Appendix B is a helpful glossary of terms such as airdrop, blockchain, hard fork and staking.
A few interesting items from the report:
- 16% of people in the US have invested in or used cryptocurrency (per Pew Research Center).
- When there is not third party reporting (such as a 1099), only 45% of taxpayers accurately report their income. I have heard this before. Per the IRS (page 14), for income subject to substantial information reporting and withholding, there is only about 1% underreporting. In contrast, for income subject to little or no information reporting and no withholding, compliance is only about 55% (45% non-compliance).
So if you wonder why IRC §6045 on broker reporting was expanded by the Infrastructure Investment and Jobs Act (PL 117-58, 11/15/21) to include virtual currency sales by exchanges (and perhaps by others), that the underreporting of transactions without third party reporting, is the key reason. - "State governments have yet to agree on a set of best practices regarding the taxation of cryptocurrencies." There are no uniform laws. There have been a good number of legislative proposals (tax and non-tax) including per the NCSL, 43 bills in 22 states since 2015.
Some of the open issues in most states regarding cryptocurrency include:
- For states that subject digital goods and electronic transmissions to sales tax, are cryptocurrency and non-fungible token (NFT) transactions subject to sales tax. Recently, Pennsylvania confirmed that NFTs are subject to sales tax.
- How does a business source income and gains from virtual currency?
- How do unclaimed property laws apply to cryptocurrency and other digital assets?
At the virtual currency and blockchain website I maintain, search for "state information" and you'll see a long list of various rulings and legislation in states regarding cryptocurrency.
What do you think? Any particular guidance you are waiting for on cryptocurrency from a state?
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