The United States Internal Revenue Service (IRS) recently issued its Revenue Ruling 2019-24 which along with a series of frequently asked questions in which it identified rules governing US taxation of digital currencies. Right now, the taxation in the US is unbelievably complex and a newly updated IRS tax guidance is looking to address some of the biggest concerns facing holders of crypto.

As the Bitcoin and altcoin news and tax updates show,  the basics show that if you hold digital currency and you sell or exchange it, you are subject to tax in the United States. If you are granted digital currency in the form of a salary as a result of a hard fork, you have taxable income. And if you receive digital currency as a result of a gift, there is no immediate tax.

The updated IRS tax guidance, however, is limited to US residents only. By this, the IRS targets US citizens, US green card holders and individuals who spend more than 183 days in the country (measured through a three-year look in the past). If this is you, you have a tax obligation for your crypto holdings.

Aside from this, the updated IRS guidance also touches on the gains or losses from a sale or exchange of currency, showing that it is the difference between your cryptocurrency cost basis and the fair market value of the property that you received in exchange for it. When seeing the detailed FAQ sheet, you can see that there is guidance on everything but essentially there are two main methods for identifying your basis:

1) You can identify the exact currency that is sold, traced to the ledger – as well as use the cost of that specific currency to determine your gains and/or losses.

2) Alternatively, you can choose the “first in, first out” method, which means that your basis will be computed based on the cost of the oldest currency acquisition made inside your wallet.

Digital currency which is provided as compensation for services, according to the updated IRS guidance, is treated as ordinary income and not a capital gain similar to cash which is paid in the form of salary and wages.

When units of new cryptocurrency are distributed, however, the Revenue Ruling holds that the taxpayer has access to wealth and therefore has ordinary income. Still, there are some concerns about unexpected hard forks and how they will affect tax-responsible crypto owners.

The post Updated IRS Tax Guidance Targets Cryptocurrency Users In US appeared first on DC Forecasts – Leading Digital Currencies.

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