One of America’s most stringently critiqued federal agencies is at it again – new reports from tech media show that in July, the U.S. Internal Revenue Service sent letters to 10,000 crypto currency holders asking for specific information on their digital assets.
Titled letter 6173: “Reporting virtual currency transactions,” the letter stipulates that those who have invested in crypto must report these details quickly, in as little as a week, or face audits.
The tax form presents further guidance such as this:
“If you believe you have accurately and completely filed your reports with the IRS – submit an affidavit stating that you have filed the entire history of currency operations, including the means taken to ensure compliance with IRS requirements.”
The IRS also defines what qualifies as a ‘true, correct and complete’ full activity report, and urges investors to double-check their calculations.
Amid reports of under-staffing backlogs and more, the IRS is hardly the poster child for efficient and effective operations.
Still, the IRS asks investors to calculate fair market value which can be hard for some buy and holders. Some see the new communications as a departure from past guidelines.
“Reading between the lines, the letters suggest changes in the agency’s approach to the asset class when compared to past public statements,” writes Wolfie Zhao at Coindesk, using insight from quoted experts to support the idea that there may be complications with the agency’s intended plan.
“If someone has multiple transactions over the course of a day and there’s significant volatility it doesn’t make sense to apply the same daily exchange rate, and also it could result in some weird outcomes,” says James Foust, a senior research fellow at industry advocacy group Coin Center, as quoted in Zhao’s reporting.
It’s not like the 1040 – the 6173 sets a high bar for those who put money into crypto over a given tax year. We’ll see how much this IRS regulation dampens the American investor’s appetite for cryptocurrencies as BTC rallies and experts continue to hint at 2019 being “the year of blockchain.”