8 Congress Reps Send Letter to IRS Urging Further Crypto Tax Clarity
Eight members of the United States (U.S.) Congress sent a letter to the Internal Revenue Service (IRS) urging the agency to provide additional clarity on cryptocurrency tax laws.
A letter dated Dec. 20, signed by eight U.S. Congress members, stated:
“We wrote in April of this year urging the issuance of guidance for taxpayers who use cryptocurrencies and we are pleased to see that you have issued guidance and addressed many questions we posed. We are, however, concerned that this recent guidance creates many new questions related to the topics it seeks to address, namely forks and airdrops.”
Cointelegraph reached out to several signatories of the letter but had not received any comment as of press time. This article will be updated as we get more information.
The IRS originally came out with an official ruling on cryptocurrency tax expectations on Oct. 9, 2019, Cointelegraph reported. The ruling noted several points of taxation, including a tax on holders in the event of a cryptocurrency fork or airdrop, regardless of the holder’s knowledge of such an airdrop, or price action following the airdrop.
The Dec. 20 letter detailed that the original Oct. 9 IRS ruling used hypothetical examples for reference that are not actually applicable or plausible, and are therefore unclear for tax-paying citizens.
The letter specified “dominion and control” as relating to forks and airdrops in the Oct. 9 IRS ruling, requesting transparency on the matter. Due to a lack of clarity surrounding each specific point that triggers a taxable event, the receptor of a fork or airdrop could face taxation without any knowledge of such an event.
The letter also points out a lack of guidance within the current IRS ruling regarding various crypto-based finance, including futures trading and interest earned from digital asset deposits, as well as all crypto-based income.
Additionally, the letter asked for decisive action on tax reporting and withholding aspects, such as 1099 form usage, as well as on the topic of retroactive enforcement.
Near the letter’s conclusion, the Congress members wrote:
“[W]e are concerned that the form of the guidance appears to indicate that this is ‘established’ law. We hope that the IRS recognizes this area as new and developing and will allow for reasonable interpretations in advance of the issuance of the most recent guidance.”
Last month, Cointelegraph explained that IRS rules do not permit crypto space participants to use like-kind exchange tax exemptions.