The IRS has contributed the development of a guide on taxation of cryptocurrency brokers to the Treasury Department’s priority plan for 2021-2022.
The Internal Revenue Service (IRS) and the US Treasury Department have published a Priority Action Plan 2021-2022. The plan is drawn up annually to identify and identify the most important tax issues that need to be addressed through regulations, income orders, tax notices and other administrative directives.
Current tax rules for traditional financial instruments require brokers to provide the IRS with information about securities and commodities transactions. Brokers are required to report not only sales proceeds, but also the value of financial instruments, corporate actions or transfers.
In the current cryptographic landscape, the tax reporting format for cryptocurrency brokers is not defined and requires clarification on the procedure for registering tax events and providing information for taxation. The IRS has scheduled by June 30, 2022 to prepare a guide on how cryptocurrency brokers report virtual currency transactions.
IRS statistics show that compliance rates in the absence of tax information can be as low as 37% and as high as 93% when cross-tax notification is implemented. In drafting new rules, the IRS plans to enforce cryptocurrency taxation by raising taxpayer awareness and the constant threat of potential audits.
The cryptocurrency community has been mixed about the IRS initiative and compares it to the infamous infrastructure bill that was passed by the US Senate in August.
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