Today’s digital world has brought about many changes in what things can be a part of a person’s financial life. These changes include the addition of new ways to make money, new types of financial transactions and new types of assets. These new financial options can have various tax implications and issues connected to them.
One thing that can pose difficulties for taxpayers when it comes to these new financial options is uncertainty regarding the tax-related treatment of these options. Such uncertainty could potentially lead to a taxpayer inadvertently taking tax steps that result in them being assessed a tax debt or facing other problems with tax officials.
One thing that can cut down uncertainty when it comes to the tax treatment of relatively new financial devices, transactions or options is the Internal Revenue Service issuing guidance on such treatment.
Virtual currencies, like Bitcoin, are one of the new types of assets that have come up in the digital age. The IRS has issued guidance in the past regarding tax issues related to this new asset type. However, a panel of a CPA organization has argued that there remain areas of tax-related uncertainty when it comes to virtual currencies and that further IRS guidance is needed regarding these areas. Among the things the panel has recommended the IRS make clarifications regarding include:
- Fair market value determination for virtual currencies for tax purposes.
- Issues related to using virtual currencies for charitable giving.
- Issues connected to virtual currency investment and retirement accounts.
- Issues related to the basis of virtual currency.
- How costs related to the mining/acquiring of virtual currency should be handled tax-wise.
One wonders if guidelines regarding these issues will be issued in the future and, if they are, what impacts this will have on how clear the tax rules related to virtual currencies are.
When an unclear tax rule environment regarding virtual currencies or other new financial devices/transactions leads to a taxpayer facing allegations of misreporting income on their taxes and having unpaid taxes, it can be critical for them to understand their options for responding to the accusations. Tax attorneys in Chicago and Cleveland can give representation and guidance to taxpayers accused of owing back taxes or facing other tax problems.
Source: Bloomberg BNA, “Virtual Currencies Still Dogged by Tax Issues, CPAs Say,” Allyson Versprille, June 14, 2016