New revisions to the US tax code now makes coins received from chain splits, such as the Bitcoin Cash and Bitcoin SV forks, a tax liability, complicating the picture of tax compliance for US citizens.
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align='right']https://twitter.com/CryptoTaxGirl/status/1181969966385385472
- CryptoTaxGirl
The United States IRS (Internal Revenue Service) last revised their cryptocurrency tax guidance in 2014 so the new guidance was met with much anticipation, however, it only included modest revisions and still lacked some key attributes. According to cryptocurrency-specializing accountant Laura Walter (CryptoTaxGirl on Twitter), the biggest change was the addition of forks as taxable income and no longer having a $0 tax basis. This income is "equal to the fair market value of the new cryptocurrency when it is received... provided you have dominion and control over the cryptocurrency so that you can transfer, sell, exchange, or otherwise dispose of the cryptocurrency". Individuals can factor in "the amount [they] spent to acquire the virtual currency, including fees, commissions and other acquisition costs in U.S. dollars" to calculate the cost basis".
The IRS FAQ page lays out answers to possible scenarios that individuals may be wondering about in relation to their tax filing. Among those is the analysis that individuals must record specific dates and times for calculating their fair market value rather than simply taking averages for time intervals.
Using cryptocurrency with tax implications
Nevertheless, a major critique of the revision is that the IRS did not make a minimum threshold for taxable events, which means that all cryptocurrency transactions, even buying a cup of coffee is still a taxable event. This inhibits cryptocurrency adoption as currency since the extra paperwork and liability could discourage American citizens from actually using cryptocurrency in everyday life.
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align='left']https://twitter.com/CryptoTaxGirl/status/1181973549642321920
- CryptoTaxGirl
The argument in favor of a minimum exemption follows the use of the USD since the IRS does not make individuals calculate their dollars' relative increase or decrease in value from the period when they earned those dollars whenever making everyday purchases. However, an improvement is that it is now clarified that it not considered a taxable event if an individual "transfer[s] virtual currency from a wallet, address, or account belonging to [themselves], to another wallet, address, or account that also belongs to [themselves]".
Another topic that the revision includes is receiving cryptocurrency as income in exchange for goods/services where individuals have to file the fair market value of the amount received as a respective wage or self-employment income. However, any cryptocurrency received as a gift is not considered income and only becomes a taxable event when sold, but the basis could carry over from the gifter.
Dash's limited risk from forks and tax compliance solutions
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align='right']https://twitter.com/CryptoTaxGirl/status/1181975559678545920
- CryptoTaxGirl
Another section of the IRS guidance specifically says that because a soft fork "does not result in a diversion of the ledger and thus does not result in the creation of a new cryptocurrency" and therefore "soft forks do not result in you receiving new cryptocurrency" it is not income and not a taxable event. Dash is a fork from Bitcoin, but has had a consistent history with soft forks to conduct upgrades and no chain splits. As such, Americans using Dash can take some confidence in the fact that they will at least have this section of the IRS tax code nailed down. Additionally, services like Node40 have existed within the Dash ecosystem to help individuals and businesses stay compliant with the appropriate tax laws. As Dash and cryptocurrency grows, the confusion between taxes and cryptocurrency also grows, but Dash is making strong arguments in favor of treating it as a currency since it is being adopted by more individuals and merchants around the world to be used in place of currency to conduct everyday transactions.
*Disclaimer: This article, its author, and/or Dash News are not qualified to give legal tax advice and anything written here should not be interpreted as legal tax advice.
Posted from Dash News : https://dashnews.org/irs-updates-cryptocurrency-tax-guidance-forked-coins-now-liable/