Bitcoin is too high-profile recently? The IRS is asked to clarify the taxation of digital currency again

The topic of whether Bitcoin should be taxed has been around since Bitcoin became valuable, and the American Institute of CPAs has reignited the topic with a letter to the IRS asking for clarification on the taxation applicable to digital currency assets.

Should Bitcoin be taxed? This question is like a ticking time bomb and deserves a vigorous debate. Most people in the Bitcoin community believe that Bitcoin should not be taxed. Bitcoin was created as an alternative currency that can be used for peer-to-peer transfers without the interference of external entities. The decentralized nature of this digital currency ensures this.

However, as the popularity of this digital currency continues to grow, governments are beginning to realize the true potential of Bitcoin as an alternative economic system, which threatens the existing financial ecosystem. Governments rely on taxes paid by citizens using the financial system. However, in the traditional monetary system, it is inevitable to avoid paying taxes, and people's use of Bitcoin has led some governments to impose taxes on Bitcoin.

The US government may be the first country to propose a complex tax system to tax Bitcoin. Although the US tax agency, the Internal Revenue Service (IRS), classified Bitcoin as an asset in April 2014, the relevant regulations have not been updated since then, so there is a lot of confusion in the US Bitcoin community.

As confusion grew, the American Institute of Certified Public Accountants sent a letter to the IRS seeking clarification. The letter reportedly sought clarification on 10 issues regarding digital currencies that could otherwise cause problems for audits.

Under the current tax system, those who hold digital currency assets for more than a year are more favorable in terms of capital gains tax rates. Any losses due to fluctuations during this period can be used to offset gains. However, the IRS does not have a clear grasp of people spending digital currency to buy goods and services. Even if the tax department considers taxing these transactions, it will be too cumbersome to track all expenses and classify them as investment gains or losses.

In addition to small-value digital currency transactions, some other aspects of Bitcoin use that the IRS has failed to clarify include the tax-exempt status of Bitcoin donations to charities. While the AICPA is waiting for a response, some firms continue to accept Bitcoin from clients and donors. If clarification is obtained, I'm afraid these firms will be affected and will have to make changes.