New IRS clarifications may lead more small time investors to jump on the cryptocurrency bandwagon.
Daniel Palmer reports at Coindesk that the IRS is providing new details on when cryptocurrency investors will have to detail holdings on their 1040 forms.
The IRS is suggesting holders will have to report any sales, or exchanges of cryptocurrencies for other assets.
They will not, in general, have to report simply holding a cryptocurrency asset, or moving it to a different digital wallet.
This might seem like a small detail, but the IRS actually has a lot of power to control whether do people get involved in cryptocurrency, or not.
Currently, tax questions remain one of the major barriers for many would-be cryptocurrency investors in America. They see the potentially lucrative strategy of buying Bitcoin as the dollar-backed equity market goes into major contractions.
However, they also see their own tax preparers looking askance at reporting requirements for cryptocurrency.
We talk a lot about things like a Bitcoin ETF and more widely available investment strategy options, but one of the biggest on-ramps for new fintech/defi investment would be tax clarification.
“The Internal Revenue Service (IRS) should – but won’t – clarify how taxes are levied on cryptocurrencies and cryptocurrency transactions in the U.S., the government’s top auditing institution said Wednesday,” wrote Coindesk’s Nikhilish De on Feb. 12 of this year, adding this reported interagency recommendation: “The GAO recommended the IRS add a note saying its 2019 FAQs are not binding guidance, clarify third-party reporting requirements and clarify the reporting requirements around FATCA. The GAO also recommended FinCEN, in coordination with the IRS, share more information about applying foreign account reporting requirements under the BSA.”
Now, at least, there’s a bit more light on how the U.S. tax collector views crypto filings. Look for more in the months to come.