Despite the complexity associated with crypto taxation, the Internal Revenue Services (IRS) has indicated that it is set to issue new crypto taxation guidelines. The agency classifies the digital asset as a property and not currency, it is possible to impose a tax when traders buy or sell the asset.
The move has far-reaching implications and the IRS will use rules that govern transactions related to properties and in particular collectible coins and vintage vehicles. However real estate tax rules will not be applicable in this case.
Any transaction will be measured in USD and must be reported to make taxation seamless. Every time a crypto user buys a product using crypto, the digital coin will be available in US dollars equivalent to the digital asset used and this will result in fair market value.
While addressing the Emmer, Charles Retting, the IRS Commissioner says the agency “had it as a priority” to issue befitting crypto guidelines. He goes on to add that the move will address issues around “acceptable methods for cost calculation, cost-based allocations, and overall crypto tax handling”.
To make the process easy, all transactions will be reported in US dollars which will act as fair market value. However, a lot is anticipated on how the agency will handle the crypto volatility and dreaded market manipulation.
Investor Unwilling to Report Taxes
In a recent Twitter survey, it has been revealed that a bi number of crypto investors are ready to risk the tough sanctions in the event they are caught with unreported earnings by the IRS. The assumption is that the agency systems are not advanced enough to track some transactions due to the anonymity of the crypto underlying technology.
Crypto investing is a risky venture since it is a new market riding on new technology and it is still in the “beta” stage and many crypto users have a wide range of loopholes to evade being taxed. However, IRS will use the exchange network to gather the information that will help in comparing reported and unreported transactions.
These will strengthen the accuracy of profits and losses. Failure to report accurately will result in their accounts being audited and no one is ready to take that direction. It is a complex venture and crypto users are waiting to see how the guidelines will play out.