US Congressmen urge IRS to provide clarity on cryptocurrency taxation laws in new joint letter

Government institutions in the United States of America have played a pivotal role in controlling the fate of cryptocurrencies and the digital asset market, in general. One of the main issues that lawmakers and government officials raise is the taxation on cryptocurrencies like Bitcoin [BTC] and Ethereum [ETH], which was discussed again in a recent letter signed by 21 Congressmen to the Internal Revenue Service [IRS].

The letter was written with the intention to clear any ambiguity concerning cryptocurrency taxation as well as informing cryptocurrency holders on how to assess their virtual assets. The congressmen requested the IRS to clarify three major areas that will help in alleviating the confusion surrounding the cryptocurrency industry. These topics included,

“1) Acceptable methods for calculating the cost basis of virtual currencies. Which specific methods does the IRS consider to constitute “a reasonable manner that is consistently applied,” as required by Notice 2014-21?

2) Acceptable methods of cost basis assignment and lot-relief for virtual currencies. Do taxpayers need to use specific identification whenever they spend or exchange virtual currency, or are other methods, such as first-in-first-out or average cost basis, acceptable as well?

3) The treatment of forks for taxpayers that use virtual currencies, such as the 2017 hard fork of the Bitcoin blockchain.”

In the letter, the Congressmen also requested the IRS to respond before May 15, which is exactly a month after the US Tax Day [April 15]. One of the Congressmen who signed the document was Tom Emmer, who introduced three cryptocurrency bills back in September 2018. He had then claimed that the bills were aimed at furthering the development of the burgeoning industry and that it had to be watched over in a controlled fashion. One of the multiple operative clauses in the bill stated,

“The United States should prioritize accelerating the development of blockchain technology to support transparency, security, and authentication in a way that recognizes its benefits and allows consumer protection while supporting future innovation”

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