The Internal Revenue Service (IRS), America’s top tax authority, has issued a new set of guidelines on cryptocurrency taxation.
And although many are bemoaning the new rules for a lack of clarity among other matters, there are a few silver linings to be found in the IRS’ press release, a new crypto FAQ page and the Revenue Ruling 2019-24 document.
So, without any further ado, here’s the optimist’s guide to the new IRS rulings:
1. The guidelines may be flawed, but the IRS doesn’t seem to have closed the door on them yet. The agency admits cryptocurrency is a “rapidly changing” sector, and stated,
“The IRS is soliciting public input on additional guidance in this area.”
Perhaps if enough people express their discontent with the rulings, the IRS will change its mind. Stranger things have happened!
2. The agency isn’t going to charge tax for gifts. As long as you think you can prove you were given cryptocurrency funds as a “bona fide” gift, you don’t even need to declare them.
3. Individuals don’t need to worry about transferring their funds between their own wallets and exchange accounts. For many crypto traders, this may seem like common sense, but when the taxman is involved, one never knows what regulatory surprises are lurking!
4. The IRS has provided (relatively) clear guidelines on the kind of records traders need to keep. Per the FAQs, the IRS wants American cryptocurrency traders to “maintain, for example, records documenting receipts, sales, exchanges, or other dispositions of virtual currency and the fair market value of the virtual currency.”
5. Charity donations made in cryptocurrency are tax-deductible. So if whomever you are paying your crypto to is a registered charity, you can claim on that.
6. The FAQs appear to legitimize crypto-for-property transactions – good news if you want to buy or sell in cryptocurrency and keep your dealings above-board.
7. The IRS seems to suggest it accepts more than one form of accounting methodology for declarations and calculations. More room for maneuver can’t be a bad thing, right?
8. The IRS says it recognizes cryptocurrency as property. Again, that’s not totally new, but as far as silver linings go, it does show that the United States government realizes that crypto is here to stay!
Of course, there has been no shortage of complaints about the IRS guidance, which does contain a few eyebrow-raising stipulations. Here are a few of the bugbears that already have the crypto-sphere tearing its hair out:
1. Hard forks will all be taxable. Many argue that it hardly seems fair to tax all airdrops in this way. After all, is it really your fault if the token you own suddenly hard forks?
2. Taxing withdrawals in fiat seems fair game to many crypto users. So why does the IRS insist that all sorts of other crypto transactions need to be reported (and taxed)?
@lopp This is why you should only be taxed on to cashout to fiat. And if you have no basis then you get flat tax from zero cost basis
— steve (@btcfeen)
3. There are a lot of guidelines to get through across several pages of documents. Some folk may need an accountant or a tax lawyer to navigate the rulings – and that’s not something that most normal crypto traders can afford.
4. The IRS seems to have gotten itself into a pickle about the correct use of the word “airdrop.” It seems to believe that airdrops only come about as a result of hard forks. It’s hard to see how users won’t get serious headaches trying to understand what kind of “airdrops” they do or do not need to report.
What do you think about the IRS’ new guidelines? Is the glass now half full or half empty when it comes to crypto tax in the United States? Let us know in the comments below, or via our Twitter, Facebook or Telegram channels – we’d love to hear your thoughts!