The Internal Revenue Service (IRS) has just published its first guidance since 2014 on the taxation of cryptocurrency. Revenue Ruling 2019-24 deals primarily with the tax treatment of forks and airdrops. The IRS also released a list of frequently asked questions (FAQs) which addresses topics such as basis, gain or loss on sale, gifts, and determining fair market value. “The IRS is committed to helping taxpayers understand their tax obligations in this emerging area,” said IRS Commissioner Chuck Rettig. “The new guidance will help taxpayers and tax professionals better understand how longstanding tax principles apply in this rapidly changing environment. We want to help taxpayers understand the reporting requirements as well as take steps to ensure fair enforcement of the tax laws for those who don’t follow the rules.”
While these latest releases by the IRS definitely clear up some of the murky information we had, there are still some issues where confusion may occur. One thing for sure, the FAQs make clear that taxpayers are required to maintain excellent records to establish positions taken on tax returns. You should maintain records documenting receipts, sales, exchanges, or other dispositions of virtual currency and the fair market value of the virtual currency.