According to latest reports, the Internal Revenue Service (IRS) has no plans to provide updates on how existing general tax principles apply to transactions using virtual currency.
Tax Revolution reported that the IRS released Notice 2014-21, which provided guidance on the matter, along with a detailed FAQ section. In the first Q&A itself, the IRS said that for federal tax purposes, virtual currency is treated as “property”. It also stated that virtual currency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.
The media source says that the most troubling aspect of this classification is that users are required to compute the realized gains and losses of every transaction – even for the purchase of a small cup of coffee. However, if classified as a currency, virtual currency users would have been saved from this problem.
Recognizing that there may be other questions regarding the tax consequences of virtual currency not addressed in the notice, the Treasury Department and the IRS requested comments from the public regarding other types or aspects of virtual currency transactions that should be addressed in future guidance. In June 2016, the American Institute of CPAs (AICPA) sent a letter to the IRS highlighting 10 major issues not addressed in the notice and requested the IRS to release additional, much needed, guidance on virtual currency.
The AICPA, in particular, sought clarification on how to value virtual currencies, property transaction rules, “mining” on virtual currencies, computing the gains and losses, and classification of virtual currencies among many types of property.
According to Tax Revolution, the IRS has no plans on releasing additional guidance. Keith Aqui, principal author, and Adrienne Griffin, information-reporting specialist, have confirmed that they do not intend to respond, nor are there any ongoing or planned projects to update the 2014 notice. The media source further highlighted that the authors struggled to explain the meaning of their 2014 notice and deflected to other coauthors when asked about computing gains and reporting them for every transaction.
