The taxation rules of the cryptocurrency sphere have been a long-time project of the United States Internal Revenue Service, with modifications of the tax forms coming year after year.
Last year’s 1040 form by the United States Internal Revenue Service (IRS) saw a lot of taxpayers have conflicting opinions and thoughts. According to tax professionals, a specific question about crypto caused an uproar amongst taxpayers.
Crypto Tax Question
At the top of the form, the question: “At any time during 2020, did you receive, sell, or otherwise acquire any financial interest in any virtual currency?” was given a subtle revision in this year’s 1040 form.
Interestingly, the tax collecting body earlier moved to correct the misconception with an update on its FAQ in March. It assured that crypto holders who purchased cryptocurrency fiat currencies are exempted from answering yes on the 1040 tax form. The clarification shows IRS’s commitment towards capturing only taxable crypto activities and quelling the confusion many had.
This year’s 1040 form has the same crypto question sitting in the top corner but rewritten. “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency,” reads the form.
The difference between last year’s form and the new form is its relatability and subtle language that speaks to taxpayers’ understanding. 2020’s form asks if all taxpayers had” otherwise acquire(d) any financial interest,” while the new words signify comprehension and clarity.
In line with the final copy of the form are easy-to-understand instructions that will aid taxpayers in answering the questions.
These instructions will help direct taxpayers who are holders of crypto assets, buyers who acquired crypto assets via fiat, and those who transferred via their wallets to answer “NO” to the question. Subsequently, taxpayers are expected to choose “YES” if they are engaged in heavy crypto activities like being paid in crypto assets, crypto airdrops, crypto-crypto exchange, mining, staking, and hard forks.
US Infrastructure Bill
The taxation rules of the cryptocurrency sphere have been a long-time project of the United States Internal Revenue Service, with modifications of the tax forms coming year after year.
The newly inaugurated infrastructure bill will be partially funded by taxes gotten from the crypto sphere. The news has reformed the crypto sector, which is already going through an internal reformation. Additionally, the government of Joe Biden has tightened the regulatory belt around different facets of the crypto market.
For the Infrastructure Bill to push through, there’s a need for a crypto platform to file Form 1099 and other people engaged in a heavy crypto activity to file Form 8300. Also, crypto platforms are to start asking for tax information from users to issue Form 1099 from 2023.
Oluwapelumi is a believer in the transformative power Bitcoin and Blockchain industry holds. He is interested in sharing knowledge and ideas. When he is not writing, he is looking to meet new people and trying out new things.
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