VIRTUAL CURRENCY FOR GOODS AND SERVICES

Virtual currency for goods and services. Whether you are ready or not, our clients are actively operating in the virtual world and that includes the payment for goods and services by Bitcoin or one of the other cryptocurrencies. The IRS has been very active in deciphering this new world and making sense of it for tax reporting purposes. In March 2020, the IRS conducted a Virtual Currency Summit which provided a look at the challenges in technology, the role of the exchanges, tax return preparation, and regulatory guidance and compliance. The focus of the Summit was to find a balance between taxpayer service and enforcement efforts. IRS Commissioner Chuck Rettig opened the day with a few comments emphasizing that compliance was critical, that the Schedule 1 question on virtual currency (At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency/) is not adequate to say that the taxpayer has met their compliance requirements, and that the emphasis is on outreach to the taxpayer and tax professional community.  Virtual currency for goods and services.

Commissioner Rettig also announced the successful investigation of two Chinese nationals who are charged with laundering over $100 million in cryptocurrency form an Exchange hack. The investigation was led by the IRS Criminal Investigation division, the FBI and the Homeland Security Investigations, the Korean National Police of the Republic Of Korea provided assistance and coordinated with parallel investigation. “This indictment shows what can be accomplished when international law enforcement agencies work together to uncover complex cross border crimes,”, acting Executive Associate Director Alysa Erichs of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

The IRS further explains that the type of gain or loss a taxpayer realizes on the disposition of virtual currency depends on whether or not it is a capital asset in the hands of the taxpayer. As a capital asset, the taxpayer would have short term or long term capital gain or loss.t