With the tax season right around the corner, the IRS is looking for new scapegoats, and cryptocurrency users/miners/investors are likely to be on the chopping block this year, especially due to the market’s growing popularity.
The taxation form called Form 1040 now has a section designated for crypto near the top of the first page, demanding that investors report their taxable transactions from the past fiscal year if they were in any way related to Bitcoin, Ethereum, Dogecoin, and any other form of cryptocurrency.
Crypto conversions, purchases of goods and services all qualify, somewhat defeating the purpose of a decentralized monetary system now that the government has a firm grasp on it.
This is, sadly, nothing new, it’s simply that the IRS is putting more focus on the matter, with their reasoning being that the industry favors numerous tax cheats while also contributing to the tax gap through loose reporting regulations which amount to lots of cases of tax evasion.
Biden’s latest bill, which is heavily packed with tax regulations, also aims to crack down on crypto miners, requiring annual reports from virtual currency brokers, starting in 2023.
Tesla CEO Elon Musk promotes the usage of Dogecoin for Tesla purchases
The step seems to have been unavoidable, especially now that investors and companies have pushed the industry into the mainstream, catching the ever-watching eye of the cash-hungry US government.
Several large company CEOs, including avid crypto enthusiast Elon Musk, have already stated that their companies would accept cryptocurrency as payment, with the aforementioned advocating for Dogecoin, which at the time, brought on a massive spike in that currency’s value.
The trend started back in 2019, when the IRS questioned taxpayers about their crypto dealings for that fiscal year, with the lapse on their part being that they only put it on the Schedule 1 form, which only applies to unemployment benefits or rental income.
The following year, however, they learned from their mistakes, placing the question on the 1040 form, where it remains to this day, albeit not with its original wording.
Namely, the 2020s question encompassed some non-taxable transactions, including the mere possession of crypto or transferring it from one virtual wallet to another, which took quite a bite into the wallets of those who reported it.
This year the form aims to present only taxable income, and the IRS intends to continue this custom in the years to come.