“IRS Announces Plans to Issue New Crypto Tax Guidance” – What it Means for the Industry By PHILIPP BEHRENDT
At the end of last year, the IRS has established a digital asset project office to address crypto-related issues, and it has already begun business. The move reflects the IRS’s growing recognition of the importance of cryptocurrencies and the need for clear guidelines for their taxation.
Julie Foerster, who leads the office, recently spoke at Consensus 2023 in Austin, Texas, and announced the IRS’s plans to issue crypto tax guidance within the next 12 months without going into the details on what this guidance will entail.
Foerster also emphasized the need for greater communication and collaboration between the IRS and the crypto community. Her team engaged with attendees at the event to gather insights and feedback, acknowledging that the crypto landscape is constantly evolving. Furthermore, the IRS is in talks with some of its foreign partners about crypto taxation best practices, indicating a desire to create international standards.
However, it’s not just the IRS that’s looking into the crypto sector. Other bodies, including the US House Financial Services Committee and House Agriculture Committee, are holding joint public hearings to put together legislation to oversee the crypto sector. The legislation will address both securities and commodities regimes and issues that are hard to fix on either side.
Sen. Cynthia Lummis, a panelist during the session, said she looked forward to coordinating those efforts with Rep. McHenry. After last year’s widely acknowledged attempt of a sweeping crypto bill, known as the Lummis-Gillibrand Digital Asset Bill, ran out of time before the legislative session ended, the House of Representatives seems to be the more promising steppingstone for new legislation. Sen. Lummis said if the House moves first on crypto, it would “improve our chances” in the Senate.
It is clear that the US lawmakers have some catch-up to do. On the other side of the ocean, the EU has launched its regulatory sandbox for blockchain projects and recently passed the new crypto licensing regime, Markets in Crypto-Assets, known as “MiCA”. The recent passages of law, however, cannot gloss over that lawmakers all over the world have difficulties in keeping up with the rapid pace the crypto industry is moving, which grows not only in uses but also in complexity from day to day. More guidance on how to report the taxes in this complex industry correctly is necessary and very welcome.
Taxpayers can be assured, though, as the IRS steps up its guidance on how to comply with the tax rules related to virtual assets, it will also increase the enforcement efforts related to virtual assets to ensure compliance. With more clarity on tax reporting requirements, the use of penalties and criminal prosecution will rise as well.
In conclusion, the IRS’s announcement of new crypto tax guidance is a positive step for the industry, signaling a growing recognition of the importance of cryptocurrencies and the need for clear guidelines. As the sector continues to evolve globally, it’s vital that the tax authorities work closely with the crypto community to establish best practices and with foreign partners to implement international standards. The potential for new legislation and regulations will likely lead to more litigation in court, but taxpayers can take steps now to ensure they are compliant with existing rules and avoid penalties.
 See https://www.coindesk.com/business/2023/04/28/crypto-tax-plan-could-come-in-12-ish-months-says-irs-official/.
 See https://www.coindesk.com/policy/2023/04/28/us-house-will-have-crypto-bill-in-2-months-mchenry/.
 See https://www.congress.gov/bill/117th-congress/senate-bill/4356/text.