US Congressman Tom Emmer reintroduced a bill for clarity from the Internal Revenue Service (IRS) on the treatment of gains or losses in “forked” digital assets, such as Bitcoun and bitcoin Cash, for the purpose of filing income tax return.
The “Safe Harbor for Taxpayers with Forked Assets Act” bill was initially introduced by Emmer in September 2018 for guidance regarding the appropriate means of reporting them. Emmer said taxpayers can only comply with the law when the law is clear.
The bill calls for prohibiting penalties against taxpayers until the IRS issues guidance on how to report gains or losses in forked digital assets. “Forks” are splits in digital assets that result in two independent digital ledgers.
Since September 2018, Emmer has been interacting with the IRS on the issue. Ahead of the deadline for American taxpayers to file their taxes in April, a bipartisan group of 21 members of the US Congress led by Emmer urged the IRS to issue guidance on how digital currency transactions and investments should be reported when tax payers file their income tax return.
In May, IRS Commissioner Charles Rettig replied to the letter by the bipartisan group of Congressmen saying that it will soon issue guidance on how digital currency transactions and investments should be reported when tax payers file their income tax return.
The letter outlined three areas that the IRS intends to publish guidelines for: acceptable methods for calculating cost basis, acceptable methods of cost basis assignment, and the tax treatment of forks. However, it’s a month since then and no guidance has been issued, the release said.
IRS treats virtual currency as a commodity or property, and not as real currency, for federal tax purposes. Therefore, virtual currencies are also subject to capital gains laws.
The current guidance for taxpayers is to file each and every transaction executed using a cryptocurrency. And the IRS has increased enforcement activities against taxpayers who “misreport” their cryptocurrency transactions.
Emmer, who is a Republican member of the US House of Representatives for Minnesota’s 6th District, is part of the Congressional Blockchain Caucus.