Jose Luis Pelaez | Getty Images
The IRS shares more details on how to report digital assets for the 2022 tax filing year, according to draft instructions.
Since 2019, there has been a yes or no question about “virtual currency” on tax returns, requiring filers to tick a box to disclose their taxable crypto activity. For 2022, the agency changed the term “virtual currency” to “digital asset”, with more guidance on when to tick “yes”.
Notably, “digital assets” now include non-fungible tokens, or NFTs, which grant ownership to things like art, and stablecoins, which are pegged to a real-world asset.
Learn more about personal finance:
How much you can earn and pay 0% capital gains tax in 2023
IRS increases estate tax exclusion to $12.92 million for 2023
What an 8.7% Social Security cost-of-living adjustment means for benefit taxes
“I think it’s a good change,” said Matt Metras, an enrolled agent and cryptocurrency tax specialist at MDM Financial Services in Rochester, New York. “People who trade things like NFTs wouldn’t consider it a virtual currency.”
The “broader language” may include new categories, such as taxpayers receiving digital assets from “gambling games to win,” which have become popular over the past year, he said.
“The IRS will always be behind the eight ball because it just can’t keep up with how fast the crypto space is changing,” Metras said.
The draft instructions state that registrants must tick “yes” if they received digital assets as a reward, reward, or payment for goods or services. And the agency can also require “yes” if registrants have sold, traded, or gifted digital assets.
Despite the agency’s attempts to clarify guidance on reporting digital assets, questions remain for filers and tax practitioners.
For example, filers are not required to submit a gift statement for transfers under $16,000 for 2022. However, the question requires taxpayers to check “yes” for gifts that may be less than this amount, said Andrew Gordon, tax attorney, CPA and president of Gordon Law Group in Skokie, Illinois.
This can cause IRS processing issues with no corresponding donation activity elsewhere on the return. Overall, “there still seems to be an education gap for taxpayers,” he added.
The American Institute of CPAs has also raised concerns about the lack of clarity for taxpayers, referring to “cryptographically-secured distributed ledger” in the instructions, which may confuse filers.
“We suggest the IRS and Treasury keep the issue focused on ‘virtual currency’ until proposed and final regulations are released defining ‘digital assets,'” said Eileen Sherr, director of policy. Tax and Advocacy at the American Institute of CPAs.
The organization submitted comments to the IRS on the matter in late August, asking for revisions and clearer instructions with examples before finalizing the 2022 tax return.
We wish to give thanks to the writer of this write-up for this amazing material
What Investors Need to Know About the Latest Crypto Tax Reporting Rules – Reuters
Our social media profiles here as well as other pages related to them here.https://metfabtech.com/related-pages/