Bill to allow cryptocurrency for tax payments passes first reading
But will the IRS charge payers with capital gains tax on top of their payment for…well, taxes?
A bill allowing residents to pay their taxes in cryptocurrencies has just passed its first reading required in Arizona. Should it pass all three readings required, Arizona would be the first US state to implement the law, with Illinois and Georgia closely following their footsteps. The bill, according to Rep. Jeff Weninger, would make it more convenient for residents to settle their tax obligations and could also possibly attract more businesses into the state.
“It’s one of a litany of bills that we’re running that is sending a signal to everyone in the United States, and possibly throughout the world, that Arizona is going to be the place to be for block chain and digital currency technology in the future,” Arizona State Rep. Jeff Weninger said. “The ease of use, being able to do it in the middle of the night, being able to do it at home while you’re watching TV. I think in a few years this isn’t even going to be a question.”
While the volatility of cryptocurrencies has made it severely attractive due to the possibility of huge profits, government agencies receiving such payments are not likely to benefit from its trade potentials and are required to convert them into US dollars within 24 hours of receipt.
This sounds like a win for cryptocurrencies in general, but it brings to question a redundancy from the IRS. Under their virtual currency guidance, they say that cryptocurrencies will be treated like assets subject to capital gains tax. Transactions involving cryptocurrencies will be treated as if you are paying with property, which is will be subjected to capital gains tax apart from being subjected to VAT. Similarly, flipping between one cryptocurrency to another is considered a taxable transaction in itself. If Arizona finally approves this, will the IRS not budge and charge payers with capital gains tax on top of their payment for…well, taxes?
Confusion over how exactly to classify cryptocurrencies—and who will have final jurisdiction over them has been raging. Recently, a ruling by a district judge agreed in favour of the CFTC (Commodity Futures Trading Commission) that cryptocurrencies are commodities and therefore fall under the CFTC’s jurisdiction. But on the other hand, the Securities and Exchange Commission (SEC) classifies them as securities and is claiming authority over regulation.