Coin Center Talks Paying Taxes on Bitcoin Hard Forks with US Congress, Asks for Safe Haven
Coin Center Asks U. S. Congress To To Give Taxpayers Safe Harbor on Bitcoin Hard Forks
Coin Center, a nonprofit research and advocacy group for cryptocurrencies has been calling the U. S. Congress to enact a legislation that will be able to protect the Bitcoin investors from federal taxes incurred as the result from software forks.
On a blog post that was written by the company, Jerry Brito, its executive director, affirmed that the investors should not be penalized retroactively by the IRS for not providing a clear guidance on how to pay taxes on cryptocurrencies. According to him, the IRS was simply not clear enough before to state properly how people should treat their digital tokens when paying taxes.
Tax Legislation Is Not Clear About Hard Forks
While the legislation might be clear in some cases, like when you buy Bitcoin and sell it for profit later, there are still no guidance on how investors should pay taxes when a single token splits into multiple ones via a hard fork, something that has happened a lot in the cryptocurrency market lately.
According to the spokesman of the group, the absence of useful guidelines has created confusion among investors. This creates a risk for them and puts them on tax liability should they get the law wrong. Therefore, it is not acceptable that the IRS would retroactively penalize the taxpayers for not answering their questions properly.
Some of the most well-known cases of hard forks were the creation of the Ethereum Classic and Bitcoin Cash tokens. Ethereum Classic split from the original Ethereum in 2016 and Bitcoin Cash in 2017 from the Bitcoin core. Other hundreds of projects have done similar things.
It Is Unfair To Take Punitive Action, Coin Center Affirms
While some US investors, mostly the ones who do not invest in cryptos, have been reported to prompt the IRS to target a campaign against Bitcoin tax cheaters, Jerry Brito believes that it is simply unfair to punish people who attempted to report their earnings but did not know how to do it properly.
According to him, until the IRS finally starts to give clear answers for people about these basic questions, taxpayers who at least tried to report their income should not be penalized for their actions, especially when they have a record of paying their taxes when the rules are clear.
As the IRS remained silent on the issue, Brito has taken the issue to the U. S. Congress in order to ask for some action that could provide a safe harbor to investors involved in hard forks. According to him, an agreement is the best answer and it can be made in a limited time-frame in which the provision expires as soon as the IRS creates specific rules for how the rules are for hard forks.
Brito finishes by stating that taxpayers can only comply with the law if they can understand it, so it is the sole responsibility of the IRS to provide them with the necessary information.
At the moment, nor the Congress nor the IRS has answered the appeals of Coin Center. Further talks will probably happen in the near future, though.