IRS Issues New Cryptos Tax Guidance For Hard Forks, Calculating Cost Basis, Buying And Selling
The U. S. Internal Revenue Service (IRS) has finally decided to publish its first guidance about how to pay crypto taxes in five years. After years and years of people asking the IRS how to pay their taxes, it seems that the entity decided to comply.
Charles Rettig, an IRS commissioner, affirmed that the agency was working on the guidance a few months ago, but most crypto investors were simply disheartened after waiting for so long.
One of the main updates on the legislation is that now people will finally know how to pay taxes over hard forks. Hard forks happen when there is no consensus in a network and one token is split in two. So far, investors often didn’t how to proceed in these cases.
It was stated that if the token went through a hard fork but you did not “receive” any new token via the fork, airdrop or something similar, the income is not taxable. If you got any new token, however, it is.
However, some people, such as the director of Coin Center, Jerry Brito, affirmed that the IRS was not clear enough. According to him, the new guidance offers some clarity but it doesn’t seem to acknowledge what hard forks and airdrops are very well, which can cause problems. The main issue is that it does not clarify what “receive” means.
More rules for determining how to pay taxes when you bought crypto on several occasions some time ago are also stated in the new report, as well as some other minor updates.