New year, new tax responsibilities. For crypto holders, it’s time to tally your gains and losses and determine what you owe the IRS. And with tax season comes new crypto tax law proposals, like the Virtual Currency Tax Fairness Act.
House of Representatives Mulling Over Crypto Tax “Fairness Act”
Under current law, every time crypto is used to purchase goods or exchanged for anything of value it is a capital gain or loss, subjecting them to higher tax reporting responsibilities. This means that even if you used bitcoin to buy something as small as a cup of coffee, you would have to calculate capital gains or loss and report the transaction to the IRS. If, however, a new bill making its way through Capitol Hill, certain crypto investors may enjoy some tax relief in coming years.
A bipartisan effort, the Virtual Currency Tax Fairness Act of 2020 (H.R. 5635) would amend the 1986 IRS code and exclude gross income gain from “the disposition of virtual currencies.” The bill also absolves crypto holders with gains under $200 from having to report their token-related gains to the IRS. Some people think the $200 bar is low. With some pressure, interested parties may be able to lobby a higher benchmark.
The Virtual Currency Tax Fairness Act, however, would work well, as currently written, for people in the crypto market who only buy and never sell.
Related: The IRS has issued several clarification memos, which you can read more about here.
Connect with a Cryptocurrency Tax Lawyer
Last year, the IRS made it clear that they intend to funnel considerable resources to crypto-related tax collection. Thousands of people have already received inquiry letters from the agency (link), and experts expect efforts to double this year since the IRS has a better understanding of the market.
Our team of cryptocurrency tax lawyers has been involved in the niche since the early days. We’ve worked on countless tax returns that include complex crypto transactions. Plus, we know all the credits, deductions, and strategies that will keep your profits safe.
Give us a call today. Let’s talk about how we can protect your assets and lower your tax obligations. Find out why our clients rate us a 10 out of 10 on respected lawyer review website AVVO.com.