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The IRS wants to know about your crypto transactions this tax season

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Tax season is fast approaching — and the IRS has its eye on crypto investors.

Form 1040, which US taxpayers use to file their annual income tax returns, there’s a question about “virtual money” near the top of the first page.

Investors must report taxable transactions for 2021 involving bitcoin, ethereum, dogecoin, and other cryptocurrencies to the federal government.

According to Shehan Chandrasekera, an accountant and head of tax at CoinTracker.

He said: Convert cryptocurrency to cash, buy goods or services and convert coin to coin.

Inquiring about cryptocurrency transactions is not new, but the IRS has put more emphasis on such tax reporting in recent years.

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The move comes as the White House and Democratic lawmakers aim to crack down on tax fraud. According to a US Treasury Department report, the crypto economy contributes to the so-called tax gap through lax reporting requirements that help facilitate tax evasion. grant this early year.

New bipartisan infrastructure law worth $1.2 trillion annual tax reporting requirements by digital currency brokers starting in 2023.

It also appears when the cryptocurrency has become more popular among investors. Tesla CEO and crypto enthusiast Elon Musk said this week the automaker will accept dogecoin as payment for some of its goods.

“[The IRS] “Every year, there’s a wave of newcomers to crypto who think it’s not taxed,” Chandrasekera said.

IRS was asked explicitly for the first time taxpayers about their crypto transactions for 2019 taxes. However, it raises questions about the Schedule 1 form that not all taxpayers use. (That form reports certain types of income, such as unemployment benefits or rental income, that don’t appear on the main 1040.)

The following year, the IRS ask a question about cryptocurrencies front-and-center in 1040 – where it remains for tax year 2021.

However, the 2021 question is worded differently from the 2020 question. It asks taxpayers: “At any point during 2021, have you received, sold, exchanged or otherwise disposed of any interest? finance in any virtual currency?”

Chandrasekera said last year that last year’s phrase included some transactions that weren’t taxable, such as simply holding crypto or sending an account from one digital wallet to another. The change in wording resulted in a narrower set of transactions, he said.

“This year, the question only asked about things that could lead to taxable events,” he said.

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https://www.cnbc.com/2021/12/15/the-irs-wants-to-know-about-crypto-bitcoin-ethereum-dogecoin-transactions-this-tax-season.html The IRS wants to know about your crypto transactions this tax season

Emma James

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