IRS: No Help
The last announcement, by the IRS on Bitcoin, was in 2014. So with the strong likelihood of three hard forks in under a year looming over us, Bitcoin owners are wondering what'll happen – and when.
The one thing that seems clear, at least, is that the IRS considers cryptocurrencies to be property – not a currency. So this could actually be a good thing, if, according to Fisher Investments … “60% of profits count as long-term capital gains and 40% as short-term, queueing up possible savings”.
So seeking professional tax advice may be prudent.
The reality is, that the more ambiguity there is, the less the compliance. It seems the Treasury Department is also looking to the IRS for more clear guidelines, and were not too happy with the IRS in a press release, stating, “None of the IRS operating divisions have developed any type of compliance initiatives or guidelines for conducting examinations or investigations specific to tax noncompliance related to virtual currencies.”
A bigger issue though, is the determination of fair market value. To date, according to the IRS, very few people have complied though Form 8949, used to report capital gains.
Plus, due to very high levels of fluctuation of Bitcoin and other cryptos, it's difficult to determine the stop and starting points for any valuation.
So the dual complexity of 1-for-1 forks, and government ambiguity, make for a bumpy road – at least until things get ironed out – which they certainly will when there are tax implications.