The United States Congress has begun introducing new legislation regarding how taxpayers should report their cryptocurrency profits.
Congressman Tom Emmer who is co-chair of the Congressional Blockchain Caucus headed up the discussion, with a call for the government to enable the US private sector to benefit from the innovative technologies like blockchain.
Emmer proposes that a resolution to support cryptocurrencies should be introduced, providing a consistent and simple legal environment, and called for a ‘Blockchain Regulatory Certainty Act’ that allows blockchain companies that don’t use consumer funds to avoid having to register as money transmitters. He also requested the formation of an act that provides a ‘safe harbor’ for taxpayers that are not covered by clearly defined laws. This will restrict fines for individuals who are unable to declare assets if the IRS doesn’t have appropriate guidance regarding them.
The most recent guidance on cryptocurrency from the IRS is from 2014 and has become somewhat outdated. It defines the exchange, receipt or spending of digital tokens as taxable events even when no fiat currency is involved. This includes ICO’s, airdrops and mining of coins but is currently almost impossible to track and monitor except when a traditional bank is involved. As a result, individuals suffer fines when trying to cash out certain assets as it is near impossible to correctly declare them in the currently unregulated market.
In some cases where the IRS have judged that tax fraud was intentional, victims have received up to a 75 percent civil penalty and criminal charges with potential jail time.
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