The Internal Revenue Service (IRS) has updated its 2020 Form 1040, aiming to clarify the issue of crypto transactions. The Bloomberg Law experts say this step will finally eliminate ambiguity regarding tax declarations.
Previously, citizens were required to report whether they “at any time during 2020, received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency.” The 2021 draft Form 1040 lacks the word “send” and replaces “otherwise acquired” with “otherwise disposed”. Marcum LLP Tax Director, Evan Fox, claimed these alterations would drastically simplify the taxation procedure.
“The data won’t be disclosed in the case when an individual already owns cryptocurrency but transfers to another exchange or wallets for security purposes,” explained the expert.
The Head of Tax Strategy at CoinTracker and writer at Forbes Crypto, Shehan Chandrasekera, shares that view: “Seems like going forward IRS only wants to know about your taxable transactions. This makes more sense compared to checking ‘Yes’ when you send or acquire a financial interest in crypto (non-taxable).”
“The IRS should only be concerned about the disposition, since it entails taxable transactions. Acquisitions don’t lead to tax consequences unless you buy one cryptocurrency using another,” explained the expert.
Shehan Chandrasekera asserts that “receive” means, for example, “getting paid in crypto”. He expects the IRS to “clarify what’s exactly included under each term in the instructions”, which will be out later in the year.
IRS Form 1040 doesn’t disclose any personal data regarding cryptocurrency provided there are no purchase or sale transactions performed.
The IRS announced its intention to tax digital assets for the first time in 2014, while cryptocurrency investments were first mentioned in 2020 IRS Form 1040.
Back in June, the IRS requested additional funding to strengthen oversight in the cryptocurrency sector.
With further expansion of the crypto sector, lots of questions regarding taxation have been arising. The IRS came up with some alterations to the annual tax declaration on Form 1040 aiming to reduce ambiguity. However, these slight changes seem to have complicated things. US residents are now looking forward to the IRS further clarifications.
Ingénieur de formation, et spécialisé dans les nouvelles technologies, je me suis toujours intéressé à la blockchain et aux cryptomonnaies. Je suis heureux de faire partie de l'équipe CoinTribune.
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
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