01-21-2020 icon

US Congress Re-examines Virtual Currency Tax Fairness Act

By Sagetwriter

A bill seeking to exempt personal and small cryptocurrency transactions from US capital gains tax has been reintroduced to the United States Congress.

The bill dubbed: “The Virtual Currency Tax Fairness Act of 2020“, seeks to establish a distinction between virtual currency expenditure that qualifies as personal transaction and those that involve profits from holding or trading.

The new virtual currency fairness bill seeks to exempt taxpayers from reporting gains under $200; hence providing fairness, better clarity on taxation, and a level playing field for this technology.

A snippet of the bill reads:

“Gross income of an individual shall not include gain, by reason of changes in exchange rates, from the disposition of virtual currency in a personal transaction (as such term is defined in section 11 988(e)). The preceding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200.”

Through this bill, cryptocurrency users would not have to report instances where they spent crypto for low value transactions involving day-to-day expenses.

Congress Representatives – Suzan DelBene and David Schweikert are said to have reintroduced the bill in a bid to aid clarity of exemption and taxable events involving cryptocurrencies.

The Earlier Bill: Challenges and IRS Interests

The current US Tax law falls short in its classification of cryptocurrencies; as they sometimes take the form of investment instruments, sometimes commodities and at other times can be classified as just currency.

This distinction in use of cryptocurrencies is what the new bill seeks to ascertain.

Last year, the US tax agency – IRS sent letters to various cryptocurrency holders requiring them to report and pay their taxes on gains earned or realized from small and big cryptocurrency transactions from the time of purchase.

The letters had seen some crypto enthusiasts seek alternative ways to avoid these taxes or get professional help to determine exactly what amount they are expected to pay due to the uncertainty of what profits were actually taxable.

However, the new bill If approved, will further aid the classification of what earnings or cryptocurrency profits are taxable and those which are not. The bill will take effect for transactions that occurred after December 31, 2019.

Governments Want a Share of the Crypto Bounty

Despite the subject of cryptocurrencies being a grey area across many countries, government and tax authorities now seek to enjoy some percentages on profits made from trading cryptocurrencies and gains from coin pumps *maybe ???*.

For some crypto enthusiasts, this tax interest is an affirmation of cryptocurrency dominance. For others, the subject of volatility; especially in cases where trades or coin values dip remains an issue…How do you pay or calculate taxes when coin prices dip???

In all, it is expected that the virtual currency tax fairness bill will specify what gains are taxable from cryptocurrencies and to what percentage.