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IRS Clarifies On Crypto Taxes; Users Seek Tax Software for Simplification

IRS Clarifies On Crypto Taxes; Users Seek Tax Software for Simplification

The latest tax guidance from the US Internal Revenue Service (IRS) has sparked many concerns for crypto users to address. The biggest confusion is related to the pre-2018 crypto transactions, which was recently clarified by an IRS staff member.

The question of pre-2018 taxes

When the IRS asked users to pay their taxes, it didn’t clarify how a previous tax amendment would apply to the new asset class. More specifically, the IRS overhauled the tax rules in December 2017 according to which taxpayers could defer tax payments on gains made by selling a property. For this exception to apply, the taxpayer had to use the proceeds of a sale to buy a similar property.

IRS Clarifies On Crypto Taxes; Users Seek Tax Software for Simplification

IRS attorney with the Office of Associate Chief Counsel (Income Tax and Accounting) Suzanne Sinno explained the new rules recently. During last week’s American Institute of CPAs conference on Wednesday, she said that taxes on like-kind exchanges in cryptocurrencies could not be deferred. This rule applies to all transactions, regardless of when they took place. She said,

“It is the agency’s position that like-kind exchange principles were never applicable to cryptocurrency.”

According to section 1031 related to like-kind exchanges, the rules apply only to the exchange of real property that is intended for business, investment or trade use. It doesn’t apply to digital properties or properties bought only for the purpose of sale.

What about airdrops?

The IRS has yet to clarify how it will treat crypto airdrops. Several crypto companies give away their coins for free as part of their marketing campaigns or to build up buzz around their coin. Bloomberg reported that Sinno’s colleague, attorney Christopher Wrobel, confirmed that the revenue ruling isn’t applicable to promotional airdrops. He noted that the agency hasn’t decided if it should treat these transactions as taxable. The IRS shared its latest tax guidance on cryptocurrency in October.

While the IRS has tried to simplify taxation for cryptocurrencies, users are still looking for good software that could help them track transactions, calculate taxes and file their returns. Tax preparation platforms are witnessing increased interest from crypto users. According to Beartax CEO Vamshi Vangapally and Tokentax cofounder Zac McClure, their site traffic has nearly quadrupled.

McClure noted that people who haven’t received a crypto tax notice from the IRS could also be interested in finding out their tax liabilities. The IRS has recently started stricter imposition of tax laws on the crypto sector, sending over 10,000 letters to Coinbase users asking them to pay their dues.

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      Sherlock Gomes loves to write and express his views on anything related to Crypto. He has been covering Crypto for more than two years now. He likes Bitcoin and Cardano. He also writes on Finance, Healthcare, and Technology among other stuff. He can be reached by e-mail on sherlockg@insidebitcoins.com