The new version of the Internal Revenue Service (IRS) Form 1040 allows not disclosing information about cryptocurrency holdings for withholding purposes when there are no buy or sell transactions.
BREAKING:
According to draft instructions released by the IRS on Oct 23rd, if you simply held crypto in a wallet/account and/or transferred crypto between wallets/accounts you own during 2020, you do NOT have to disclose this to the IRS by checking \”yes\” 👇 #cryptotaxes pic.twitter.com/WIij2wwUVf
— Shehan Chandrasekera, CPA 🧗♀️|🇱🇷|🇱🇰 (@TheCryptoCPA) October 25, 2020
In this case you can tick the \”No\” box in response to the question:
\”Have you during 2020 ever received, sold, sent, exchanged, or otherwise acquire any financial interest in any virtual currency?\”
The head of tax strategy at CoinTracker and Forbes contributor Shehan Chandrasekera says this is good news for privacy-conscious crypto holders.
Added language is good news for privacy-concious hodlers. 🔏
If you are a hodler and didn’t have any transactions during 2020, you won’t have to share your info with the IRS. You simply check \”No\” pic.twitter.com/ktotw6duSw
— Shehan Chandrasekera, CPA 🧗♀️|🇱🇷|🇱🇰 (@TheCryptoCPA) October 25, 2020
Added language is good news for privacy-concious hodlers. 🔏
If you are a hodler and didn’t have any transactions during 2020, you won’t have to share your info with the IRS. You simply check \”No\” pic.twitter.com/ktotw6duSw
— Shehan Chandrasekera, CPA 🧗♀️|🇱🇷|🇱🇰 (@TheCryptoCPA) October 25, 2020
In other cases, he advises answering affirmatively. Chandrasekera adds that this does not entail tax obligations.
If you receive, sell, send, exchange, or otherwise acquire any financial interest in crypto, you’d still have to check \”yes\”.
(Checking \”yes\” doesn’t necessarily mean you are paying taxes)
— Shehan Chandrasekera, CPA 🧗♀️|🇱🇷|🇱🇰 (@TheCryptoCPA) October 25, 2020
The new guidance clarifies cases that trigger taxation of cryptocurrencies. For example, airdrops like Uniswap in September. Also falls into this category are exchanges of crypto for goods, services, or \”other property, including other crypto assets\”.
The individual income tax return (Form 1040) is the main tax filing for 150 million Americans. The crypto question first appeared in 2019 in Schedule 1, which is filed by those required to report additional income. In other words, if such a requirement did not exist for the taxpayer, they could refrain from reporting their cryptocurrency transactions.
The IRS will now require this information from all taxpayers.
\”I don’t think the new principles imply a fundamentally new IRS approach to cryptocurrencies. The IRS is simply giving more clarity on how to answer this question. At least for now, the agency does not appear to need information about your crypto assets. You are not required to disclose them if you do not have a taxable transaction,\” Chandrasekera said in a conversation with DeCrypt.
Earlier in Forbes, the expert noted that holding cryptocurrency through a so-called pass-through entity (a pass-through taxation company) may indicate a \”material interest\”.
As a reminder, the Bitcoin exchange Coinbase UK will disclose HMRC data on residents who earned over £5,000 in cryptocurrency.
OECD’s overview of crypto taxation regimes is available at link.
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