IRS puts focus on crypto as tax filing season due to close April 18

6 months ago
3 mins read

In recent months, as cryptocurrencies have surpassed the $2 trillion market capitalization and continued to rise in value, they have drawn more attention from governments and taxation agencies, notably the United States Internal Revenue Service (IRS).

Specifically, taxpayers in the United States filing their forms this season have noticed a slight change to the cryptocurrency question in their income tax returns, according to the Quantum Economics newsletter from March 29.

“At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

This question has been present in the income tax returns since 2019, but so far has only asked about acquiring the cryptocurrency. This is the first time that the disposal of crypto is mentioned in the form.

With this question, the IRS is inquiring whether the taxpayers have used Bitcoin (BTC), Ethereum (ETH), or any other digital asset, to purchase goods and services during the fiscal year. 

What does it mean?

Accordingly, any increase in the value of a cryptocurrency is taxable – if the taxpayer sells it for profit, swaps it for other cryptocurrencies, or even uses it for payments in some of the major retailers that accept crypto, such as The Home Depot or the Microsoft Store.

As long as you had any gain or loss from the activity, you need to report it. And if you receive crypto as income, you need to report its fair market value in U.S. dollars at the time of receipt.

The tax filing season in the US usually lasts between January 24, when the IRS beings accepting and processing returns for the previous year, and April 15, when the filing deadline ends.

This year, the closing date has been moved to April 18, due to the Emancipation Day holiday.

Crypto tax in other countries

Around the world, financial authorities are looking for ways to acquire greater visibility in the crypto market and tax these popular assets.

The Organisation for Economic Co-operation and Development (OECD), which publishes economic policy recommendations for its 38 member countries, is working on its Crypto-Asset Reporting Framework, which forces crypto exchanges to share information with tax authorities.

On top of that, Finbold has earlier reported that the authorities in India were planning a 30% tax on trading cryptocurrencies and non-fungible tokens (NFTs), prompting the creation of a petition on Charge.org to reduce what they consider unreasonable crypto tax policies.

As things stand, the current worth of the crypto market stands at $2.16 trillion, recording a weekly growth of 9.64% and a 0.93% 24-hour increase, according to CoinMarketCap data.

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Ana Nicenko

Ana Nicenko has a plethora of knowledge and experience as a journalist covering the cryptocurrency and blockchain industries, having written for a variety of projects and organizations. Additionally, Ana has a master's degree in English Language and Literature. At Finbold, she reports news on the digital assets sector.