As America's Tax Day approaches this Monday, April 15, U.S. lawmakers have written to the Internal Revenue Service (IRS) to ask for clarification regarding tax on cryptocurrencies. They have requested “guidance on the consequences and basic reporting requirements for taxpayers that use virtual currencies.” However, despite the cross-party effort of 21 members of Congress, it is unlikely it’ll happen before the deadline.
The IRS issued preliminary guidance regarding cryptocurrencies in 2014. However, it does not address new advancements such as hard forks. While the IRS admitted updates were needed over two years ago, it has failed to provide further guidance since.
The Congress members' letter outlines three urgent questions.
- Acceptable methods for calculating the cost basis of virtual currencies. Which specific methods does the IRS consider to constitute “a reasonable manner that is consistently applied,” as required by Notice 2014-21?
- Acceptable methods of cost basis assignment and lot-relief for virtual currencies. Do taxpayers need to use specific identification whenever they spend or exchange virtual currency, or are other methods, such as first-in-first-out or average cost basis, acceptable as well?
- The treatment of forks for taxpayers that use virtual currencies, such as the 2017 hard fork of the Bitcoin blockchain
The bipartisan letter includes signatures by U.S. Reps. Tom Emmer, Bill Foster, David Schweikert, and Darren Soto. They have asked the IRS to issue a response by May 15, exactly a month after Tax Day.