The Internal Revenue Service (IRS) is working on releasing comprehensive guidance to address the taxation of cryptocurrencies in “12ish months”, according to Julie Foerster. Foerster, the Project Director for Digital Assets for the IRS, spoke at Consensus Friday about the IRS’ efforts to clarify crypto taxes.
Foerster expressed that the IRS is looking to work with the industry closely to issue sensible guidance and eliminate ambiguity. It is important to note that this was not an official announcement by the IRS, but rather an opinion expressed by Foerster.
This news comes in response to the rapidly growing interest in digital assets and the need for clear, concise, and effective regulatory policies to guide taxpayers in the US.
Foerster mentioned that she and her 5-person team were speaking with industry experts at the convention to be able to issue more informed guidance. She added that “We are engaging with you all so we get it right and build a plan.”
In recent years, the cryptocurrency market has seen a significant surge in popularity and value, with more people investing in digital currencies and businesses integrating blockchain technology into their operations.
As the market expands, the need for a robust taxation policy has become more pressing. The current lack of clarity has left taxpayers and businesses uncertain about how to report their crypto transactions. This can lead to potential non-compliance issues and revenue loss for the government.
The IRS first released guidance on crypto taxes in 2014 and the basics haven’t changed since although the scale of enforcement and audits has ramped up considerably. Cryptocurrencies (and other digital assets) are taxed like property.
The first hint at what this guidance may contain came as a proposal in March. The IRS published a document stating that it was considering taxing non-fungible tokens (NFTs) like other collectibles including stamps and wine.
Because collectibles are taxed at a noticeably higher capital gains rate than most property is subject to, this may have a detrimental effect on the NFT market. The IRS is still looking for comments on the proposal so this may change or be scrapped entirely before guidance is released.
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