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IRS May Make It Harder to Avoid Declaring Crypto on Tax Returns
The Internal Revenue Service plans to make all income tax payers check a box indicating whether they have transacted in crypto over 2020.
Updated Sep 14, 2021, 10:00 a.m. Published Sep 25, 2020, 10:37 a.m.
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The U.S. Internal Revenue Service (IRS) is about to deploy a simple trick to make it far harder for taxpayers to avoid declaring their cryptocurrency assets.
STORY CONTINUES BELOW
- According to a Wall Street Journal report Friday, the Internal Revenue Service plans to reposition a question on the 1040 income tax form for 2020 that will require all returnees to check a box if they have transacted any crypto assets over the year.
- An IRS draft of the 1040 shows the question placed near the top of the form will likely read: "At any time during 2020, did you sell, receive, send, exchange or otherwise acquire any financial interest in any virtual currency?"
- The question was included on the form for 2019, but was placed in a part of the document that not all returnees had to fill out, the WSJ says.
- An expert on tax law told the WSJ the question would make it easier for the IRS to win cases if the taxpayer checks the "no" box and is later found to have held crypto.
- Reporting crypto taxes in the U.S. is notoriously tricky and even the IRS has conceded things need to improve.
- An official told CoinDesk in July that some of the guidance published to date could be clarified and “is not ideal.”
- The IRS is working to keep up with the crypto industry, the official added.
- The more prominent placement of the crypto question for 2020 may be effective, the WSJ writes.
- The IRS previously added a similar question regarding taxpayers' offshore bank accounts resulted in the IRS receiving over $12 billion in taxes.
Also read: Cryptocurrency Earned From Carrying Out Microtasks Is Taxable, Says IRS Memo
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