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Cryptocurrency nonprofit research and defense organization Coin Center asks Congress to enact legislation that will provide bitcoin investors with a safe haven on federal taxes incurred as a result of software forks.
Writing in a post posted on the Washington, DC organization blog, Executive Director Jerry Brito claimed that cryptocurrency investors who made a bona fide effort to properly pay taxes on funds received from forks blockchain should not be penalized retroactively by the Internal Revenue Service (IRS) did not provide clear guidance on this subject, in addition to stipulating that investments in cryptocurrency should be treated as property for tax purposes.
While that classification is clear enough for those who buy bitcoins and then sells them as a result of a profit, it does not provide guidance on how investors should handle the funds received when a single cryptocurrency network ork splits into more independent blockchains, leaving current holders of coins with ownership of new funds they may not want.
"In the absence of a useful guide, taxpayers have filed their returns in a state of real confusion about the status of the law.Unfortunately, this puts them at risk of being penalized on the basis of their tax liability, in case they were wrong in the law.It would be unreasonable for the IRS to issue a guide answering these open questions and retroactively penalize those taxpayers who did not correctly guess what the answers would be. "
The most known forks led to the creation of Ethereum Classic and Bitcoin Cash, which separated from the Ethereum and Bitcoin networks in 2016 and 207, respectively, although hundreds of other projects have tried to restart their communities by starting with a fork block blockin.
While some US investors appear to have rejected reporting requirements, prompting the IRS to undertake a targeted campaign to unmask fraud tax bitcoin, Brito says it is unfair that the agency undertakes a punitive action against investors who have attempted to accurately report their investment income in cryptocurrency but have failed.
"Until the IRS gives clear answers to the fundamental taxpayers' tax questions regarding cryptocurrencies, taxpayers who bother to report their income from cryptocurrency should not be penalized in addition to own tax liability This is especially true for tax payers who have a record of paying taxes on time when the rules are clear. "
Brito says that since the IRS remained silent on the matter, Congress should act to provide taxpayers who have made a good faith effort to return their cryptocurrency income with "safe harbor" so as not to face any punitive action or penalty as well as covering their tax debt. He notes that this safe haven would not necessarily conflict with subsequent IRS rulings as Congress could include a clause that will stipulate that the provision will expire once the agency will issue specific indications on the blockchain forks.
Concludes:
"Taxpayers can only comply with the law when the law is clear, until the IRS releases the necessary indications that tax professionals have clamored for, confused taxpayers they should not be penalized for being rightly uncertain about how to report income from cryptocurrency. "
Images from Shutterstock
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