Crypto tax ‘a top enforcement priority,’ reminds IRS Commissioner
The IRS’ commissioner says crypto gains are taxable in the cannabis industry as the IRS treats cryptocurrencies as property.
The United States Internal Revenue Service continues to propose new tax reforms to regulate the crypto investments in the U.S., with the latest notice sharing tax obligations for the marijuana industry.
The notice, signed by IRS Small Business/Self-Employed Division Commissioner De Lon Harris, reflects the priorities of the United States federal agency to ensure cryptocurrency tax compliance among local businesses that grow, distribute and sell cannabis.
Commissioner Harris said that the use of cryptocurrencies in the cannabis industry is one of the top enforcement priorities of the IRS. The statement coincides with the recent proposal by the Senate lawmakers from July 2021 that intends to tighten taxation and reporting rules on businesses dealing in cryptocurrencies. According to Harris:
“Those who use it [cryptocurrencies] need to understand that the IRS considers it property, and there are gains that are taxable.”
In addition, the IRS commissioner recommended cannabis businesses work with reputable exchanges for converting cryptocurrencies into U.S. dollars.
The IRS has not yet asked businesses to report high-worth crypto transactions explicitly. However, companies will need to file Form 8300 for every transaction that exceeds $10,000.
Related: US lawmakers propose adding digital assets to ‘wash sale’ rule and raising capital gains tax
The Senate’s bipartisan infrastructure deal recently that saw last-minute amendments proposed means to raise funds worth $28 billion by taxing crypto investments and transactions.
Following suit, more recently, on Sept. 13, Democrats in the House of Representatives proposed new tax initiatives that would increase the tax rate on long-term capital gains. If approved, the law will increase crypto taxes for “certain high-income individuals” by 5%.
According to Cointelegraph’s report, the bill also recommends a surtax of 3.8% on net investment income, bringing up the tax rate to 28.8% for select investors.
Additionally, the new tax plan will impose the wash-sale rule on cryptocurrencies and other digital assets, which prevents investors from claiming capital gains deductions. Currently, U.S. lawmakers suspect crypto investors of using wash sales to manipulate the capital gains of their portfolio.