Anyone who’s bought and traded in cryptocurrencies in the U.S. now have a much clearer picture of their tax responsibilities. A lawyer from the Internal Revenue Service (IRS) has clarified that taxpayers won’t be able to defer taxes on exchanges of cryptocurrency, including transactions that occurred before 2018.
Suzanne Sinno of the IRS Office of the Associate Chief Counsel (Income Tax and Accounting) made these comments at the American Institute of CPAs conference in Washington D.C., Bloomberg Tax reports. This helps correct the notion that activity from before 2018 could be used to help postpone paying taxes on gains made by referring to re-investments in a similar property, namely digital assets.
With changes made to the tax code in 2017, some tax experts speculated that this rule would only apply to trades beginning in 2018, when the laws kicked in. Sinno clarified that the IRS position has been that like-kind exchange principles were never applicable to cryptocurrency, so taxpayers who had losses before 2018 still have to just swallow any losses before that point.
The IRS has stressed though that the IRS is mostly concerned with crypto users who are avoiding taxes entirely, which seems to suggest that those making a best effort to report on their income are not their biggest concern.
Attorney Christopher Wrobel, from the same office as Sinno, also spoke about the IRS stance on taxing hard forks and air drops. He clarified that income gained from a hard fork is taxable, as the IRS has stated in the past, but that airdrops, where a company gives away tokens as a marketing stunt, don’t fall under the same portion of the tax code, and have no decision as of yet if they should be considered taxable.
This adds to a recent notice from the agency that hard forks aren’t considered taxable if no new tokens are received.
If you received a letter from the IRS about your taxable crypto income, it would be a good idea to do something about it. The agency has warned that those avoiding their taxes are potentially criminally liable, and if the tax man doesn’t get their share, there’s bound to be trouble.
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