The Internal Revenue Service (IRS) of the United States has recently extended tax regulations on cryptocurrency similar to fiat currencies. These new regulations have come in response to tax avoidance on cryptocurrency transactions. Increasingly, countries, such as South Africa, have been issuing legislation to turn cryptocurrency into a taxable income. This would boost state income during the economic downturn caused by the global COVID-19 pandemic.
Updated Tax Regulations
The IRS extended the guidance on how cryptocurrency should be treated for tax purposes, according to Fox Business.
The IRS now will require anyone who receives digital currency through a crowdsourcing platform in return for services to report it as ordinary income, and thus taxable as such. This comes as the IRS has been performing a crackdown on those flouting tax regulations with regards to cryptocurrency.
In 2019, the IRS sent out 10,000 letters to taxpayers who had dodged tax on cryptocurrency transactions, Fox Business reported.
In the memorandum extending the regulations, the IRS identified cryptocurrency as “property”, and thus subject to the same regulations and tax rules as any other proprietary thing, reported Forbes.
Similarly, China has recently extended a legislation to consider virtual assets as property, and thus subject to the Law of Property.
Cryptocurrency in USA
In March 2020, a US congressman for Arizona introduced the Cryptocurrency Act to the Legislature in the US, reported Bitcoin.com.
The new law aims to make cryptocurrency dealings more favourable and understandable than before. The law further aims to make cryptocurrency rules clear to the public. It also requires regulatory bodies to inform the public about new regulations regarding virtual assets.
This comes as the US’ competitors in Russia have been making that country more crypto-friendly.