Where Are We Anyway? Recent Developments in Tax Accounting and Auditing Issues

August 11, 2021 (3 min read)

As we pass the mid-year point and companies share their 2021 interim results, it’s vital to reevaluate the major tax accounting and auditing issues that individuals and entities may face in 2021. How these accounting and auditing issues tie into the developing guidance by the IRS and Treasury on the obligation of cryptocurrency brokers and exchanges to report data on an investor’s gains and losses is a key component of this discussion. Given the importance of effectively taxing cryptocurrency transactions and the difficulties inherent in taxing these types of transactions, taking into account the reluctance of the parties to report these transactions, the taxation of virtual currencies will remain on the IRS’s plate for the duration of 2021 and years to come.

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Lawmakers to Push for Cryptocurrency Tax Reporting Regime
Discover how the taxation of virtual currencies is among several significant issues on the IRS’s plate. The IRS has had a framework for taxing virtual currencies for several years but has lagged in implementing an effective reporting regime. Both the IRS and Treasury are currently developing guidance to make clear that cryptocurrency brokers and exchanges are obligated to report data on an investor’s gains and losses.

Understanding Bitcoin and Virtual Currency
See how Bitcoin is both a type of currency and a decentralized transaction protocol. A key component of the Bitcoin protocol is a public ledger, known as the blockchain, which records the transactions conducted using the protocol. This ledger can be used for transactions other than just transfers of virtual currency.

Tax and Accounting Aspects of Virtual Currency
Learn about the IRS determination that a virtual currency is generally property for all federal tax purposes. This status of virtual currency as property holds true even though a virtual currency might function much like a real currency, including the use of a virtual currency to pay for goods and services, to pay wages, or to hold as an investment.

Virtual Currency State Law Survey
Reference this survey which provides an overview of the treatment of virtual currency in all 50 states and the District of Columbia.

Practical Guidance Updates

Featuring the latest updates from your Practical Guidance account.

Tax Key Legal Developments Tracker (Federal)
Stay informed on new developments.
- Compensation/Employee Benefits/Payroll
  IRS reiterates its position that taxpayers using FSA debit cards to pay qualifying medical expenses must provide the required substantiation, except for qualifying expenses from certain providers (e.g., pharmacies) that can be auto-substantiated. IRS Information Letter 2021-0013.
  IRS provides guidance on American Rescue Plan Act of 2021 (ARP) changes to the funding rules for single employer defined benefit plans, including guidance on the manner and timing of elections permitted under the ARP. IRS Notice 2021-48.
- Excise Taxes and Credits
  IRS advises state and local housing credit agencies that allocate low-income housing tax credits under I.R.C. § 42 of the county and parish-level populations residing in a qualified disaster zone to use in calculating the applicable dollar limitation for 2021 and 2022. IRS Notice 2021-45; 2021-31 IRB 170.