Investors in cryptocurrencies, Bitcoin (Bitcoin) and Bitcoin Cash (Bitcoin.Cash) in particular, rejoicing at the unprecedented surge of their prices and market capitalisation, are not prepared to face a new challenge — taxation.
According to The Wall Street Journal article, with little guidance from the IRS on tax issues for digital currencies many people do not understand whether or not they should pay taxes from the sudden receipt of Bitcoin Cash and how it could be done technically.
The Internal Revenue Service has so far failed to provide strict guidance on the issue. It also remains unclear if IRS would treat Bitcoin Cash as investment income or property.
In the latter case, no tax would be due until the holder sells or transfers the Bitcoin Cash.
Meanwhile, IRS has obtained a software tool allowing to track Bitcoin and other cryptocurrency addresses in order to route out potential tax evaders, Insider.Pro reported yesterday.
IRS purchased this software from the blockchain analysis group Chainalysis to be able to identifying people who hide their wealth. This appears to be a reasonable move for IRS after the Bitcoin’s market cap skyrocketed over the recent months. The track-record of this cryptocurrency is really fascinating it gained more than 200% in six months and 30,000% in five years.
According to IRS, only 802 people declared Bitcoin losses or profits in 2015. This number is clearly less than the actual number of people trading the cryptocurrency.