Daniel Pilla writes about how the IRS is focusing on cryptocurrency this year:
The Internal Revenue Code does not address the tax consequences for cryptocurrency in particular. A few years after its emergence on the scene in 2009 as a financial asset, IRS Notice 2014-21 deemed “virtual currency” — Bitcoin in particular — as “property,” to be treated no differently than a share of stock or an automobile. The IRS refers to “virtual currency” as “convertible” currency in that it has a value measured in real currency, or it acts as a substitute for real currency. Any one of the hundreds (and growing) of today’s digital currencies meets this broad definition.
Tax problems with cryptocurrency arise as a result of two issues: (1) the failure to report the gains on trading crypto assets, and (2) the failure to report income paid in the form of crypto assets. Let me address them in turn.
The most urgent priority is finding a deal to keep the government open. Because Congress failed, once again, to agree on spending levels for 2023, President Joe Biden signed a deal in late September — a continuing resolution — to keep the government funded past the end of the fiscal year. That agreement will end on December 16.
Now, members of Congress will have no choice but to come to terms on a new agreement, which also provides an opportunity to tack on even more spending and unrelated priorities. As legislators head out the door, many will take the time to grab as much taxpayer money as possible for their favored priorities along the way. This year could be even worse than normal.