The Internal Revenue Service (IRS) has announced that it will be increasing its crypto reporting requirements following a record-high adoption of digital assets in 2022. The IRS will now refer to crypto as “digital assets” instead of “virtual currencies” and will require taxpayers to report any transactions involving digital assets on their 1040 income tax form.
Taxpayers will be asked if they received digital assets as a reward, award, or payment for property or services, or if they sold, exchanged, gifted, or disposed of a digital asset or financial interest in a digital asset during the year. The IRS views digital assets as property rather than actual money, which means that reporting protocols will differ from reporting income received from a job.
Abhinav Soomaney, a managing partner at Crypto Tax, commented on the new requirements, stating that “the IRS is taking a more aggressive stance on crypto reporting, and taxpayers need to be aware of the changes.” He also advised taxpayers to keep detailed records of their digital asset transactions to ensure accurate reporting.
The IRS’s decision to increase its crypto reporting requirements comes as digital assets continue to gain mainstream acceptance and adoption. With more individuals and businesses using digital assets for transactions, the IRS is looking to ensure that taxpayers are accurately reporting their digital asset income and transactions.
Overall, the new reporting requirements are a reminder to taxpayers that digital assets are subject to taxation and must be reported on their income tax returns. As the use of digital assets continues to grow, it is important for taxpayers to stay informed about the latest reporting requirements and to seek professional advice if needed.
