The United States Internal Revenue Service (IRS) will defer tax payments below $1 million from April 15 to July 15. Crypto traders can also take advantage of the measure to ease the strain from the market fall due to the coronavirus outbreak.
According to a March 18 statement from the Department of the Treasury, individuals and non-corporate entities can defer their tax payments for three months without suffering any penalty or interest. Corporations are also exempt for up to $10 million of income tax payments.
The tax returns will still need to be filed for their original deadline of April 15, but the payment can be delayed until July 15.
Temporary relief for crypto traders
As Bitcoin (BTC) fell from a price of more than $9,000 at the beginning of March to about $5,500 as of press time, the crypto market was hit even harder than traditional markets like stocks.
Cointelegraph spoke with Robert W. Wood, managing partner at tax-focused law firm Wood LLP, to learn more about how the decision impacts crypto investors. Briefly explaining the new measure adopted by the U.S. government, he said:
“With life safety concerns paramount, it can be easy to forget for a time about pedestrian issues like taxes. Today, the IRS main tax filing deadline remains April 15, but there is a 90 day reprieve on payments to the IRS — until July 15.”
While the delay only concerns payments and not the tax return filing, Wood suggested a potential solution for it as well. He continued:
“Unless the IRS says differently, you should go on automatic extension so your tax return is due October 15.”
An automatic extension, if requested, allows taxpayers to delay the tax return filing for any reason — provided they offer an estimate of their tax liability and pay it within the usual terms. Delays would normally result in penalties and interest, but they are deferred due to COVID-19 measures.
Wood emphasized that the measures do not free crypto traders from their reporting duties, saying:
“Crypto investors should still gather records for 2019, and those who need to fix their past reporting should not forget about that either. When we all come out the other side of this, we should remember that the IRS still cares a lot about crypto taxes.”
Unfriendly crypto taxation in the U.S.
Crypto tax reporting requirements are considered to be a “nightmare” by many small businesses and users.
There are currently no exemptions on the amount or type of transaction, which means that using Bitcoin to pay for coffee is a taxable event that must be reported. Crypto-to-crypto exchanges are also not considered “like-kind” transactions and are taxable.
The agency held a summit on March 3 to discover how regulations can be reconciled with the need to let the sector grow. Specific measures are yet to be announced, however.