Crypto Taking A Backseat During Pandemic, IRS Official Says

Releasing additional cryptocurrency guidance has not been a top priority for the Internal Revenue Service recently, as the agency has been tasked with promulgating regulations related to the coronavirus pandemic, an official said Tuesday. 

While the IRS recognizes the need to produce additional cryptocurrency guidance, the agency has been focused recently on releasing regulations related to the pandemic, John Moriarty, associate chief counsel at the agency's Income Tax and Accounting division, said at the American Bar Association's virtual midyear tax meeting.

Specifically, the agency has been focused on producing guidance flowing from the Coronavirus Aid, Relief and Economic Security Act  and pandemic-oriented legislation that Congress passed in December, and finishing up its work related to the 2017 Tax Cuts and Jobs Act, Moriarty said. 

"I don't think there's any doubt that there is a need for guidance," he said. "Virtual currency is an area we are aware of, we are continuing to work on, and [we] anticipate getting to it in due course."

The IRS released guidance in 2019 that addressed the treatment of so-called hard forks and airdrops. Michael Desmond, then the chief counsel, said the agency was working to release additional guidance that would focus on users' reporting requirements. 

Desmond resigned from his position this month and was succeeded, in an acting capacity, by William M. Paul.

In a 2014 notice, the agency established the principle that cryptocurrencies should be treated as property for tax purposes. In 2019, the agency released additional guidance in a revenue ruling and a set of frequently asked questions. The guidance said the splitting of a cryptocurrency blockchain so-called hard fork does not create taxable income if no new cryptocurrency is received, but taxable income is generated by so-called airdrops that deliver new cryptocurrency.

The agency has also sought to clarify, via an internal legal memorandum, that convertible virtual currencies that are exchanged for services known as microtasking do in fact constitute income, per Internal Revenue Code Section 61 , Moriarty said, referring to a section that defines gross income. Microtasking can involve posting online reviews for establishments or completing online surveys, among other activities. 

The IRS, through its memo, is confirming that "receipt of property for provision of services is income," he said.

"I don't view it as particularly groundbreaking," he said, adding that the agency may continue to field such questions as they relate to virtual currency. 

The IRS declined to comment further.

--Editing by Robert Rudinger. 

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