IRS issues more guidance on cryptocurrency

The IRS has issued additional guidance on common questions regarding the tax treatment of a cryptocurrency hard fork (when a single cryptocurrency splits in two).

A new set of FAQs also addresses virtual currency transactions for those who hold it as a capital asset.

Some taxpayers with virtual currency transactions may have failed to report income or did not report transactions properly, the IRS admits. The agency’s responses have ranged from taxpayer education to audits to criminal investigations. The techno-currencies has created a series of questions for many preparers.

The new guidance supplements the guidance on virtual currency in Notice 2014-21. In Notice 2014-21, the IRS applied general principles of tax law to determine that virtual currency is property for federal tax purposes.

The IRS is seeking public comment on other types or aspects of virtual currency transactions. Address comments to: IRS, Attn: CC:PA:LPD:PR (Notice 2014-21), Room 5203, P.O. Box 7604, Ben Franklin Station Washington, D.C. 20044. Comments may also be emailed to Notice.Comments@irscounsel.treas.gov, with “Notice 2014-21” in the subject line.