. Shapiro, counsel at Shartsis Friese LLP in San Francisco.
The IRS and Treasury will probably wait for Congress to weigh in before providing an extensive “top-to-bottom framework” for how to treat cryptocurrency, Shapiro said. Officials at IRS and the Treasury Department believe “We do need to provide guidance, but we really need to put the ball back in Congress’s court,” he said.
This article was provided by Bloomberg News.