The U.S. Internal Revenue Service (IRS) service has published a draft new mandate for taxpayers in the country to report their cryptocurrency activities. There are also some rules for non-fungible tokens (NFT). Here are the details…
IRS changes cryptocurrency reporting requirements
A new draft of Form 1040 submitted by the IRS says that cryptocurrencies “will be treated as a ‘digital asset’ for federal income tax purposes.” The document clearly includes NFTs, cryptocurrencies and stablecoins in the “digital assets” category. It also includes “any digital representation of value recorded in a cryptographically secure distributed ledger or similar technology.”
Taxpayers are required to indicate whether they have received cryptocurrencies through payment, rewards, mining, staking or hard forking. In addition, taxpayers must indicate whether they are selling, disposing of, or bartering assets. They even need to declare whether they are gifting digital assets for free.
In addition, taxpayers are required to answer the “Digital Assets” section on their income tax returns, regardless of whether they made digital asset transactions during the tax year. This new guideline differs from last year’s in the use of the phrase “digital asset”. Last year, the term “virtual currencies” was used, which the institution describes as “more limited”. Also, as we reported on Kriptokoin.com, the guide only defined the rules governing cryptocurrencies and stablecoins.
Biggest change, NFTs
Taxpayers can only respond negatively when they own a digital asset, transfer a digital asset between their wallets, or purchase digital assets in real currency, such as US dollars. For this reason, he states that crypto purchases made via Paypal and Venmo do not need to be reported. If digital assets are required to be reported, taxpayers report these assets as capital gains and losses or regular income.
One of the most notable changes in 2022 tax reporting is the focus on NFTs, which saw a boom in popularity in 2021. The new rules require NFT investors to report all NFT income, an area filled with accusations of illegal trading and fraud. With this development, the USA joined the list of countries that want to tax NFT trade. There are some major countries on this list, including Singapore, Israel, and India.
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