The IRS hosted a daylong session with industry stakeholders, tax experts and regulators to have a discussion over some questions including exchanges, technology, the tax filing process and regulatory guidance. The regulatory agency has only produced two pieces of binding guidance and published some non-binding documents for taxpayers and financial advisors in a decade. Financial advisors reportedly want to ensure they don’t have their clients fulfill costly reporting requirements just to unearth they didn’t need to. But according to IRS, it has gotten a number of questions from several agency employees regarding taxing process, technical factors of blockchain and difference between privacy coins and cryptocurrency. Even after the event being a positive step, there is no hope any new guidance.
Sophistication about calculation
In the event, question over calculation of costs and transferred coins, whether microtransactions can be exempted was risen. According to an opinion, publishing of guidance would be more convenient than just these frequently-asked-questions. A number of cryptocurrencies still don’t fall neatly into any existing tax laws counted as a problem creating confusion. Tax filing process is unknown because of the absence of rules. Questions circulated among industry members that whether they develop software that conducts tax calculations or they were from exchanges. But they didn’t talk about the way of how taxpayers can calculate the value of their digital assets.
The IRS said individuals who buy and sell crypto at different times can use a method like ‘’first-in-first-out’’ but this one may not be allowable. On the contrary to that, the tax code says users ‘’should use specific identity’’ meaning the cost should be calculated on the actual specific bitcoin being transacted. Though there are conflictions yet left, IRS should come out with clarity and guidance.
Complexity rises with several questions circulated among IRS officials and what would be the result. Some were thinking having everyone in a room together was likely a good thing even though different people have different experience and opinion regarding the space. Whether IRS will be able to provide a clear guidance is unknown but it can take some measures to immediately clarify its existing guidance.
An industry member said that just moving its list of FAQs into the Internal Revenue Bulletin would provide some clarity. But it is partially true that turning questions appeared on the FAQ could financial advisors and taxpayers the comfort of knowing they were looking at proper legal guidance and would hinder them from inadvertently breaching the tax code.