RECOMMENDATION 2670
RECOMMENDATION TEXT:
Cryptocurrency and other Digital Assets We are recommending a new IRS publication be created to address the tax issues related to cryptocurrency and other digital assets. IRS has provided different resources on the issue. Taxpayers may have difficulty locating online resources depending on the search terms used. Cryptocurrency and other digital assets are growing in popularity, and taxpayers need to be made aware of the proper tax treatment of these types of assets. We encourage the IRS to raise the profile of these types of assets and related transactions for the taxpayer community. We are recommending that existing publications be updated to include recent the IRS guidance issued on topics relevant to each publication. See below for specific references to existing publications.
IRS Action:
In May of 2023 our team began looking in to creating a publication that was similar in development to that of the TAS Tax Examination Roadmap, we have met with the developers in TAS of that roadmap and have been working to build out our own since then. It is still in development but barring any unforeseen issues we would like to have it public by filing season ’25.
RECOMMENDATION 2671
RECOMMENDATION TEXT:
We recommend adding additional cross references to the various webpages that address digital assets and cryptocurrency. For example, on the Digital Assets webpage, under IRS guidance, add the reference to Frequently Asked Questions on Virtual Currency Transactions.
The Frequently Asked Questions on Virtual Currency Transactions already has Digital Assets as a reference/related topics. Another example, IR 2023-12 IRS updates to question on digital assets: taxpayers should continue to report all digital asset income, should be added to the Frequently Asked Questions on Virtual Currency Transactions webpage. Taxpayers may be using terminology they are familiar, with rather than the general description of digital assets. They may miss valuable information provided by the IRS. Access to relevant guidance should be accessible, regardless of where the taxpayer begins the search.
IRS Action:
Not quite sure I’m understanding this one exactly. We have been working on updating and manipulating the public facing DA page(s) since June of 2023. There are links to the FAQs on the DA page, as well as other links were appropriate. We are currently working on providing more natural language and have also added terminology that is more common within this asset class with the public.
RECOMMENDATION 2672
RECOMMENDATION TEXT:
Add digital assets and related questions to the search function under Interactive Tax Assistant – ITA. Taxpayers should be able to access digital asset information from each webpage.
IRS Action: Adopted
Will work with IT and applicable BOD to see if this can be done.
RECOMMENDATION 2673
RECOMMENDATION TEXT:
Move the Digital Assets webpage to a general overview webpage. Taxpayers may not look at self-employed page when looking for information on Digital Assets.
IRS Action: Not adopted
This has been in consideration for several years now, however to date there has not been a space that makes more sense to house this. We are not adopting at this time, however this is continually at the forefront of our mind and if a better space presents itself we will take the opportunity to move it.
RECOMMENDATION 2674
RECOMMENDATION TEXT:
Definition of Digital Assets – Tax Consequences Guidance and Publications. We recommend including these sections at the top of the Digital Assets webpage. This information should be common to all sections of the website, regardless of the search term used by the taxpayer. This will ensure that taxpayers have a complete listing of relevant resources.
IRS Action: Not adopted
Not sure if I understand this correctly, please see if the changes we have already made to the DA Public page address this.
RECOMMENDATION 2675
RECOMMENDATION TEXT:
Understanding digital asset reporting and tax requirements. We recommend including a link/cross-reference to the Digital Assets webpage on this page. Information within the IRS website should use consistent language and examples. Examples of digital asset transactions and reporting requirements should be easily located by taxpayers.
IRS Action: Not adopted
This does not appear to be relevant any longer, this page does not exist, we have in the last year been working to streamline and provide a better user experience on the public facing page so this may have been changed because of that.
RECOMMENDATION 2676
RECOMMENDATION TEXT:
Publication 5839, IRS Digital Assets Initiative. We recommend including a link/cross-reference to Publication 5839 on the Digital Assets webpage. Adding the link/cross reference on the Digital Assets webpage will inform taxpayers of the IRS Digital Assets Initiative. Taxpayers may not find the publication with a simple website search. All information relating to Digital Assets will be easily accessible from one location.
IRS Action: Not adopted
This publication, will be referenced / included on the New DA Publication. The Digital Assets Webpage as of right now only contains information as it relates to digital assets and preparing taxes, this would be an outlier but would fit in to the DA specific publication
RECOMMENDATION 2677
RECOMMENDATION TEXT:
Add the Digital Assets webpage to the bottom of the document. Currently, the document includes only a bar code to be scanned. Not all taxpayers have the ability to scan bar codes.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2678
RECOMMENDATION TEXT:
Other Items You May Find Useful Section. Include New Publication- Cryptocurrency and other Digital Assets in this section. Will alert taxpayer to the possibility that certain digital asset transactions may be required to be reported on this form.
IRS Action: Adopted
Will work with the owner of this page to implement this once the publication is out.
RECOMMENDATION 2679
RECOMMENDATION TEXT:
We recommend adding how the taxpayer determines the sales price/ fair market value when the exchange involves a digital asset. IRS has issued guidance on how to determine the fair market value of a digital asset. Including it under digital assets will alert the taxpayer to the proper way to calculate fair market value.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2680
RECOMMENDATION TEXT:
We recommend adding how the taxpayer determines fair market value when the exchange involves a digital asset. IRS has issued guidance on how to determine the fair market value of a digital asset. Including it in the example will alert the taxpayer to the proper way to calculate fair market value.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2681
RECOMMENDATION TEXT:
Current Revision Instructions for Schedule D. Under Items for Special Treatment -Certain virtual currencies, such as Bitcoin See the Instructions for Form 1040 and IRS;gov/VirtualCurrencyFAQs. Include the FAQ answer in the Schedule D instructions. Including relevant information in the instructions makes it easier for taxpayers to comply with IRS guidance.
IRS Action: Adopted
Will coordinate with TF&P and Form Owner to see if we can do this.
RECOMMENDATION 2682
RECOMMENDATION TEXT:
Add a fourth bullet after “purchasing digital assets using U.S. or other real currency, including through the use of electronic platforms such as PayPal and Venmo: Engaging in a combination of holding, transferring, or purchasing virtual currency as described above. The additional language is consistent with the IRS guidance: IRS reminds taxpayers they must check a box on Form 1040, 1040-SR or 1040-NR on virtual currency transactions for 2022.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2683
RECOMMENDATION TEXT:
Add tip about FBAR when the digital assets are held in a foreign financial account. Current changes have occurred regarding holding digital assets in a foreign financial account for FBAR reporting.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2684
RECOMMENDATION TEXT:
Other Resources You May Find Useful Section. We recommend adding a link to the New Publication we are recommending. Taxpayers should be alerted to the possibility that some digital asset transactions may be required to be reported as gifts.
IRS Action: Adopted
Will work with the owner of this page to implement this once the publication is out.
RECOMMENDATION 2685
RECOMMENDATION TEXT:
We recommend adding language on how to value the digital assets for gift tax purposes. IRS has issued guidance on how to determine the fair market value of a digital asset. Including examples will alert the taxpayer to the proper way to calculate fair market value.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2686
RECOMMENDATION TEXT:
We recommend adding language on how to report a donation of virtual currency and other digital assets. Taxpayers donating digital assets and need to know how to report these transactions. Digital Assets webpage refers to Publication 526 but there is not specific language about digital assets.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2687
RECOMMENDATION TEXT:
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2688
RECOMMENDATION TEXT:
We recommend including the reporting requirements when selling/ exchanging digital assets or virtual currency. Taxpayers are selling/exchanging digital assets and need guidance on the tax consequences of these transactions. The Digital Assets webpage refers to Publication 544 but there is not specific language about digital assets.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2689
RECOMMENDATION TEXT:
We recommend including specific discussion on how to determine the basis of digital assets or virtual currency purchased or received in exchange for products. Digital Assets refers to Publication 551 but there is not specific language about digital assets.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2690
RECOMMENDATION TEXT:
We recommend adding the holding in Chief Counsel Advice (CCA) 202302012 which addresses the qualified appraisal requirement for charitable contributions of cryptocurrency. Including the CCA in the publication will highlight the guidance issued on the qualified appraisal requirement for cryptocurrency. Taxpayers may not be aware of the guidance and could potentially lose the charitable deduction if the qualified appraisal requirement isn’t satisfied.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2691
RECOMMENDATION TEXT:
We recommend adding instructions how to value digital assets or virtual currency donated to a charity. IRS has issued guidance on how to determine the fair market value of a digital asset. Including it in the publication will alert the taxpayers to the proper way to calculate fair market value.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2692
RECOMMENDATION TEXT:
We recommend the new publication include the reference to FinCEN Notice 2020-2 which provides guidance on Report of Foreign Bank and Financial Accounts (FBAR) reporting requirements related to virtual currency. Although FinCen isn’t an IRS compliance issue, providing the information for the taxpayer will help with compliance and reduce potential penalties for not properly reporting virtual currency.
IRS Action: Adopted
Will add to the new publication with counsel approval.
RECOMMENDATION 2693
RECOMMENDATION TEXT:
We recommend adding Chief Counsel Advice (CCA) 202316008P which describes the tax consequences to an individual who holds a cryptocurrency that undergoes a protocol upgrade to all publications relevant to the topic. Taxpayers may not be aware of the guidance issued and including it in all publications and on all webpages relevant to the issue will greatly assist the taxpayer will complying with the tax law.
IRS Action: Adopted
Will add to the new publication with counsel approval.
RECOMMENDATION 2694
RECOMMENDATION TEXT:
We recommend adding language to indicate whether digital assets are a specified foreign asset requiring inclusion on the form. Taxpayers are unclear as to whether to include digital assets and cryptocurrency on Form 8938.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
RECOMMENDATION 2695
RECOMMENDATION TEXT:
We recommend guidance be issued on the treatment of proof of work mining. We recommend this guidance be added to the webpage and the proposed publication. Some taxpayers believe there is a difference between proof of work and proof of staking. Clarification is needed so taxpayers accurately report the income.
IRS Action: Adopted
Will put the request into Counsel / Treasury and add what we can by way of this to the publication.
RECOMMENDATION 2696
RECOMMENDATION TEXT:
We recommend adding Rev Rul 2023-14 to each publication and webpage that discusses cryptocurrency. Including this ruling in each publication and on each webpage will draw attention to the most recent guidance on cryptocurrency.
IRS Action: Adopted
Will discuss with Counsel and TF&P and see if this is done for anything else, an alternative would be to include the new DA pub to anything that discusses DAs. As the publication would be kept up to date and would reference any recent guidance.
RECOMMENDATION 2697
RECOMMENDATION TEXT:
We recommend that answers to these questions be provided in the new publication that we have recommended. In addition, due to the timeliness of these issues, we recommend that technical advice be issued and made available as quickly as possible. Due to the recent failure of several cryptocurrency exchanges and other high-profile frauds related to digital assets, taxpayers and their tax advisors need immediate guidance as to the tax consequences of these events.
IRS Action: Adopted
Will add to the new publication with counsel approval.
RECOMMENDATION 3306
RECOMMENDATION TEXT:
We recommend adding instructions how to value digital assets or virtual currency when received in exchange for services. Including the methodology of how to value digital assets or virtual currency in exchange for services in the publication will alert the taxpayers to the proper way to calculate fair market value.
IRS Action: Adopted
Will coordinate with TF&P and Counsel to see if we can do this.
