The Wall Street Blockchain Alliance is the latest to ask the U.S. Internal Revenue Service (IRS) to consider a ‘de minimis’ exemption for crypto tax payments below a specific value.
IRS Should Reduce Crypto Tax Burden
According to Law360, the Wall Street Blockchain Alliance has written a letter to the IRS calling for tax exemptions for crypto transactions below a certain threshold. As part of the letter, chairman of the group, Ron Quaranta advised the IRS to focus on large bag holders instead of forcing virtual currency owners to examine all their cryptocurrency microtransactions.
Back in 2018, the American Institute of Certified Public Accountants (AICPA) also called for a de minimis crypto tax exemption. At the time, the AICPA suggested an upper threshold limit of $200. A couple of crypto and blockchain-related bills before the U.S. Congress also contain digital asset exemption provisions for small transactions.
Proponents of a de minimis crypto tax exemption point to the cumbersome nature of determining cost basis for every cryptocurrency transaction. With the IRS classifying virtual currencies as property for tax purposes, owners and traders are subject to capital gains tax filings.
However, critics say such a move could complicate matters for the IRS. Some commentators even opine that the emergence of such a rule will see crypto traders attempting to game the system by staging their transactions will ways that fit the exemption criteria.
Price Benchmarking Problems
Despite including a de minimis crypto tax exemption provision, the Wall Street Blockchain Alliance faults the specific conditions listed in the proposed Cryptocurrency Tax Fairness Act 2020.
According to the group, setting the tax exemptions on transaction gains and not transaction value does little to ease the burden on crypto taxpayers. The absence of a universally agreed-upon exchange benchmarking standard for cryptos means cost basis calculations can be complicated especially when dealing with multiple exchanges.
In light of these issues, the group says the IRS needs to do more by way of creating a clear-cut set of guidelines for digital asset tax reporting. In 2019, the IRS published updated rules for cryptocurrency tax reporting to include hard forks and airdrops.
The IRS has also stated its intention to keep a watchful eye on crypto tax reporting compliance in 2020. As previously reported by Bitcoinist, the IRS added a crypto-related checkbox to its Form 1040 with U.S. tax reporting company H&R Block recently advising its customers not to attempt evading crypto taxes in 2020.
Should the IRS create a de minimis exemption rule for crypto tax reporting? Let us know in the comments below.
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