The taxman cometh. On Friday, March 23, 2018, the Internal Revenue Service (IRS) issued a release to remind taxpayers that "income from virtual currency transactions is reportable on their income tax returns." The agency provided a link to its 2014 guidance, which explained that "for federal tax purposes, virtual currency is treated as property."
The IRS warned, "Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest."
In February 2018, ETHNews reported on President Trump's nomination of Charles Rettig as IRS Commissioner. When reached by telephone today, an IRS spokesperson was unable to provide the date of Mr. Rettig's Senate confirmation hearing.
Just a week after the White House announced Rettig's nomination, his colleagues at Hochman Salkin Rettig Toscher & Perez, PC hosted an informative webinar on cryptocurrency taxation, perhaps a sneak peek at the nominee's attitude toward digital asset taxation.
Readers may remember that in December 2017, ETHNews reported on the Tax Cuts and Jobs Act (now Public law no. 115-97), which officially limited the exemption from capital gains taxes (CGT) on like-kind exchange to domestic real estate trading. Before the law took effect on January 1, 2018, virtual currencies arguably could have been eligible for the like-kind exemption from CGT.
For all the hurrah about the IRS, it's vital to remember that federal taxes are just one piece of the pie. Additional obligations may vary by state.