IRS To Issue Crypto Tax Guidance
The US Internal Revenue Service (IRS) is planning to change its approach to cryptocurrency and is hoping to issue crypto tax guidance in around a year’s time, according to Julie Foerster, the digital assets project director at the IRS. Speaking at Consensus 2023 on Friday, Foerster said her five-person team was present at the event and talking to people about taxes and what the IRS can do better. She added that the agency needs to have the right tools and the right people to handle the evolving landscape of digital assets.
The US Internal Revenue Service hopes to issue crypto tax guidance ready "in 12-ish months". While not considered to be fiat currency, for federal tax purposes cryptocurrencies are considered property, and as such users are required to report their digital assets activity on…
— Wu Blockchain (@WuBlockchain) April 29, 2023
Proposed NFT Tax
Currently, the IRS treats cryptocurrencies as property for federal tax purposes, with users required to report their digital assets activity on their tax returns. However, Foerster emphasized the need to increase communication between the agency and the crypto community and urged people to comment on a March proposal to tax non-fungible tokens (NFTs) like other collectibles. The comment period closes on June 9.
Foerster also revealed that the IRS is talking to some of its foreign counterparts about best practices for crypto taxation. “I will say that we have had countries come in and want to talk to us,” she said. “Events like this and other events that we’ve attended also are providing us an insight or perspective internationally.”
Approach to Crypto Taxation
Despite these efforts, Foerster acknowledged that the agency needs to find “other ways to get our message across to assist in voluntary compliance.” The IRS hopes to work more closely with the industry to better understand how to handle cryptocurrencies and provide clear guidance for taxpayers. Foerster stressed that her views are her own and not necessarily those of the IRS.
The potential changes to the IRS’s approach to crypto taxation could have significant implications for the industry and users of digital assets. The IRS’s current stance has been criticized for being unclear and potentially hindering the growth of the crypto sector. However, a more nuanced and informed approach could help provide much-needed clarity and guidance for taxpayers.
