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Illustration: Lazaro Gamio / Axios

Tax day is just two weeks away, but there are still a lot of unanswered questions for those who have gains (or losses) to report from investments in cryptocurrencies.

Bottom line: The IRS hasn't issued any guidance besides a short memo in 2014, even through the global cryptocurrency market cap grew from around $18 billion to over $600 billion last year, according to CoinMarketCap.

Yes, you need to pay taxes on crypto investments

Cryptocurrencies and digital tokens are classified by the U.S. government as commodities, meaning that they’re subject to capital gains tax laws.

  • In 2014, the Internal Revenue Service declared that cryptocurrencies are property, and issued its first, and still only, guidance that same year.
  • But by the IRS’s own estimates for 2015, only 802 Americans reported cryptocurrency transactions.
  • Experts expect a major uptick this year, based on the increased values and trading volume. Hiding transactions wouldn't be advisable as popular exchanges like Coinbase's GDAX and Gemini are highly regulated, and the IRS recently assembled an investigations team for cryptocurrency-related crimes.
What the fork?

The IRS hasn't provided guidance on several crypto-related tax issues that have arisen since 2014.

  • Perhaps the most pressing example is forks, such as when Bitcoin last year split into two separate versions, with each Bitcoin holder receiving an equal amount of Bitcoin Cash. Does that represent taxable income for someone who now owns both? What if they don't have access to their Bitcoin Cash because their exchange doesn't support it?
  • Then there's using Bitcoin (or other digital tokens) to pay for goods or services. Last year, a bipartisan bill was introduced to exempt transactions under $600, inspired by the foreign currency rules, as a way to eliminate this huddle to using cryptocurrencies for small purchases, although it hasn't passed yet and didn't make it into the recent tax reform bill.
  • Some have tried to apply the “like-kind exchange” rule, commonly used for real estate, which would defer gains if someone used one cryptocurrency to purchase a different one. The IRS hasn’t formally weighed in on this, but language in the recent tax bill suggests that it won’t be allowed.
It's complicated

People typically use spreadsheets to track crypto investments and manually tally their gains and losses.

  • Some people use multiple exchanges to buy and sell cryptocurrencies and tokens, and it can be tricky to determine cost basis when tokens are transferred from one to another.
  • Coinbase's GDAX exchange, for example, only sends tax forms to business customers and merchants (a 1099-K), but not to individuals (a 1099-B). And while individuals can access their purchase and sales history to help with tax calculations, it doesn’t include transfers in and out of their digital wallets.
  • On its website, GDAX recommends that customers keep their own records of these transactions. Same goes for Gemini, another popular exchange.
  • A small number of startups have spring up to tackle these issues, including Cointracking, Libra, and TokenTax. There also are some tax accountants in the know.
The IRS vs. Coinbase

In late 2016, the IRS summoned information about all of Coinbase’s customers between 2013 and 2015, and even sued the company after it initially declined to turn over the data.

  • Coinbase argued the request was too broad.
  • In November, the company was ordered by a federal judge to turn over information for a much smaller subset of its customers (ultimately about 13,000).
  • The battle raises questions about whether it will set a precedent that could allow the IRS to demand such information from other financial services institutions.

Go deeper

14 hours ago - Health

Food banks feel the strain without holiday volunteers

People wait in line at Food Bank Community Kitchen on Nov. 25 in New York City. Photo: Michael Loccisano/Getty Images for Food Bank For New York City

America's food banks are sounding the alarm during this unprecedented holiday season.

The big picture: Soup kitchens and charities, usually brimming with holiday volunteers, are getting far less help.

16 hours ago - Health

AstraZeneca CEO: "We need to do an additional study" on COVID vaccine

Photo: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

AstraZeneca CEO Pascal Soriot said on Thursday the company is likely to start a new global trial to measure how effective its coronavirus vaccine is, Bloomberg reports.

Why it matters: Following Phase 3 trials, Oxford and AstraZeneca said their vaccine was 90% effective in people who got a half dose followed by a full dose, and 62% effective in people who got two full doses.

Updated 19 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: Coronavirus cases rose 10% in the week before Thanksgiving.
  2. Politics: Supreme Court backs religious groups on New York coronavirus restrictions.
  3. World: Expert says COVID vaccine likely won't be available in Africa until Q2 of 2021 — Europeans extend lockdowns.
  4. Economy: The winners and losers of the COVID holiday season.
  5. Education: National standardized tests delayed until 2022.

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