Tax agencies globally are starting to issue guidance on cryptocurrencies to ensure people pay taxes on their crypto investments
The United States Treasury and the Internal Revenue Services (IRS) have reiterated their desire to issue tax guidance on cryptocurrencies. The guidance is expected to make it easy for cryptocurrency investors to report and pay their taxes.
The Treasury and the IRS published their Priority Guidance Plan for the 2021-2022 fiscal year last week. According to the plan, designing brokerage rules for cryptocurrencies is one of the major priorities of the agencies.
In the tax administration section of the document, the IRS said regulation regarding information reporting on cryptocurrencies under Section 6045 is a priority. Section 6045 comprises guidance on brokerage reporting. However, at the moment, there is no clear and unified regulation for cryptocurrency exchanges pertaining to virtual currency tax reporting.
Currently, the investor is burdened with reporting their activities on cryptocurrency investments. However, traditional brokerage platforms are now required to send forms to their users and the IRS detailing the year’s activities. This is expected to make it easier for the consumer to report their trading activities to the IRS. However, this specific regulation is not in place for cryptocurrencies and exchanges at the moment.
Tax agencies in various parts of the world are starting to roll out guidance to investors and cryptocurrency trading platforms. The cryptocurrency market has experienced massive growth over the past few years and is now worth over $2 trillion.
The huge amount of capital present in the cryptocurrency space is the reason why tax agencies are now serious about investors and traders reporting their earnings. The IRS has maintained over the past few months that more clarity surrounding cryptocurrency broker reporting is coming. However, the agency is yet to reveal when it intends to publish this guidance.
The IRS had requested an extra $32 million in its 2022 fiscal year budget to increase its cryptocurrency and cyber operations. IRS chief Charles Rettig said expanding their coverage of the crypto space will help close the tax gap for the agency.