Coin Center, a non-profit research and cryptocurrency advocacy group, is asking Congress to enact legislation that will provide investors in Bitcoin (BTC) a safe a harbor on federal taxes incurred as the result of software forks. The Washington DC-based organization’s CEO reasoned that cryptocurrency investors, who have made effort to correctly pay taxes on funds gotten from blockchain forks, shouldn’t be penalized. This is because the Internal Revenue Service has not provided a better solution.
However, much of the classification is clear enough for someone who purchases BTC and later sells it for a profit. On the other hand, it provides no advice on how investors should treat the funds they receive. When a single cryptocurrency network splits into many independent blockchains, it leaves the current coin-holders with ownership of new funds that they may not even need.
The CEO Of Coin Center, Jerry Brito, Elaborates
“In the absence of useful guidance, taxpayers have filed their return in a state of genuine confusion about the state of the law. Unfortunately, this puts them at risk of assessing penalties on top of their tax liability. Whenever they get the law wrong. It would be unconscionable for the IRS to issue guidance answering these open questions. Then retroactively penalize those taxpayers who didn’t correctly guess what the answers would be.”
Some investors from the U.S. seem to have declined reporting requirements. This is bringing about the IRS to wage a targeted campaign in order to unveil BTC tax cheats. Brito states that it’s not fair for the agency to take punitive action against investors who have tried reporting their cryptocurrency investment income accurately, but came up short.
Coin Center Suggestions
The Coin Center, through its CEO, mentioned that the IRS has remained silent on the issue. Congress should act to provide taxpayers, who made a good effort to report their cryptocurrency income, with safe harbor. This is to prevent the taxpayers from facing any penalties on top of covering their tax liability.
Brito concluded that, “Taxpayers can only comply with the law when the law is clear. Confused taxpayers shouldn’t be penalized until the IRS issues the sorely necessary guidance that tax practitioners have been clamoring for. For being justifiably uncertain about how to report their cryptocurrency-derived income.”
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