Treasury and the Internal Revenue Service (IRS) have reaffirmed their determination to tax cryptocurrency guidance.
The authorities presented their Priority Guidance Plan for the fiscal year 2021-2022 on Thursday, and developing cryptocurrency brokerage rules remains a priority. The Tax Administration section of the plan lists one such priority as “Regulations relating information reporting on virtual currency under 6045.”
Under the Tax Administration portion of the previous year’s guidance plan, “Proposed regulations regarding information reporting on virtual currency under 6045” was also named as a priority.
The instruction contained in Rule 6045 pertains to brokerage reporting. There is currently no consistent regulation governing exchanges that deal with virtual currency tax filing. Though the reporting burden ultimately falls on the individual, traditional exchanges are required to deliver documents to users and the IRS outlining the previous year’s trading activities, which makes it easier for the consumer to record trade activity to the tax watchdog. This is not the case for cryptocurrency at the moment, however, some exchanges do submit 1099 forms when possible.
The IRS has been progressively improving its crypto tools, recently requesting an additional $32 million to expand its crypto and cyber activities in its fiscal year 2022 budget report. IRS Commissioner Charles Rettig said that cracking down on cryptocurrency misreporting could help close the tax gap or the unreported amounts of taxable funds.
The tax agency has often stated that greater clarity about crypto broker reporting will be forthcoming, however, the timing of this guidance remains unknown. Many anticipate the IRS would require exchanges to report using Form 1099B, as it, unlike other 1099 forms, tracks the cost basis of the assets, which is critical when computing capital gains and losses for cryptocurrency. However, this instruction has yet to be implemented, and the agency is now reverting to this year’s priority list.
The current US Senate infrastructure bill casts further doubt on who qualifies as a “broker” in the crypto context. Without additional guidance from the IRS, this might make tax codes even murkier for those seeking to declare their digital assets. The IRS will need to define who qualifies as a broker as it writes guidelines under rule 6045. Bloomberg reports that the Treasury now argues that the definition will apply only to trading platforms in upcoming guidelines.
Also Read: NASCAR Announces The Launch Of NFTs And Its Own Marketplace
Wallets