Guide for charging cryptocurrencies announced by the US IRS

Expected as of May 2014, the US IRS Tax and Tax Service has released a new cryptocurrency taxation guide. This clarifies some aspects of cryptocurrencies from hard forks and how to calculate taxes on cryptocurrencies traded.

Hard forks – taxable only if controlled by the user

The new IRS cryptocurrency taxation guide says that new cryptocurrencies created through a hard fork should be treated as “an ordinary income equal to the fair market value of the new cryptocurrency when it is received.”

In other words, the tax obligations will apply when the new cryptocurrencies registered on a blockchain are under the taxpayer’s control and can spend them.

Method of calculating the value of cryptomedicines

The new IRS document also provides an expected clarification on how taxpayers can determine the cost basis or fair market value of currencies received as income. This applies to cryptocurrencies from mining or the sale of goods and services.

The cost basis must be calculated by summing all the money spent on the purchase of the crypto, “including taxes, fees and other purchase costs in US dollars”.

No tax exemptions for cryptocurrencies used in shopping

A third key issue addressed by the new IRS guide is the calculation of the value of purchases made with cryptocurrencies. Although the public requested an exception when calculating taxes when used for purchases, the IRS explicitly stated that no such exemptions are granted.

Payments made with cryptocurrencies will result in a capital gain or loss, which should be calculated as “the difference between the fair market value of the services you received and your adjusted virtual currency base.”

Purchases of goods and services have been considered taxable since 2014, when the IRS decided to treat cryptocurrencies as property, rather than as currency for tax purposes. This statute discourages their use as a payment method, according to analysts, because it generates complications in the reporting process.