IRS or Internal Revenue Service of the United States has fastened its belts to trace every crypto transaction. If you’re an American and filing tax in 2020, watch out. IRS is using sophisticated software and other services to find out which American individual has used crypto.
If you’ve made any transaction in cryptocurrency, you better declare that into the tax filing or the complex methods of the IRS will find out on its own. Recently the IRS issued a draft mentioned that every tax filing individual will have to mandatory make it clear in the documentation.
The first page of the draft has a question that goes like this: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
The IRS form 1040 has a question regarding cryptocurrency. It means that the IRS is concerned about cryptocurrency and the taxes related to it. Earlier the IRS was giving hints about considering crypto into the upcoming taxation. But now it is official that everyone has to show the crypto transactions.
The first time when crypto came under the radar of the IRS was when the officials started to consider the stake as income. Everything was normal when cryptocurrencies were using the POW method. But due to its main disadvantage of consuming a lot of energy, some crypto miners have moved to the PoS system.
PoS or Proof of Stake system is being considered as a taxable income by the IRS. That’s why the IRS has started to take a few steps to disclose the crypto income of American investors. The crypto traders or owners stake tokens and are also rewarded with tokens in return. These tokens are just monetary rewards and not actual returns.
A lot of debate is going on back and forth between the IRS and crypto professional groups to make it understand the model of cryptocurrency. The co-founder of crypto tax software, Cointracker, has spilled the beans on this new draft. He said, there should be specific information on which crypto asset is being taxed by the regulators. There should be new rules and definitions about the crypto taxation laws, added the co-founder of Cointracker. While the head of the tax strategy at Cointracker, Shehan Chandrasekera has advised staying cautious. According to the head of the tax strategy, the taxpayers should stay informed about the income they are receiving